UK SME Financial Health Report

Comprehensive Analysis of 2.6M+ Small & Medium Enterprises

Summary

Our latest analysis of over 2.6m UK SMEs reveals a resilient small business sector navigating economic headwinds with cautious optimism. With median solvency ratios holding steady at 1.28:1 and equity growing at 1.6% year-on-year, Britain's entrepreneurial backbone demonstrates adaptability in challenging conditions.

Key Findings:

• 89.2% of previously solvent SMEs maintained financial health
• Median net profit margin: 3.4% among profitable companies
• Turnover growth: flat (0.0%) reflecting economic pressures
• Regional disparity: Northern Ireland authorities show strongest solvency improvements

Market Overview

Financial Health Snapshot

The SME landscape shows mixed signals with stability being the dominant theme:

Current Solvency Ratio 1.281

Previous Period 1.277

Change +0.4bp

Equity Growth +1.6%

Asset Growth +0.1%

Turnover Growth 0.0%

This data tells a story of SMEs focused on consolidation rather than expansion, prioritising financial stability over aggressive growth.

Sectoral Deep Dive

Top Performing Sectors (by Solvency Improvement)

Our data reveals clear winners in the current economic environment:

1. Manufacturing of Coke & Refined Petroleum (SIC 19)

Solvency delta: +5.0%

Companies analysed: 106

Equity growth: 0.4%

2. Veterinary Activities (SIC 75)

Solvency delta: +3.5%

Companies analysed: 3,483

Equity growth: 5.1%

Notable: Strong demand for pet care services

3. Sewerage (SIC 37)

Solvency delta: +1.5%

Companies analysed: 739

Equity growth: 5.8%

4. Human Health Activities (SIC 86)

Solvency delta: +1.4%

Companies analysed: 100,238

Equity growth: 7.3%

Largest cohort in top performers

5. Residential Care (SIC 87)

Solvency delta: +1.0%

Companies analysed: 11,792

Equity growth: 3.9%

Sectors Under Pressure

1. Scientific R&D (SIC 72)

Solvency delta: -0.9%

Companies analysed: 5,265

Innovation investment impacting short-term ratios

2. Other Manufacturing (SIC 30)

Solvency delta: -0.5%

Companies analysed: 1,758

3. Food & Beverage Services (SIC 56)

Solvency delta: -0.5%

Companies analysed: 104,625

Hospitality sector continues recovery challenges

4. Manufacture of Chemicals (SIC 20)

Solvency delta: -0.5%

Companies analysed: 2,805

5. Manufacture of Tobacco (SIC 12)

Solvency delta: -0.3%

Companies analysed: 883

Regional Analysis

Geographical Winners & Losers

Regional performance shows striking divergence, with Northern Ireland and rural areas outperforming urban centres.

Top 10 Local Authorities (Solvency Improvement)

Rank	Authority	Companies	Solvency Δ
1	Fermanagh and Omagh	2,991	+2.1%
2	South Holland	3,452	+2.0%
3	Armagh, Banbridge & Craigavon	4,217	+1.6%
4	Mid Ulster	3,614	+1.5%
5	Blaenau Gwent	780	+1.4%
6	Powys	3,583	+0.8%
7	Sandwell	9,875	+0.7%
8	Erewash	3,438	+0.7%
9	Ribble Valley	2,723	+0.6%
10	Moray	1,906	+0.6%

Pattern Insight: Five of the top six authorities are in Northern Ireland, suggesting regional economic policies or sector concentrations are driving outperformance.

Bottom 5 Local Authorities

Authority	Companies	Solvency Δ
Clackmannanshire	703	-0.8%
Torridge	1,707	-0.3%
Na h-Eileanan Siar	730	-0.2%
Neath Port Talbot	2,385	-0.2%
Warrington	13,459	-0.1%

Critical Insights

The Profitability Divide

A significant finding emerges when comparing companies that report full profit and loss statements versus those that don't:

Companies WITH P&L Data (41,666 companies)

• Median solvency: 1.374 (higher)
• Net margin: 3.4%
• Equity growth: 1.2%
• Turnover growth: 0.0%

Companies WITHOUT P&L Data (2,581,523 companies)

• Median solvency: 1.280 (lower)
• Equity growth: 1.6% (higher)
• Asset growth: 0.1%

Interpretation: Companies with transparent reporting show stronger solvency positions but more conservative equity growth. This may reflect larger micro-enterprises with more formal structures.

Insolvency Transitions

Our transition analysis reveals stability with pockets of distress:

Previous State	Current State	Companies	% of Total
Solvent	Solvent	1,791,596	68.3%
Insolvent	Insolvent	512,575	19.5%
Solvent	Insolvent	211,838	8.1%
Insolvent	Solvent	107,180	4.1%

Key Takeaway: While 89.4% of previously solvent companies maintained health, 8.1% deteriorated into technical insolvency. However, 17.3% of previously insolvent companies achieved recovery.

The Turnover-Solvency Correlation

Our statistical analysis reveals a negligible correlation (r = -0.00010) between turnover growth and solvency improvement. This finding challenges conventional wisdom that top-line growth automatically translates to financial stability.

Implication: SMEs should focus on operational efficiency and margin management rather than revenue growth at all costs.

Data Quality & Methodology

Coverage Excellence

• Total companies analysed: 2,623,189
• Data source: Companies House filings
• Filters applied: Active SMEs only (≤49 employees or designated micro/small)
• Metrics calculated: Solvency ratios, growth rates, liquidity measures
• Regional granularity: 400+ local authorities
• Sectoral detail: 80+ two-digit SIC codes

Calculation Framework

• Solvency ratio: Total Assets ÷ Total Liabilities
• Equity growth: Year-on-year change percentage
• Delta calculations: Current period minus previous period

Market Implications

For Lenders and Investors

1. Healthcare and veterinary sectors show exceptional resilience
2. Northern Ireland represents untapped opportunities
3. Hospitality recovery remains challenged despite reopening

For Business Owners

1. Flat turnover should not cause panic: focus on margins
2. Regional location matters more than previously thought
3. Transparency (full P&L reporting) correlates with stronger balance sheets

For Policymakers

1. Regional disparity requires targeted support programmes
2. R&D-intensive sectors need patient capital frameworks
3. Hospitality sector still requires strategic intervention

Looking Forward

The UK SME sector enters the coming period with cautious fundamentals:

• Stability over growth remains the theme
• Sectoral divergence creating winners and losers
• Regional factors increasingly influential
• Margin management more critical than revenue expansion

This comprehensive dataset provides the granular insights needed to navigate the current business climate with confidence.

About Our Data

This analysis represents one of the most comprehensive views of UK SME financial health available, combining:

• Official Companies House filings
• Advanced financial metric calculations
• Regional and sectoral segmentation
• Longitudinal comparison capabilities

Want deeper insights for your sector or region? Our platform offers customisable analysis across 2.6M+ active SMEs with monthly updates.

Data current as of latest Companies House filings. Analysis covers active SMEs with available financial statements. Methodology available upon request.

For data inquiries: Contact DataLedger team

Next report: Monthly update cycle

Coverage: UK-wide, all active SME sectors