A new survey by Tyneside technology giant Sage has revealed increased profitability in the SME sector, though late payments continue to pose a significant challenge for many smaller firms.
Profit Growth Accelerates
The Sage SME Performance Pulse, which analyses accounting data from nearly 150,000 SMEs across the UK, found that profit growth has accelerated consistently over recent quarters, reaching its highest level since early 2022. According to Sage's data, profits grew by 7.4% in the year to Q1 2026, up from 5.5% in the previous quarter.
Sage noted that SME growth remains broad-based across the UK, with the East Midlands experiencing the highest growth and SME profits in the North increasing by 3.4%. Strong performances were observed in the manufacturing, professional services, technology and finance sectors.
Resilience of Small Businesses
Sage has positioned itself as a champion of the small business sector, which forms a large part of its client base for accounting software and other technologies.
Derk Bleeker, chief commercial officer at Sage, said: “The UK’s small business community continues to demonstrate extraordinary resilience to adapt and grow. The fact that profitability has reached its highest level in four years is a testament to the determination and ingenuity of business owners across the country. It also highlights the opportunity that exists to help SMEs build on this momentum and unlock even greater growth in the years ahead.”
Late Payments Remain a Problem
However, the survey also highlighted that late payments remain a significant issue for many small firms. Nearly half of all SME invoices (49%) are overdue, with businesses waiting an average of 27 days to receive payment after issuing an invoice. These delays are creating a ripple effect across the economy, with SMEs themselves now taking an average of 37.1 days to pay supplier invoices, up from 31.9 days in the first quarter of 2025.
Emma Jones, the Government’s Small Business Commissioner, said: “Sage’s data shows that more needs to be done to tackle late payments, with too many small businesses still waiting weeks to be paid. That’s why action to improve payment practices is so important. It gives firms greater certainty over their cash flow and the confidence to invest, hire and grow. Tackling late payments isn’t just about fairness; it’s essential to unlocking the full potential of the UK’s small businesses.”
Support for Under-Represented Entrepreneurs
Separately, Sage and its partner Village Capital have awarded 12 grants totalling £141,000 to entrepreneurs from the second cohort of the Sage Impact Entrepreneurship programme. The programme supports under-represented businesses addressing pressing challenges and has recognized two Newcastle firms: Recovolt, which develops infrastructure to safely neutralise end-of-life electric vehicles, and METZero, a wastewater technology company that retrofits treatment sites with a solution that cuts pollution and energy use.
