In collaboration with Smart Data Foundry and The Centre for Economics and Business Research (Cebr), the latest iteration of the Sage Small Business Tracker has been launched (see here for previous versions).

The Tracker continues to analyse anonymised Sage Accounting and Payroll data of over 130,000 UK Small and Mid-sized Businesses (SMBs) and looks at how they are performing in real terms in the current economic climate. The anonymised data set includes SMBs from all regions across the UK, including Northern Ireland, Scotland, and Wales with annual revenue of between £0–£200,000 + .

The most recent report explores how SMBs are handling a tough economy with changing customer demands and uncertain politics, highlighting that they are poised to capture growth opportunities as average profitability increases.

While average revenues dropped by 1.7 % compared to last year, small businesses managed to grow their profits by 6.5 %. This increase in profitability was supported by considerable reductions in expenses and overheads, decreasing by 8.8 % and 8.1 % respectively. This careful financial management shows how businesses are smartly adjusting to economic pressures, and continued political and market uncertainty is impacting on investment decisions.

Derk Bleeker, Chief Commercial Officer at Sage, said "This quarter's tracker shows how small businesses are effectively managing challenges like reduced revenues and broader economic uncertainties. By controlling costs, they've managed to become more profitable, though many are waiting for a more stable economic and political climate before making major investments."

The report shows that small businesses are financially healthier, with their cash balances up by 4.8 % from last year, providing a buffer against financial surprises. At the same time, average debt reduced by 11.6 %, showing intentional financial planning in an uncertain economy.

The Tracker also highlighted a steady drop in capital spending, with a sharp 16.1 % annual decrease. This is due to higher interest rates raising borrowing costs, leading businesses to postpone or scale down their investment plans and impacting growth.

As the cost of energy and fuel started to drop, small businesses saw their biggest yearly decrease in overheads since the post-pandemic period began. However, productivity fell by 11.4 % over the year due to tough revenue conditions.

Q1 2024 – top findings

• Small businesses saw 6.5 % increase in profitability, despite 1.7 % drop in revenues on an annual basis
• Expenditures and overheads decreased by 8.8 % and 8.1 %, respectively
• Capital expenditures dropped by 16.1 % annually, showing ongoing investment caution
• A 11.4 % annual decrease in productivity, impacted by weak revenue performance

Download the report here for the full analysis.