Small business profits rising despite challenges in the economy, Sage survey says

The Sage SME Performance Pulse also highlighted continuing problems from late payments

A survey by Tyneside technology giant Sage has pointed to increased profitability in the SME sector, but warns that late payment continues to be a major problem for many smaller firms.

The Sage SME Performance Pulse, which draws on accounting data from nearly 150,000 SMEs around the UK, found profit growth has accelerated consistently over recent quarters, reaching its highest level since early 2022. Sage’s data suggests profits grew by 7.4% in the year to Q1 2026, up from 5.5% the previous quarter.

Sage said that SME growth remains broad-based across the UK, with the East Midlands seeing the highest growth and SME profits in the North increasing by 3.4%. It said strong performances were seen in the manufacturing, professional services, technology and finance sectors.

Sage has in recent years set itself up as a champion of the small business sector, which makes up much of the client base for its 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.”

But Sage’s survey has also highlighted how late payments remain a significant issue for many small firms. Nearly half of all SME invoices (49%) are overdue, the survey found, with businesses waiting an average of 27 days to receive payment after issuing an invoice. The 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.”

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 EV, and METZero, a wastewater technology company that retrofits treatment sites with a solution that cuts pollution and energy.