East Midlands SMEs Outpace UK with 18.8% Profit Growth

Sage, the leading provider of accounting and financial technology for small and mid-sized businesses, has released new data highlighting the exceptional performance of East Midlands-based SMEs. According to the Sage SME Performance Pulse, which draws on anonymized data from nearly 150,000 SMEs, East Midlands businesses recorded a profit growth of 18.8% in the year to Q2 2026, a figure three times higher than the national average of 5.3%.

Derby emerged as the standout city, with a revenue growth of 39.1% over the past two years. This marks the fourth consecutive quarter that Derby has held the top spot, with government investment of £10 million supporting its growth. The city’s economic success is attributed to a combination of local leadership and rising AI adoption.

The performance of the East Midlands region stands out against a backdrop of more challenging national economic conditions. The findings suggest that regional policies and investments are driving sustainable growth. "The East Midlands is where the UK's small business growth story is being written," stated Derk Bleeker, Chief Commercial Officer at Sage. "What stands out in our data is that this region is growing faster than its counterparts, in the same sectors, facing the same national headwinds. That kind of sustained regional performance is a blueprint for growth."

While the national economy grew by 1.2% year-on-year in Q2 2026, small businesses across the UK saw a marginal uptick in profits, growing by 5.3% compared to 5.1% in Q1. Meanwhile, real revenues for small businesses rose by 1.6% annually in Q2 2026, down from a 3.2% growth rate in the previous quarter. This deceleration in revenue growth indicates softening demand for goods and services.

The East Midlands' success is attributed to its industrial strengths, particularly in construction, professional services, and real estate, which are growing faster than their UK counterparts. Government-backed initiatives like the £10 million Team Derby program and private-sector investments from companies such as Rolls-Royce are contributing to the region’s robust industrial ecosystem. Additionally, businesses across these sectors are increasingly leveraging AI, automation, and digital technologies to enhance productivity and competitiveness. Research by Enterprise Nation indicates that 83% of AI adopters in the East Midlands increased their use of AI over the past year, underscoring the growing role of technology in supporting business growth.

The West Midlands also showed strong performance, recording the second-highest profit growth in the country at 12.8%. The region’s ability to leverage its strengths and foster technological adoption is seen as a model for regional economic development. The North East is also experiencing momentum, with small business revenues rising 1.5% and real-term profits increasing by 4.3%. The region’s AI Growth Zone is building on its strengths in digital technology, energy, advanced manufacturing, and university-led innovation, demonstrating how regions with a blend of industrial heritage, technological capability, and local decision-making can drive growth.

Sage’s quarterly performance pulse provides real-time insights into the health and behavior of UK SMEs, complementing traditional economic indicators. The data underscores the resilience and ambition of small businesses across the UK, with the East Midlands leading the pack in profitability and revenue growth. As the UK faces economic challenges, the region’s success offers valuable lessons for policymakers and regional economic strategies.