Welsh SMEs experience increase in business health in the first quarter of the year

• The SME Health Check Index revealed a small increase in the Health Check Index for SMEs in Wales despite a sharp fall in employment
• The growth of the SME population in Wales has been well below the UK average in recent years expanding by less than 15% between 2014 and 2018

CYBG’s latest SME Health Check Index dropped by 6.6 points to 48.5 at a national level in the first quarter of 2019, its lowest rating for a year, driven by lower SME borrowing and an increase in businesses operating below capacity.

Wales experienced a small increase in its SME Health Check Index score from 51.8 in Q4 2018 to 55.1 in Q1 2019. However, despite strong gains in the confidence and capacity indicators, 28,000 fewer people were employed in Wales in the first three months of the year.

Following last quarter’s special report into the health of SMEs in 25 UK cities, this Index examined the growth rates of business populations in various sectors at a city level. In Wales, Swansea and Cardiff are featured with key findings including a 21% rise in the overall Cardiff SME population as well as a 41% rise in the number of financial services sector SMEs operating in the city.

In Swansea, the manufacturing sector performed well, increasing by 17% between 2014 and 2018. But there was particularly weak growth rate in the business administration sector.

The report is published in partnership with leading economic consultancy, the Centre for Economics and Business Research (Cebr). Despite the gloomy national top line figure, and persistent low confidence amongst the country’s SMEs, there are grounds for cautious optimism with GDP and employment both slowly increasing.

However, there is concern that some of the rebound in activity at the start of the year was related to Brexit contingency planning and the underlying picture is less promising than the headline figures suggest. It remains unclear if pre-Brexit stockpiling will continue in the run up to the new 31st October expected Brexit date.

Gavin Opperman, Group Customer Banking Director, at CYBG, said: “The latest SME Health Check Index paints a picture of resilient SMEs despite low confidence and a reluctance to borrow. As a bank, it is our mission to help businesses grow. We expect that a future uptick in confidence will increase willingness to borrow to fund growth.

“Previous deep dives into the city information has given us some rich insight into the regional picture, so this time we have chosen to take a closer look at how business creation has evolved on a city-by-city basis. The number of SMEs in Welsh cities bodes well for future economic vibrancy.”