Business income growth rate slows for SMEs in 2015

The incomes of smaller UK businesses have risen steeply since 2010 but the growth rate has slowed this year, a new report shows.

The latest Barclays SME Income Index analysed the current account levels of small and medium sized enterprises (SMEs) to determine their overall income levels. It found that business incomes were still rising but had slowed to a growth rate of 4% in 2015. This compares to 8% in 2014, which was the biggest annual growth rate in 14 years.

Annual business income growth rate is a good general indicator of a company’s health. If a business stagnates or income levels actually start to decline, it could lead to spiralling problems that, if not taken in hand, could eventually leave a company facing business insolvency.

The Barclays report revealed that SME income growth in the UK had slowed but that it still remained above 2010 levels. Business income had grown by a total of almost a quarter (24%) since 2010. The fact that business growth had continued in 2015, even at a lower level than the previous year, suggested that growth should still continue into 2016.

Adam Rowse, Head of Business Banking at Barclays, said that the 4% growth rate could still be seen as an indicator of a thriving year ahead for UK businesses.

Positive annual income growth was achieved across all sectors apart from agriculture and education, with construction, real estate, the arts and transport showing the highest growths. Construction moved up from third place in 2014 to achieve the highest growth this year. Real estate slipped from first to second, with the top two reflecting a continuing property boom.

The arts made a major jump, rising from seventh in 2014 to third this year, while the transport sector leaped from 11th to fourth.

Growth was also achieved across all areas of England and Wales, although not all achieved the same rates. London saw the highest income growth (5.2%), followed by the Northwest (4.7%), the East Midlands (4.4%) and East England (4%).

By Phil Smith

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