Further squeeze on sectors
The latest data-led insights from Clarity explore indicators of financial distress among UK SMEs across regions, as well as within key sectors of the economy. Clarity’s forward-looking recommendations take on particular importance when seen in the wider context of continued high levels of economic uncertainty.
The UK’s cost-of-living crisis may be lengthier than hoped. Although energy prices have fallen recently, the UK’s headline inflation continues to be surprisingly high. Inflation risks remain on the upside. This may mean that monetary tightening will still have quite a distance yet to run. Additional interest-rate rises will put further pressure on SMEs across the board by raising debt-service costs.
In the meantime, some of the sectors which the Clarity data shows have already experienced considerable pressure may be squeezed still further.
Comparing UK sectors to unlock potential
Our Clarity research compares sectors using a series of financial performance ratios that speak to an SME's financial health, which are correlated with stress/distress and growth indicators. The quantifiable and trackable early warning signs and growth indicators identified by Clarity are based on more than 30 years of data gathering.
Our latest Clarity research reveals wide sectoral variations in capital efficiency, as measured by return on capital employed (ROCE), with construction out in front and education a long way down with an unsustainable 1.4%.
The research looks at how real estate profits have surged on the back of smart dealmaking and growing demand for out-of-town properties, as hybrid working takes hold. Despite this, real estate could be facing a potential sector wide liquidity crisis on the basis of our latest current ratio measures.
Further analysis by sector can be found in Quantuma’s new report ‘Clarity in uncertain times’. Designed to support professional advisers and business owners, this data rich report examines SME viability and vulnerability across sectors and regions, equipping professional advisers and business owners with powerful insights. The Clarity report signposts the way forward for sectors, indicating short- and longer-term areas of focus to help unlock potential for SMEs.
The way forward - Clarity in uncertain times
We have recently launched our latest programme of insight and support powered by our unique data asset, Clarity. Developed by an expert analytics team, the Quantuma Clarity data tool provides analysis of SME’s performance against growth and distress factors to provide professional advisers and business owners with powerful insights, to allow them to unlock potential.