Findings from the Sage Small Business Performance Pulse Q1 2026

Sage Quarterly Summary

The latest Sage SME Performance Pulse showed robust performances for profits and growth, though this was combined with a weaker performance among indicators such as productivity. Expenditure growth decelerated more than revenue growth, leading to a strong performance for small business profits. The UK economy grew by an estimated 1.1% year-on-year in Q1 2026, an increase in pace from the 1.0% growth seen in Q4 2025. The latest quarter also saw the effects of rising global energy prices begin to feed through to the UK economy, though the full effects of this shock has not fully emerged.

Key Highlights

Profits grew robustly: Small business profits grew by 7.4% in the year to Q1 2026. This marks the highest rate of growth in four years.

Revenues rose: Real revenues for small businesses in the sample grew by 3.2% year-on-year in Q1 2026. This marks the fourth consecutive quarter of positive yearly growth, but a moderation from the 4.4% revenue growth recorded in the previous quarter.

Expenditure growth decelerated: Real expenditures among small business grew by just 1.6% year-on-year in Q1 2026, down from 4.8% growth in the previous quarter. Lower expenditure growth than revenue growth helped support the positive result for profits over the quarter. 

Productivity declined and wage growth moderated: Productivity for the average small business in the sample fell by 3.0% in Q1 2026, down from 1.8% growth in the previous quarter. Meanwhile, wage growth moderated.

Sage Forecast

Looking ahead, the UK economy is expected to remain subdued as rising energy prices feed through into higher business costs and household bills, weighing on consumer spending and wider economic activity. Inflation is also expected to remain above target for longer, delaying monetary easing, which combined with lingering uncertainty is will act as a headwind to investment over the coming year. A deceleration in wage growth is expected to ease the burden on businesses by lowering labour costs.

To ­­­­explore the full insights and analysis, you can read the full report here.

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