The bank’s SME Health Check Index found that businesses in Yorkshire and the Humber experienced a fall of 15 per cent in the third quarter of the year compared to the previous quarter.
In line with the national picture, business confidence fell, while employment in the region dropped by 16,560 in the third quarter of 2017.
Business cost measures also deteriorated along with the net creation of new businesses.
There were a few positive signs in that economic growth (as measured by GDP) improved from the second quarter. Also improvements in lending performance should provide a boost later next year.
Compiled by leading economics consultancy Centre for Economics and Business Research Limited (Cebr), the report brings together a range of indicators on the health of the UK’s SMEs and is an important tool in helping understand how SMEs can be better supported.
Across the UK, the SME Health Check Index fell to its lowest level since January 2014 – falling from 56.3 in Q2 of 2017 to 46.9 in Q3, with the indicators for employment, revenue, confidence and net business creation all down compared to Q2.
Businesses in the North and the Midlands were the worst hit – areas of the country that have been prioritised by the Government and where there already exists a substantial gap in growth compared to London and the South-East.
Given the recent drop in the SME Health Check Index, CYBG is calling on the Government to make changes sooner rather than later and do more to help businesses manage their costs and restore confidence.
Graeme Sands, head of business banking at CYBG, said: “The recent announcements made by the Chancellor in his Budget to help SMEs, especially on business rates, were very welcome.
“We also welcome the publication of the Industrial Strategy White Paper and the important measures this includes to build long-term prosperity, particularly outside of London and the South-East.
“However, what is clear is that more needs to be done in the short term to help boost confidence amongst SMEs while we wait for the longer-term benefits of some of these policies to take effect.”
SME business costs increased by 2.5 per cent this quarter, with many SMEs unable or unwilling to pass this cost on to customers.
Small and medium businesses are essential to the productivity and prosperity of the UK economy. There are 5.7 million SMEs, employing 16.1m people (60 per cent of private-sector employment) and they account for 51 per cent of the UK’s total business revenue (£1.9 trillion a year). Sustained poor performance by SMEs could have a significant and long-term negative impact on the economy.
Earlier this year, CYBG committed to making a minimum of £6bn of lending available from 2017 to 2019 to help fuel the growth of SME businesses in the UK.
Oliver Kolodseike, senior economist at CEBR, said: “It is disappointing that SMEs are currently facing an increasingly challenging economic environment, with rising business costs continuing to act as a barrier to stronger business growth.
“Confidence and business creation are also down which is likely a result of the political uncertainty that persists. With the OBR (Office for Budget Responsibility) recently revising down its growth and productivity forecasts for the coming years, SMEs may face a challenging 2018. ”