Sage SME Pulse: East Midlands SMEs outpace th...

East Midlands SMEs deliver 18.8% profit growth, outpacing the UK by a wide margin.

What the company is saying

Sage positions the East Midlands as the UK's standout region for SME profitability, highlighting 18.8% profit growth in the year to Q2 2026—over three times the national average of 5.3%. The announcement frames Derby as the top UK city for revenue growth at 39.1% over two years, supported by £10 million in government investment and ongoing private-sector backing from firms like Rolls-Royce. Sage emphasizes the role of local leadership and rapid AI adoption, citing that 83% of East Midlands AI adopters increased their usage in the past year. The company draws attention to sectoral strengths in manufacturing, construction, and real estate, and presents its SME Performance Pulse as a real-time, data-driven benchmark for policymakers and investors. The tone is confident, with Derk Bleeker, Chief Commercial Officer, underscoring the region’s resilience and blueprint potential for national growth. Sage avoids forward-looking projections, focusing instead on realised gains and comparative outperformance.

What the data suggests

The data shows East Midlands SMEs achieved 18.8% profit growth in the year to Q2 2026, more than triple the UK average of 5.3%. Derby led all UK cities for revenue growth at 39.1% over two years and has topped the rankings for four consecutive quarters. The West Midlands posted the second-highest profit growth at 12.8%. The SME Performance Pulse draws on anonymised accounting data from nearly 150,000 SMEs. Manufacturing in the East Midlands contributes around £17 billion annually and supports over 300,000 jobs. Government investment in Derby reached £10 million. Across the UK, real estate was the fastest-growing sector with 12.4% revenue growth in Q2 2026, followed by agriculture at 8.4%. Nationally, small business profits grew by 5.3% in the year to Q2 2026, up slightly from 5.1% in Q1, while real revenues rose 1.6% annually, down from 3.2% in the previous quarter. AI adoption is accelerating in the East Midlands, with 83% of AI adopters increasing usage, though only one in five of the UK's 5.7 million small businesses use AI regularly. The North East also saw positive momentum, with 1.5% revenue growth and 4.3% profit growth for small businesses.

Analysis

The announcement is data-driven and focused on realised, historical performance metrics for SMEs in the UK, particularly the East Midlands. All key claims are supported by specific, recent numerical data (e.g., 18.8% profit growth for East Midlands SMEs, 39.1% revenue growth for Derby, etc.), and there are no forward-looking projections or aspirational statements about future performance. The tone is positive but proportionate to the evidence, with no exaggerated language or unsupported claims about future outcomes. While the summary references government and private investment, these are described as historical facts rather than future plans, and no large capital outlay is paired with uncertain, long-dated returns. The absence of any forward-looking claims or promotional language means the narrative closely matches the disclosed reality.

Risk flags

• ●The regional outperformance may not be sustainable if underlying demand continues to soften, as indicated by the slowdown in small business revenue growth from 3.2% in the previous quarter to 1.6% in Q2 2026. If this trend persists, future profit growth could moderate.
• ●The heavy emphasis on AI adoption as a driver is based on a relatively small subset of firms—only one in five UK small businesses use AI regularly, so broader productivity gains may be limited unless adoption accelerates.
• ●Government and private-sector investment, such as the £10 million in Derby and involvement from Rolls-Royce, are cited as catalysts, but the announcement does not quantify the direct impact or sustainability of these investments for future periods.
• ●The data sample is large (150,000 SMEs) but may not capture all relevant regional or sectoral risks, especially if economic conditions shift or if there are unreported concentrations in specific industries.
• ●While the East Midlands and select regions show strong results, the national average remains modest, and the deceleration in revenue growth points to potential macroeconomic headwinds that could affect future SME performance.

Bottom line

Sage’s data-driven update confirms that East Midlands SMEs are outperforming the UK average, with 18.8% profit growth and Derby’s 39.1% revenue surge standing out. The narrative is credible, anchored in specific, recent numbers and supported by evidence of government and private investment, as well as rapid AI adoption among leading firms. Risks include the recent slowdown in revenue growth, limited AI uptake across the broader SME base, and uncertainty about the durability of current trends if economic conditions worsen. Investors should treat these results as a snapshot of realised regional strength, not a guarantee of future performance. The most important takeaway is that regional and sectoral differences in SME growth are widening, and the East Midlands currently offers a clear example of how targeted investment and technology adoption can drive outperformance.

Announcement summary

(LSE/AIM:SGE) Sage has published the latest edition of its SME Performance Pulse, revealing that East Midlands SMEs recorded profit growth of 18.8% in the year to Q2 2026, more than three times the national average of 5.3%. Derby ranked first among UK cities for revenue growth over the past two years, up by 39.1%, and has held the top spot for four consecutive quarters, supported by £10 million of government investment in the city’s growth. The West Midlands recorded the second-highest profit growth in the country at 12.8%. Lincoln placed third nationally for revenue growth, giving the East Midlands two of the UK's three fastest-growing urban areas. Across the UK, Sage’s data shows that real estate recorded the strongest revenue growth of any sector in Q2 2026 at 12.4%, followed by agriculture at 8.4%. Manufacturing contributes around £17 billion annually to the East Midlands economy and supports more than 300,000 jobs. The Sage SME Performance Pulse draws on anonymised accounting data from nearly 150,000 SMEs. The UK economy grew by 1.2% year-on-year in Q2 2026, more than double the 0.6% growth in Q1 2026. Real revenues for small businesses rose by 1.6% annually in Q2 2026, down from 3.2% in the previous quarter. Research by Enterprise Nation finds that 83% of AI adopters in the East Midlands increased their use of AI over the past year, while just one in five of the UK's 5.7 million small businesses use AI regularly. The North East saw average small business revenues rise 1.5% and real-terms profits increase by 4.3%.

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