South West SMEs outperforming rest of UK when it comes to growth

The South West is the leading region in the UK when it comes to growth prospects for SMEs, according to Clarity, a new data asset from business advisory firm Quantuma. Clarity also reveals that the South West’s combined growth potential and financial strength is 11 per cent higher than London.

Quantuma’s Clarity model has been created to inform and support the advisory and lending community in developing predictive insight into the health of UK’s SMEs. In addition to identifying opportunities for growth, Clarity also measures levels of distress amongst SMEs and their respective sectors in order to spot issues early and support advisers in taking action to resolve them.

Sectors driving growth

In Quantuma’s latest report it reveals that several sectors have been instrumental in the growth of SMEs across the South West with retail and wholesale, construction, and leisure outperforming London by 44 per cent, 21 per cent and 20 per cent respectively. This growth has been driven by many retailers and businesses in the leisure sector quickly returning to near-normal trading patterns as the South West recovered from lockdowns quicker than many other UK regions. Wholesale businesses also outperformed London, benefitting from established routes of distribution of products by air and sea.

Distress in the region

The report also reveals that financial distress is concentrated across fewer sectors in the region. According to Clarity, 75 per cent of companies in the highest risk category lie across only five sectors – construction (19 per cent), property (16 per cent), wholesale and retail (14 per cent), technology (14 per cent), and financial services (12 per cent).

Despite construction and wholesale and retail providing some the biggest growth opportunities for the region, Clarity also shows they’re at significant risk of financial distress. This insight will allow the advisory and lending community to prioritise support to businesses in these sectors.

Clarity also shows that from September 2021 to January 2022 levels of distress in the region remained stable in comparison to the rest of the UK, despite a spike in November and December 2021, which is promising for the long-term health of the region.

Louise Durkan, managing director at Quantuma, said: “It is encouraging to see that Clarity reveals a broadly positive picture for the South West region and its SME community with strong growth prospects in several sectors coupled with levels of distress that are in line with the rest of the UK. Whilst we might expect to see tourism and leisure making a strong comeback post-lockdown restrictions, it is interesting to see how our data indicates the relative strength of sectors like retail and construction in comparison to London.

“We are delighted to launch Clarity in the South West, and we are already finding that the model is providing invaluable support to the advisory community to help identify key sectors and individual businesses that are growth champions in the region and those that are struggling and need further support and advice.”