The Sage Small Business Tracker Q1 2023

In collaboration with Smart Data Foundry and The Centre for Economics and Business Research (Cebr), the Sage Small Business Tracker has been launched. 

The Tracker analyses anonymised Sage Accounting and Payroll data of between 85,000 - 120,000 UK Small and Mid-sized Businesses (SMBs) to look 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 data indicates a mixed picture for SMBs. There is no doubt that there are challenges in the current climate, such as a contraction in profitability and revenue balanced by signs of resilience, with a decrease in overheads and potential profit growth on the horizon for Q2 2023.
 
The Sage Small Business Tracker is part of a suite of analysis Sage undertakes to ensure we have a clear picture for SMBs. Sentiment data from earlier in the year, including data from Sage’s Small Business Big Opportunity Survey and the company’s collaborative report with Cebr ’SMBs Driving Economic Recovery’, is consistent with the recent Tracker suggesting while SMBs are currently facing financial constraints, there's an underlying optimism. They are keen to adapt and invest in the future, even if immediate resources are limited.
 
While UK SMBs have shown an appetite for technology and hold a generally positive outlook for 2023 and beyond, they still face hurdles, such as limited tech investment and talent recruitment.

The present landscape underlines the need for a Blueprint for Digital-led Growth to enable innovation and automation and help SMBs invest in digital in the future with a time-limited Small Business ‘Digital Growth Fund’. 

Sage's stance is echoed by Group CEO Steve Hare, who is a champion of SMBs: “As pillars of our economy, SMBs success is integral. We'll continue to work alongside them and the government, advocating for an environment where they can thrive.

Q2 2023 – top findings

• SME revenue and profitability contracted year-on-year. Profitability fell by 8.3% with revenue down by 27.9%. 
• A stagnating economy, marred by a cost-of-living crisis and rising interest rates and inflation is dampening business activity. 
• However, average overheads fell by double-digits (16.4%) in Q1, meaning cost pressures for small businesses are easing because of lower energy costs. 
• Looking ahead, profits are estimated to grow in Q2 2023 by 13.5% on an annual basis due to significant falls in overheads. 
• Nonetheless, the large fall in revenues in Q1 2023 shows small businesses are struggling this year with no growth predicted for the first part of 2023. This likely reflects wider GDP growth for the whole economy of just 0.2% in Q1. 
• Small businesses show a sustained period of increased resilience between Q1 2019 to Q1 2023, with the average number of days to pay an invoice dropping by 16 days in the past four years.

Download the report for the full analysis.