THE latest SME Health Check Index from CYBG 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 borrowing and an increase in businesses operating below capacity.

The North-East was one of six regions to see an improvement in the SME Health Check Index in Q1 2019, with its score increasing by 3.7 points to 57.3.

This was due to an uptick in SME sentiment and a LARGE fall in the number of firms operating below capacity, particularly in the manufacturing sector.

However, the North-East employed 5,000 fewer people compared to the previous quarter and nearly 26,000 less than at the same point last 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 the North-East, SME growth was slightly below the UK average and the expansion of professional, scientific and technical sectors have been slower than in most other parts of the UK.

Newcastle has seen a rapid growth in firms specialising in information and communications while Sunderland experienced a large increase in SMEs that fabricate metal products as part of the car manufacturing supply chain.

Middlesbrough’s SME numbers grew by 18 per cent between 2014 and 2018, with the construction sector one of the largest drivers for growth.

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 much 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 October 31 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.

“Growth in the number of SMEs in the North-East has been just below the national average, but it’s encouraging to see strong growth seen in information and communications firms in Newcastle, car manufacturing supply chain firms in Sunderland and the importance of the construction sector in Middlesbrough.”