UK small business profits hit four-year high, Sage finds

UK small and medium-sized enterprise profits have reportedly grown by 7.4% in the year to the first quarter of 2026, marking the highest growth rate since 2022, according to Sage data.

The findings, which have been compiled from anonymised accounting records of nearly 150,000 firms by the technology company, showed an acceleration from 5.5% profitability growth in the previous quarter.

Real revenues for small businesses also increased by 3.2% during the same period, representing a fourth consecutive quarter of revenue growth for the sector.

The expansion comes alongside wider economic growth, with Office for National Statistics (ONS) data showing the UK economy expanded by 0.6% quarter-on-quarter in the first quarter of 2026.

However, progress remains limited by cash flow issues, as 49% of small business invoices remain overdue. According to Sage, firms wait an average of 27 days for payment after billing.

These delays have created a wider impact, with small firms taking an average of 37.1 days to pay their own suppliers, up from 31.9 days in the first quarter of 2025.

The data coincides with the progression of the Small Business Protections (Late Payments) Bill through parliament, which aims to penalise firms that persistently pay suppliers late.

The government also plans to introduce mandatory e-invoicing from 2029 to speed up transactions. Digital invoicing typically accelerates payment by five to seven days.

Regionally, the East Midlands led small business profit growth at 20.2%, followed by the West Midlands at 16.3% and London at 10.6%.

Derby recorded the highest two-year revenue growth among UK cities at 43.6%, maintaining the top position for three consecutive quarters.

Small business commissioner, Emma Jones, 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.”