Author: Paula Fagan, Marketing Manager
This is the third article in our Clarity series where we look at UK SME viability and vulnerability across sectors and regions, to provide professional advisers and business owners with powerful insights. In this article, we look at SME distress analysis by sector.
This is the third article in our Clarity series where we look at UK SME viability and vulnerability across sectors and regions, to provide professional advisers and business owners with powerful insights. In this article, we look at SME distress analysis by sector.
Challenging market conditions for SMEs
Market conditions continue to be mixed for the UK’s circa 5.5 million SMEs. Inflation is down from the peaks seen in 2022/23. However, SMEs are grappling with the impact of rising payroll costs and volatile energy prices. Top concerns include the increase in employers’ national insurance contributions (NICs). In addition, the Bank of England anticipates a “bumpy path” for inflation rates over the coming year.
The fall in borrowing costs provides some relief for SMEs. However, interest rates are unlikely to come down to the very low levels seen through much of the 2010s.
The current economic challenges are hitting SMEs hard, making it critical for business leaders to take action in the areas that are within their control. Such interventions can support the SME sector, and ensure it is in the best possible situation to withstand additional economic turbulence.
Gauging vulnerability - Distress analysis by sector
Our Clarity distress research identifies those SMEs experiencing increased risk across three alert categories, focusing on SMEs with insolvency risk rates of 4 to 25 times the average rate. The latest research confirms that the challenging and uncertain economic conditions are increasing the level of insolvency risk.
The Clarity analysis shows a rising level of insolvency risk across sectors, with vulnerability at its most acute amongst the construction sector. Construction has been experiencing mixed fortunes, and the challenges could continue to build in the latter part of 2025. The sector’s standout ROCE contrasts with the high distress levels across the 4-8%, 8-15% and 15-25% insolvency risk rate bands.
With the high distress levels in construction come the heightened risks in the closely related real estate and electrical, gas, steam and air conditioning supply sectors.
Vulnerability and viability within sectors
Further distress analysis by sector can be found in Quantuma’s new report ‘Clarity in a challenging climate’. Designed to support professional advisers and business owners, this data rich report examines SME viability and vulnerability across sectors and regions. This equips professional advisers and business owners with powerful insights.
The way forward - Clarity in a challenging climate
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.
Request your copy of our latest Clarity report
Designed to equip lenders, lawyers, accountants and business owners with powerful insights, this data rich report examines SME viability and vulnerability across regions and sectors. To request your copy of the ‘Clarity in a challenging climate’ report, please click below.
