New Sage data reveals East Midlands SMEs recorded profit growth of 18.8% in the year to Q2 2026 - the highest of any UK region.
Derby ranked first among UK cities for revenue growth over the past two years, up by 39.1%. It has now held the top spot for four consecutive quarters, supported by £10 million of government investment in the city’s growth.
The findings point to a combination of local leadership and rising AI adoption, offering lessons for policymakers seeking regional growth during a period of more challenging national economic conditions.

LONDON, Sept. 10, 2026 (GLOBE NEWSWIRE) -- Sage (FTSE: SGE), the leader in accounting, financial, HR and payroll technology for small and mid-sized businesses, today revealed that small businesses in the Midlands are outpacing the rest of the UK on profitability. 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%.

The Sage SME Performance Pulse, which draws on anonymised accounting data from nearly 150,000 SMEs, found the East Midlands led all UK regions on both profitability and revenue growth over the past year. The West Midlands recorded the second-highest profit growth in the country at 12.8%, showing how regions are turning their strengths into growth.

"The East Midlands is where the UK's small business growth story is being written right now," said Derk Bleeker, Chief Commercial Officer at Sage. "What stands out in our data is that this is a region growing faster than its counterparts elsewhere in the country, in the same sectors, facing the same national headwinds. That kind of sustained regional performance is a blueprint for growth. It shows the power of backing local economic strengths and harnessing technology like AI."

Sage’s data provides timely insights into the growth of UK small businesses, revealing that profits grew by 5.3% for the average small business in the year to Q2 2026 - a marginal uptick on the 5.1% recorded in Q1. This data comes as the UK economy grew by 1.2% year-on-year in Q2 2026, according to the Office for National Statistics (ONS), more than double what it was in Q1 2026 at 0.6%.

Whilst real revenues for small businesses rose by 1.6% annually in Q2 2026, this was down from the 3.2% pace recorded in the previous quarter. The deceleration in revenue growth suggests softening underlying demand for small businesses' goods and services.

The local drive

The overarching findings underline the resilience and ambition of small businesses across the UK. At the city level, Derby recorded the strongest revenue growth of any UK city over the past two years, up 39.1% and topping the rankings for the fourth consecutive quarter. Lincoln placed third nationally, giving the East Midlands two of the UK's three fastest-growing urban areas.

Across the region, government-backed initiatives such as the £10 million Government-backed ‘Team Derby’ and major private-sector investment from companies including Rolls-Royce are strengthening the region’s industrial ecosystem and creating opportunities for smaller businesses and local supply chains.

Growth powered by industry strengths and AI

Across the UK, Sage’s data reveals that real estate recorded the strongest revenue growth of any sector in Q2 2026 at 12.4%, followed by agriculture at 8.4%.

The East Midlands' strong performance reflects a region building on its industrial strengths. Construction, professional services, and real estate are all growing faster than their UK counterparts, supported by a pipeline of investment and development. Additionally, manufacturing contributes around £17 billion annually to the East Midlands economy and supports more than 300,000 jobs, making it one of the UK's most important industrial regions.

Businesses across these sectors are increasingly using AI, automation, and digital technologies to improve productivity and competitiveness. Research by Enterprise Nation finds that while just one in five of the UK's 5.7 million small businesses are using AI regularly, 83% of AI adopters in the East Midlands increased their use of AI over the past year, highlighting the growing role technology is playing in helping firms scale and build resilience.

The North East is also seeing similar momentum, with average small business revenues rising 1.5% and real-terms profits increasing by 4.3%. The region's AI Growth Zone is building on strengths in digital technology, energy, advanced manufacturing and university-led innovation, demonstrating how regions that combine industrial heritage, technological capability and local decision-making are increasingly well placed to drive the UK's next phase of growth.

Find out more about the Sage SME Performance Pulse for Q2 2026, including regional rankings, sector analysis and economic forecasts: https://www.sage.com/en-gb/company/sustainability-and-society/tech/data-for-good/

About the Sage SME Performance Pulse

The Sage SME Performance Pulse is a quarterly measure of UK SME health and behaviour, drawing on anonymised accounting and payroll data from nearly 150,000 businesses using Sage software. The Smart Data Foundry aggregates and cleans the data; Cebr deflates and analyses it ahead of publication. The Pulse is hosted on Sage's Data For Good platform and is designed to complement traditional economic indicators by showing what businesses are actually doing, in real time. Data is produced in partnership with Cebr.

About Sage

Sage exists to knock down barriers so everyone can thrive, starting with the millions of small and mid-sized businesses served by us, our partners and accountants. Customers trust our finance, HR and payroll software to make work and money flow. By digitalising business processes and relationships with customers, suppliers, employees, banks and governments, our AI-powered platform connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology and experience to tackle digital inequality, economic inequality and the climate crisis.

Notes to editors

What has Sage announced?
Sage has published the latest edition of its SME Performance Pulse, revealing that small businesses in the East Midlands are outpacing the rest of the UK on profitability. 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% — making it the fastest-growing region in the country.

What is the Sage SME Performance Pulse?
The Sage SME Performance Pulse is a quarterly measure of UK SME health and behaviour, drawing on anonymised accounting and payroll data from nearly 150,000 businesses using Sage software. The Smart Data Foundry aggregates and cleans the data, which is then deflated and analysed by Cebr ahead of publication. It is designed to complement traditional economic indicators by showing what businesses are actually doing, in real time.

Which areas are performing strongest?
The East Midlands leads all UK regions on both profitability and revenue growth. Derby ranked first among UK cities for revenue growth over the past two years, up 39.1%, and has now held the top spot for four consecutive quarters. Lincoln placed third nationally, giving the East Midlands two of the UK's three fastest-growing urban areas. The West Midlands recorded the second-highest profit growth in the country at 12.8%.

What is driving the East Midlands' strong performance?
The region's growth reflects a combination of local leadership, a strong advanced manufacturing base, and rising technology adoption. Government-backed initiatives such as the £10 million Team Derby programme and major private-sector investment from companies including Rolls-Royce are strengthening the regional industrial ecosystem.

How is AI contributing to growth in the region?
Businesses across the East Midlands are increasingly using AI, automation, and digital technologies to improve productivity and competitiveness. Research by Enterprise Nation finds that 83% of AI adopters in the East Midlands increased their use of AI over the past year — highlighting the growing role technology is playing in helping firms scale and build resilience, even as just one in five UK small businesses use AI regularly.

Media Contact
Erin Brooks
erin.brooks@sage.com
561-693-9471

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