SME H E A LT H C H E C K INDEX CAPTURING SME HEALTH ACROSS THE UK
Q1 2017 #SMEhealth
J U N E 2 017 Compiled by Cebr, in association with CYBG
DISCLAIMER Whilst every effort has been made to ensure the accuracy of the material in this report, none of Centre for Economics and Business Research Ltd (“Cebr”), CYBG PLC (“CYBG”), or any of their group companies, directors or employees will be liable for any loss or damages incurred through the reliance on or use of this report. This report does not constitute an investment or research recommendation, or any other form of investment advice. This report may contain forward looking statements, based on assumptions and/or targets. Actual results may differ. Authorship and acknowledgements This report has been compiled by Cebr, an independent economics and business research consultancy established in 1992. The views expressed herein are those of Cebr only and are based upon independent research by it. This report does not necessarily reflect the views, financial position, business strategy or intentions of CYBG, its group companies, or their directors or employees. All lending decisions are subject to status. London, June 2017
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CO N T E N T S
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FOREWORD – DAVID DUFFY, CEO
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INFOGRAPHIC 6 EXECUTIVE SUMMARY
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1
UK MACROECONOMIC ENVIRONMENT
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2
SME BUSINESS HEALTH SOFTENS IN THE FIRST QUARTER 2017
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•
Index Indicators
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Regional breakdown
3 CONCLUSIONS
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4 METHODOLOGY
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FOREWORD DAVID DUFFY CEO, CYBG PLC
This is a significant moment in time for Britain’s economic future. With the Brexit process now beginning in earnest and the Government’s Industrial Strategy beginning to take shape, it is imperative that industry pulls together to ensure a prosperous future for Britain. After a long period of sluggish growth and Britain’s future position in the global economy set to change, securing a path to sustained and stronger growth will be critically dependent on unlocking improvements in the UK’s productivity and business competitiveness. This future economic success will depend in no small part on the strength and general ‘health’ of our SME businesses. Small and medium-sized businesses remain the engine room of the British economy, and their future prospects are likely to be ever more critical postBrexit, when we will be dependent on a stronger and more competitive domestic economy. This is especially true for those national and regional economies away from London and the South East. In Scotland and Yorkshire, where CYBG is rooted, SMEs are the backbone of the economy and the future prospects of these areas rest on the ability of SMEs to grow and prosper. The banking sector has a critical role to play in supporting new start-ups, cultivating established businesses and encouraging sector expansion and innovation, and this is a responsibility that we at CYBG take seriously. As a bank, we are entirely unique in our strength in the North of England and Scotland, and our SME lending business is a key enabler for growth in these regions. We are on the frontline in these regions, particularly in delivering on rebalancing the economy and addressing the challenges faced by businesses trying to scale-up and become truly
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Banks need to act as ’brokers’ – not just from a finance perspective, but also in relation to accessing expertise in innovation. competitive in the marketplace. Much can be done at a macro level to support this through maintaining an open, pro competition economy, but it is also paramount that, at a micro level, businesses can access the finance they need. Banks need to act as ’brokers ’– not just from a financial perspective, but also in relation to accessing expertise in innovation. For example, a host of public and private funds exist such as Challenge Fund, LEP funds, Private Investment Funds, the Business Angels networks, Innovate UK and the Northern Powerhouse Investment Fund; however many SMEs often survive in a ‘mire’ of possible funding pots, many of which they do not know are available to them unless advised. We appreciate that this is a gap that needs filling and we are working to address it. I believe that building a prosperous future for Britain requires us to understand how businesses are performing UK-wide, both now and in the future, which is why CYBG has collaborated with the Centre for Economics and Business Research (Cebr) to produce the country’s first SME Health Check Index. We hope that this ongoing quarterly research can aid our understanding of the current state of the industry, as well as demonstrate how the dynamics in regional economies differ and what trends are emerging. We hope this will ultimately lead to a better informed debate about how we can help make small and medium sized businesses succeed. This Index concentrates on the first quarter of 2017, but includes a historic look back to the start of 2014 to allow a comparison of how the economic situation for SMEs has changed over the last three years. It is an old adage that if you look after the pennies then the pounds will look after themselves. I believe that it is only by getting the environment right for our SMEs to grow that we can guarantee Britain a nationally and internationally successful future.
David Duffy
TAKING THE TEMPERATURE OF THE UK’S SME PERFORMANCE
6 Small and medium sized enterprises are the backbone of the UK economy
#SMEhealth | Q1 2017 REPORT
99.5%
52%
47%
of the total number of businesses
of total employment
of total business revenue
Overall Index Score Q4 2016
56.4
Q1 2017
46.5
SME Health Check Index mirrors trend of weaker GDP growth in 2016/17 46.5
56.4
52.6
51.3
47.8
77.4
Scotland
67.0
74.1
GDP
64.5
68.6
75.3
69.0
67.6
SME Health Check Index
North East
N. Ireland North West
Yorkshire & the Humber
West Midlands
Q 2
Q 1
20 14 20 14 Q 3 20 14 Q 4 20 14 Q 1 20 15 Q 2 20 15 Q 3 20 15 Q 4 20 15 Q 1 20 16 Q 2 20 16 Q 3 20 16 Q 4 20 16 Q 1 20 17
East Midlands East of England
Wales
SME Health Check Index Score
London
From Q4 2016 to Q1 2017 Confidence 67 ( 17)
Bankruptcy 11 ( 18)
Employment 75 ( 13)
GDP 67 ( 13)
Business Costs 42 ( 7)
Revenue 45 ( 25)
Lending 16 ( 23)
Capacity 49 ( 23)
Despite these challenges, business confidence rose to its highest level in over a year in the first quarter, highlighting how SMEs grew more confident about their prospects.
South West
South East
Scotland 41 ( 4)
East Midlands 48 ( 7)
Wales 62 ( 4)
West Midlands 32 ( 9)
Northern Ireland 27 ( 26)
East of England 53 ( 2)
North East 49 ( 5)
South East 46 ( 11)
North West 42 ( 4)
South West 50 ( 3)
Yorkshire & the Humber 58 ( 1)
London 42 ( 6)
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EXECUTIVE SUMMARY In recent years the number of the UK’s small and medium sized enterprises (SMEs) has greatly increased. While there were around 1.2 million SMEs in 2010, latest figures1 reveal that there are now more than 1.3 million SMEs throughout the country. Across the entire UK private sector, small and medium sized enterprises account for 99.5% of the total number of businesses and roughly 52% of total employment. The importance of SMEs for the UK economy has been growing in recent years and in 2016 SMEs had an annual turnover of £1,825 billion, equal to 47% of total revenue across all UK businesses. This quarterly report for CYBG, owner of Clydesdale and Yorkshire Banks, analyses the health of SMEs in the UK. The result of the analysis is the SME Health Check Index, which combines various statistics and indicators to evaluate the health of both the business and macroeconomic environments SMEs are operating in. The SME Health Check Index takes on values between 0 and 100. A score of 100 would indicate maximum improvements in the SME Health Check Index’s eight sub-components2 while a score of 0 would point to major declines in the sub-components. The maiden Q1 2017 report finds that: • The SME Health Check Index fell from 56.4 in the final quarter of 2016 to 46.5 in Q1 2017. This is the lowest reading since the historical look back to the beginning of the series in the first quarter of 2014. • Only two out of the eight indicators of the SME Health Check Index have improved since the previous quarter. SME business confidence and rising employment levels across the UK had a positive impact on the Index. • Slower revenue growth, rising spare capacity and a sharp increase in bankruptcies all exerted downward pressure on the headline figure. The number of UK business insolvencies rose by almost 6% since the previous quarter. • Wales and Yorkshire & the Humber lead the regional ranking, with the SME Health Check Index in the former up 3.1 points since Q4 2016. Improved business confidence and employment were some of the factors positively contributing to the improving business and economic health of SMEs in Wales. • Northern Ireland and the West Midlands placed at the bottom of the regional ranking. Weak employment growth and subdued lending all negatively impacted Northern Ireland’s SME Health Check Index Score.
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Data comes from the Department for Business Energy & Industrial Strategy’s Business Population Estimates and refers to 2016.
2
The eight sub-components are: bankruptcies, business costs, capacity, confidence, employment, GDP, lending and revenue.
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1 UK MACROECONOMIC ENVIRONMENT
0.6% business investment growth over Q1 2017
1.6% unemployment continues to trend downwards
projected UK economic growth this year
The UK economy grew at a quarterly rate of just 0.2% in Q1 20173, down from 0.7% in the final quarter of 2016 and the weakest performance since Q1 2016. The service sector expanded at a particularly slow pace with a decline in several important consumer focused industries, such as retail sales and accommodation. With inflation outstripping wage growth, households will feel a squeeze on their spending power this year, which is likely to dampen consumer spending. We have already seen the impact to some extent as reflected in a particularly poor performance in retail sales over the first quarter. Although retail sales figures for April pointed to a positive start to the second quarter, the uptick was likely distorted by warmer than usual weather and the late timing of Easter this year. While a weak pound and improving global economic demand should boost the UK’s export performance and the contribution of net trade to overall GDP growth, net trade in fact subtracted 1.4 percentage points from overall GDP growth over the first quarter, whereas it was one of the drivers of the UK’s economic performance in Q4 2016. A weak currency also raises the cost for imported commodities and materials needed in the production process and industrial production barely grew in the first quarter. On a more positive note, business investment grew 0.6% over the first quarter and unemployment continues to trend downwards. However, with wage growth failing to pick up, the squeeze on real household incomes is set to intensify in coming months. We expect business investment to rise slightly over 2017 and project UK economic growth of around 1.6% this year.
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ONS release: https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/secondestimateofgdp/quarter1jantomar2017
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2 SME BUSINESS HEALTH SOFTENS IN THE FIRST QUARTER 2017 As Section One highlights, the UK economy grew at a subdued pace at the start of 2017, with a particularly worrying slowdown recorded for the service sector. Accounting for over 99% of all UK businesses, SMEs are crucial to the UK economy and this section seeks to explore the health of SMEs across the country. Not only are we analysing different variables that can be directly linked to the performance of SMEs, such as confidence and revenue, we also investigate the business and macroeconomic environment in which SMEs are operating. This section begins by presenting the overall results of the SME Health Check Index and its indicators, before turning to regional comparisons. Mirroring the trend of weaker GDP growth at the beginning of the year, the SME Health Check Index fell from 56.4 in the final quarter of 2016 to 46.5 in the first quarter of 2017, thereby highlighting a deteriorating business health for UK SMEs. The SME Health Check Index was 1.3 points lower than a year ago, and at its lowest level since the start of the series in Q1 2014. The individual scores of all eight sub-components were below their respective long-term averages. The SME Health Check also remains well below levels seen throughout 2014 and 2015 when GDP growth was considerably stronger4, business costs faced by SMEs were lower and business confidence was elevated. The following section analyses the sub-components of the SME Health Check Index in more detail. Figure 1: SME Health Check Index SME Health Check Index Score
UK GDP quarter-on-quarter change
90
1.0%
80
0.9% 0.8%
70
0.7%
60
0.6% 50 0.5% 40 0.4% 30
0.3%
20
0.2%
SME Health Check Index
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The average quarterly growth rate over 2014 and 2015 was 0.6%.
Sources: FSB, ONS, BBA, Cebr analysis
GDP
20 17 Q 1
20 16 Q 4
20 16 Q 3
20 16 Q 2
20 16 Q 1
20 15 Q 4
20 15 Q 3
20 15 Q 2
20 15 Q 1
Q 4
Q 3
Q 2
Q 1
20 14
0.0% 20 14
0 20 14
0.1%
20 14
10
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2.1 INDEX INDICATORS
Bankruptcies Out of the eight indicators included in the SME Health Check Index, the bankruptcies measure received the lowest score for the third quarter running. Data from the Insolvency Service5 show that an estimated 5,857 companies across England, Wales, Scotland and Northern Ireland entered insolvency in the final quarter of 2016 (latest available data), a 52.6% increase on the same quarter in 2015 and the largest amount of bankruptcies in any quarter since the financial crisis. However, the ONS comments that the decline was largely driven by “changes to claimable expense rules”6 and it is therefore likely that next quarter’s figure will be lower. We therefore excluded this one-off effect for the purposes of measuring SME health. Despite omitting the mentioned one-off effect, bankruptcies increased 5.8% over the final quarter of 2016, marking the third consecutive quarterly rise in insolvencies.
GDP Another downward contribution to the overall SME Health Check Index comes from slower GDP growth. The UK economy expanded just 0.2% in the opening quarter of 2017 as service sector activity weakened, the Index of Production barely grew and net trade acted as a main drag on economic growth. Although business investment held up much better than expected, the 0.6% rise was not sufficient to offset the broad-based slowing of the goods-producing and services industries.
Business Costs Although wage growth has been relatively subdued in recent months, overall business costs faced by SMEs7 rose 3.3% year-on-year in Q1 2017, up from 2.8% in the final quarter of 2016 and the highest value since data collection for the SME Health Check Index began in Q1 2014. Rising prices for physical inputs such as basic metals and chemicals exerted upward pressure on overall business costs faced by SMEs. Recent price developments for commodities and the depreciation of the pound against major currencies since the Brexit vote mean that those businesses that rely on the import of raw materials faced particularly sharp cost increases over the first quarter. Ultimately, companies will have to decide on whether to pass higher input costs on to their customers in order to protect their profit margins or to accept lower profits in an attempt to maintain market share.
Lending to SMEs Latest data from British Bankers’ Association (BBA)8 highlight that lending to small and medium sized enterprises in the UK stood at £94.8 billion in the final quarter of 2016, down 1.3% from £96.1 billion in the previous quarter and the lowest amount since data collection for the SME Health Check Index started in Q1 2014.
https://www.gov.uk/government/statistics/insolvency-statistics-october-to-december-2016 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/586287/Q4_2016_statistics_release_-_commentary.pdf, p.6 7 The basket includes 33 different inputs such as physical inputs, services and employment. 5
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Lower lending figures could imply that SMEs are growing more concerned about economic and political uncertainty - especially with regards to ongoing Brexit negotiations – and are therefore more cautious about borrowing in order to finance investment. The decline in lending had a negative impact on the SME Health Check Index.
Revenue There was a smaller proportion of SMEs reporting increased revenues over the first quarter, thereby negatively affecting the overall Health Check Index. The contribution from the revenue indicator to the SME Health Check Index was among the weakest recorded since the start of the series in Q1 2014.
Capacity Another concern is that a larger proportion of SMEs operated below capacity in the first quarter of 2017. While this can partly be seen as a positive development suggesting that firms are able to cope with increased future demand, higher spare capacity is also an indication of subdued investment intentions and low productivity growth. Operating below capacity can result in job cuts as some businesses will have to adjust staff levels according to demand. The capacity indicator fell to its lowest level since Q2 2016.
SME business confidence There were only two sub-components of the SME Health Check Index that improved compared to Q4 2016. Business confidence9 as measured by the Federation of Small Businesses (FSB) Voice of Small Business Index rose to its highest level in over a year in the first quarter, highlighting how SMEs grew more confident about their prospects. The improvement in SME business confidence adds to the hopes that the UK economic growth slowdown in the first quarter was only a temporary blip, rather than the start of a prolonged period of subdued growth.
Employment The UK labour market has gone from strength to strength and the jobless rate stood at its lowest level in over four decades in March. The number of people in employment rose by 121,000 over the first quarter, representing a 0.4% rise since the final quarter of 2016. This was up from 0.1% in the final quarter of 2016 when the UK added 47,000 jobs. Rising employment figures generally highlight confidence about future workloads, adding to hopes that the SME Health Check Index will trend up again next quarter. However, with employment rising faster than GDP, productivity growth is likely to fall further.
8 The data refers to end of quarter balances and includes value of overdrawn balances and value of loan balances. The data can be accessed via the BBA website: https://www.bba.org.uk/news/statistics/sme-statistics/bank-support-for-smes-4th-quarter-2016/#.WUKDqJIrK01. 9 https://www.fsb.org.uk/docs/default-source/fsb-org-uk/fsb-sbi-q1-2017-with-infographicac25e0bc4fa86562a286ff0000dc48fe.pdf?sfvrsn=0
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2.1 INDEX INDICATORS
Only two out of the eight indicators of the SME Health Check Index have improved since the previous quarter. SME business confidence and rising employment levels across the UK had a positive impact on the Index. Figure 2: Indicators of the SME Health Check Index 80 70 60 50 40 30 20 10 0
SME Health Check Index
Employment Confidence
GDP
Q1 2017 Sources: FSB, ONS, BBA, Cebr analysis
Capacity
Revenue
Q4 2016
Business Costs
Lending
Bankruptcies
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2.2 REGIONAL BREAKDOWN
While the previous section of the report analysed the sub-components of the UK SME Health Check Index, this part investigates regional differences in order to understand which parts of the UK currently present a more favourable business and macroeconomic environment for SMEs. We divide the UK into nine English regions as defined by the Government office for the regions (East Midlands, East of England, London, North East, North West, South East, South West, West Midlands and Yorkshire & the Humber) as well as Northern Ireland, Scotland and Wales. Figure 3: Regional SME Health Check Index 60 50 40 30 20 10
Q1 2017
Sc ot lan d W es tM idl an No ds rth er n Ire lan d
W es t
No rth
Lo nd on
Hu m be r So ut h W es Ea t st of En gla nd No rth Ea st Ea st M idl an ds So ut h Ea st
Yo rk sh ire
&
th e
W ale s
UK
0
Q4 2016
Sources: FSB, ONS, BBA, Cebr analysis
With its SME Health Check Index rising 3.1 points since the final quarter of 2016, improving business confidence helped Wales remain at number one in the regional ranking. Wales remained in top position with its SME Health Check Index rising 3.1 points since the final quarter of 2016. Improving business confidence helped the region to secure the top spot in the regional rankings. Over the first quarter, staffing levels expanded by 1.8% in Wales, following a 1.3% decline in the previous quarter and positively contributing to the SME Health Check Index. Meanwhile, business costs faced by Welsh SMEs increased by 3.6% since the same quarter a year ago, thereby exerting some downward pressure on the region’s SME Health Check Index. The rise in business costs was the joint-strongest out of the monitored regions.
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2.2 REGIONAL BREAKDOWN
Business confidence was also a particularly bright spot in Yorkshire & the Humber, with only SMEs in the North East and East Midlands more upbeat about their future prospects. Over the first quarter, employment in Yorkshire & the Humber is estimated to have been unchanged since the previous quarter when staffing levels rose 0.9%. Lending to SMEs in the regions declined for the third consecutive quarter. However, the rate of decline was only slight. Overall, there were only four regions in which the health of SMEs improved during the first quarter of 2017. In addition to the 3.1 point rise in Wales, Yorkshire & the Humber recorded a 0.6 point increase in its SME Health Check Index while the East of England and the North West gained 2.6 and 3.9 points respectively since the previous quarter. Notably, the East of England moved into third spot, its highest ranking since Q2 2016 and indicative of a marked improvement in SME health in the region. It is especially encouraging that lending to SMEs in the East of England rose 2.5% in Q4 201610, suggesting that business investment may improve in the short term. The rise in lending was the most marked on record and the rate of increase was stronger than in any other monitored regions. Scotland remains in tenth position and ranks just below the North West with most subcomponents of its SME Health Check Index falling since Q4 2016, thereby pointing to a more challenging business and economic environment faced by the region’s small and medium sized enterprises. Scotland’s economy suffered under the drop in global oil prices since 2014 and was among the slowest growing regions in the UK for the past couple of years11. Moreover, the Scottish labour market has shown some signs of weakness recently, with employment numbers declining in Q1 2016 and Q3 2016. Encouragingly, the Scottish economy added jobs in Q1 2017 for the second successive quarter, although the rate of growth was only slight. Lending to Scottish SMEs fell, according to latest data12, marking three consecutive quarters of declines. The West Midlands and Northern Ireland find themselves at the bottom of the rankings, with both regions recording significant declines in their respective SME Health Check Indices since Q4 2016. While the West Midlands retained its position in the regional ranking, Northern Ireland dropped five places since the final quarter of 2016, placing 12th in Q1 2017. The data for Northern Ireland highlight that employment in the region is estimated to have declined 2.5% quarter-on-quarter during Q1 2017, marking the first fall in hiring since Q2 2016. The decrease in employment numbers is one of the largest contributors to the drop in the overall SME Health Check Index for Northern Ireland.
Data for Q1 2017 were not available at the time this report was produced. This assumption is based on GVA growth. 12 Latest available data refer to Q4 2016. 10 11
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Good news
2.5% confidence was a particularly bright spot in Yorkshire & the Humber
encouragingly, lending in the East of England increased in Q4 2016
GVA gross value added in London is likely to have outpaced other regions
and bad...
2.5% Scotland’s economy suffered under the drop in global oil prices since 2014
employment in Northern Ireland has fallen 2.5% quarter-on-quarter in Q1 2017
West Midland’s Index below UK average for seventh successive quarter
The West Midland’s SME Health Check Index remained below the overall UK average for the seventh successive quarter. Employment is estimated to have declined for the second consecutive quarter while lending also fell further. Although business confidence at SME firms in the West Midlands remained subdued in the first quarter of 2017, companies are more confident about their prospects than they were a year ago and GDP is predicted to have expanded at a similar rate to that recorded at the UK level.13 London’s SMEs accounts for roughly 30% of all UK SME turnover14 and the city moved from ninth position in Q4 2016 into eighth spot in Q1 2017. Despite the slowdown of the UK service sector in the first quarter, growth of gross value added in London is likely to have outpaced the other regions15 and business confidence at the capital’s SMEs improved markedly since the previous quarter. Although overall business costs faced by SMEs in London increased at the fastest pace in five-and-a-half years, the rise was below the overall UK average. One of the only indicators that improved since the previous quarter was the confidence measure, while the employment and lending measures exerted downward pressure on London’s SME Health Check Index.
Based on the historic relationship between the UK and the West Midlands, Cebr estimates GVA in the region to have expanded by 0.2% over the first quarter. Data come from the 2016 Business Population Estimate, Cebr calculations. 15 Based on the historic relationship between the UK and the West Midlands, Cebr estimates GVA in the region to have expanded by 0.6% over the first quarter. 13
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3 CONCLUSIONS
Rising employment and improved business confidence figures add to hopes that the economic environment in which SME businesses operate will improve next quarter and that the first quarter slowdown in UK GDP growth was only a temporary softening.
The SME Health Check Index – which analyses SME’s performance as well as their business and macroeconomic environment – fell from 56.4 in the final quarter of 2016 to 46.5 in the first quarter of 2017, highlighting a more challenging environment for the UK’s small and medium sized companies at the beginning of the year. A high number of bankruptcies and slower lending to SMEs were some of the main contributors to the weaker reading. Moreover, the analysis also revealed that a growing number of businesses operate below capacity which could ultimately result in subdued future investments and a hiring freeze going forward. Meanwhile, rising employment and improved business confidence figures add to hopes that the economic environment in which SME businesses operate will improve next quarter and that the first quarter slowdown in UK GDP growth was only a temporary softening. The regional breakdown of the SME Health Check Index revealed that small and medium sized businesses in Wales and Yorkshire & the Humber fared better than those in other regions. Yorkshire & the Humber was one of only four regions in which the SME Health Check Index moved higher since the previous quarter. At the bottom end of the regional rankings were the West Midlands and Northern Ireland, with the business and economic environment for SMEs having become more challenging in the opening quarter of 2017.
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4 METHODOLOGY
The SME Health Check Index is designed to measure small business performance and the business and macroeconomic environment within which SMEs operate. The index includes measures that can be directly linked to SME performance, as well as components that relate to the wider economy. Specifically, the following measures are included:
Bankruptcies The data comes from the Insolvency Service Statistics and measures the number of total new company insolvencies in the UK on a quarterly basis. Instead of including the raw figures in our calculation, we use the quarterly change in the number of new company insolvencies. The higher the change in the number of bankruptcies, the lower the score.
Business costs The Index measures the annual change in costs faced by a typical SME and the main data source for this measure is the Office for National Statistics. Higher costs are associated with a deteriorating business environment as companies will either have to pass these on to their clients in order to protect profit margins or accept lower profit margins in order to secure market share.
Capacity The data for capacity comes from the Federation of Small Businesses (FSB) and measures the proportion of SMEs operating below capacity. If firms operate below capacity, this could have negative implications for hiring and investments intentions. Therefore, a higher proportion of SMEs reporting to operate below capacity will have a negative impact on the overall SME Health Check Index.
Confidence SME business confidence data also comes from the FSB. The Index indicates how confident businesses are about their short-term prospects over the next three months. Higher business confidence has a positive effect on the SME Health Check Index.
Employment Data for this sub-component is taken from the ONS and measures the quarterly change in absolute employment figures. Higher employment figures are associated with an improving macroeconomic environment and may signal improved confidence about future workloads.
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Gross domestic product Gross domestic product figures are taken from the ONS and measure the quarterly percentage change in economic growth. For the regional breakdown, we estimated the quarterly figures based on the previous relationships between a region’s GVA and overall UK GDP growth.
Lending For the lending indicator, we used data from the British Bankers’ Association and calculate the quarterly change in lending balances. The following measures are included: value of overdrawn balances and value of loan balances.
Revenue Data come from the FSB and measure the net percentage balance of SMEs reporting an increase in revenues. Following the data collection we calculate the average of each individual series (such as employment, GDP etc.). In a second step, we calculate how many standard deviations a single data point (for example the employment data point for Q1 2017) deviates from its long-run mean. We then apply a scoring system ranging from 0 to 100. A score of zero is assigned to the lowest observed value while the highest observation receives a value of 100. This means, the more standard deviations a data point is below the mean, the lower its score and the more standard deviations is above the mean, the higher its score. This exercise is repeated for each of the eight indicators. The eight individual scores are the combined with an equal weight to the SME Health Check Index. A summary table of the subcomponents can be found below: Sub-component Bankruptcies Business Costs Capacity Confidence Employment GDP Lending Revenue
Source
Measure Quarterly percentage change in UK Insolvency Service number of bankruptcies Various, including Office for Annual change in business costs National Statistics faced by SMEs Federation of Small Net balance of SMEs operating Businesses below capacity Federation of Small Federation of Small Businesses Businesses Small Business Index Quarterly percentage change in Office for National Statistics employment numbers Quarterly percentage change in Office for National Statistics gross domestic product Quarterly percentage change in British Bankers’ Association lending to SMEs Federation of Small Net balance of SMEs reporting rise Businesses in revenue
Latest score 11 (Q4 2016) 42 (Q1 2017) 49 (Q1 2017) 67 (Q1 2017) 75 (Q1 2017) 67 (Q1 2017) 16 (Q4 2016) 45 (Q1 2017)
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CONTACT DETAILS
Corporate Affairs Christina Kelly christina.kelly@cybg.com 0141 242 315 07484 905 358 Jennifer Devlin jennifer.devlin@cybg.com 0141 242 3314 07484 908 519 @cybgplc #SMEhealth CYBG Plc Website: http://www.cbonline.co.uk/business/business-news/ http://www.ybonline.co.uk/business/business-news/
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CYBG PLC Registered number 09595911 (England and Wales)
Head Office: 30 St. Vincent Place Glasgow G1 2HL Registered Office: 20 Merrion Way Leeds, West Yorkshire LS2 8NZ
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