July 2026 updateM.INDEXOur Monthly Index on the state of UK CreditThe view from ExperianGrowth resumes, but the SME outlook remains mixedRecent economic indicators suggest the UK SME environment improved in July, although the recovery remains uneven. Flash PMI data showed private sector activity returning to growth after two months of contraction, supported by a recovery in services and continued strength in manufacturing. However, part of the manufacturing improvement may still reflect precautionary stock-building linked to supply chain disruption, rather than a broad-based recovery in underlying demand.The wider demand backdrop remains challenging. ONS survey evidence shows falling demand remains the most frequently cited concern among UK businesses, ahead of taxation and inflation. While energy price concerns have eased, this suggests businesses are still facing uncertainty around future revenues, limiting confidence around hiring, investment and expansion.Business investment has shown tentative signs of recovery, with Q1 growth outpacing wider capital investment. However, annual growth remains negative, and higher labour costs, elevated borrowing costs and geopolitical uncertainty continue to constrain capital expenditure. Construction remains a clear weak spot, with weak activity highlighting how investment cutbacks are still weighing on parts of the economy most exposed to larger capital projects.Experian credit data reflects this mixed environment. Credit quality continues to look resilient, with Commercial Delphi scores improving further and delinquency rates remaining slightly below year-end levels. However, liquidity and debt indicators still require close attention. Overdraft utilisation and the proportion of current accounts overdrawn remain above year-end, while revolving credit, loan and mortgage debt have all increased. This suggests some businesses are still relying on credit to support cashflow and working capital, even as headline risk metrics improve.Overall, the SME lending market appears to be moving into a more balanced but still uncertain phase. The return to growth and easing input cost inflation provide some reassurance, but weak demand, subdued investment and continued liquidity reliance mean the recovery is not yet secure. For lenders, the priority remains distinguishing businesses borrowing to fund genuine expansion from those using credit to bridge cashflow pressure.Gareth ReesHead of Commercial Credit & Risk, Experianbusinessuk@experian.comKey UK Economic & Commercial Credit MetricsPMIs: The UK’s private sector returns to growth in July, though construction downturn drags onUK Purchasing Managers Indices (PMIs)The latest flash UK Purchasing Managers’ Index (PMI) readings signalled a return to growth in July following two months of contraction. The Composite Output Index rose to a three-month high of 52.1, up from 49.3 in June, as services activity returned to expansion (51.8) and manufacturing output grew at its fastest pace in 22 months (53.6). New orders were supported by AI-related investment, defence spending and stronger export demand, while input cost inflation eased for a third consecutive month. However, respondents noted that part of the improvement in manufacturing may reflect precautionary stock-building in response to supply chain disruptions linked to the conflict in the Middle East.Construction remained the weakest area of private sector activity. The Construction PMI stood at 38.4 in June, only marginally above May’s six-year low of 38.2, with civil engineering activity declining at its fastest rate since April 2020. There were, however, tentative signs that conditions were becoming less adverse, as new orders continued to fall but at the slowest pace since March, while business optimism strengthened on expectations of increased infrastructure and public sector spending.Source: S&P Global, CIPS ONS BICS: Falling demand continues to weigh on business sentimentMain concern for UK businesses in August 2026According to the ONS Business Insights and Conditions Survey (BICS), falling demand remains the most frequently cited concern among UK businesses heading into August, reported by 18% of firms. This was notably higher than respondents citing taxation (12%) and inflation (6%), suggesting that weakness in customer demand continues to present a greater challenge than cost pressures for many businesses. Concerns surrounding energy prices have eased significantly, falling from 10% of responses in April to just 5% in August, reflecting summer seasonal factors and softer international energy prices. However, as most survey responses were collected before the conflict resumed, this improvement in sentiment may prove temporary.Key concerns for falling demand were most pronounced in manufacturing and professional, scientific and technical services, where 23% of firms cited it as their main challenge. By contrast, taxation was the principal concern in construction (14%), reflecting the sector’s exposure to rising payroll tax costs and upcoming regulatory levies, while accommodation and food services reported a more even spread of concerns across demand, taxation, energy prices and inflation, highlighting the sector’s continued fragility as businesses contend with pressures on multiple fronts.Source: ONS UK Business Investment: Shows tentative recovery, though momentum remains fragileUK business investment and gross fixed capital formationBusiness investment (BI) rose by 0.9% quarter on quarter in Q1 2026, outpacing 0.4% capital investment growth across the wider economy (GFCF), reflecting a partial rebound from the weakness during 2025, while growth in overall capital spending continues to be supported by other components of investment.However, the annual picture remains subdued, with business investment 1.3% lower than a year earlier despite total capital investment rising by 1.6%. Firms’ appetite for capital expenditure remains constrained by higher labour costs, elevated borrowing costs and ongoing geopolitical uncertainty. These pressures were again evident in the construction sector, where businesses cited cutbacks to investment plans as a drag on activity in June.There are, however, some tentative signs that conditions are becoming less adverse. Business expectations in the July flash PMI strengthened to their highest level since February, while some firms reported increased spending on AI adoption and digital technologies. Nevertheless, persistently weak annual investment growth suggests that businesses remain cautious to increase investment spending.Source: ONS Key UK Commercial Credit Metrics(Asset Finance, Credit Cards/Revolving Credit, Loans, and Mortgages) Average Commercial Delphi Score: 2019: 45; 2020: 43; 2021: 43; 2022: 38; 2023: 37; 2024: 37; 2025: 38; 2026 (June): 39; Variance: 3%Median Commercial Delphi Score: 2019: 41; 2020: 37; 2021: 37; 2022: 28; 2023: 27; 2024: 26; 2025: 29; 2026 (June): 32; Variance: 10.3%Average credit card/revolving credit utilisation rate: 2019: 100; 2020: 84; 2021: 101; 2022: 108; 2023: 111; 2024: 107; 2025: 106; 2026 (June): 105; Variance: -1.2%Average overdraft utilisation rate: 2019: 100; 2020: 62; 2021: 46; 2022: 81; 2023: 81; 2024: 80; 2025: 74; 2026 (June): 76; Variance: 2.8%Proportion of current accounts overdrawn: 2019: 100; 2020: 63; 2021: 73; 2022: 78; 2023: 78; 2024: 73; 2025: 55; 2026 (June): 59; Variance: 5.7%Average asset finance debt: 2019: 100; 2020: 100; 2021: 104; 2022: 112; 2023: 148; 2024: 157; 2025: 158; 2026 (June): 159; Variance: 0.6%Average credit card/revolving credit debt: 2019: 100; 2020: 94; 2021: 157; 2022: 182; 2023: 209; 2024: 237; 2025: 291; 2026 (June): 312; Variance: 7.2%Average loan debt: 2019: 100; 2020: 110; 2021: 129; 2022: 128; 2023: 134; 2024: 125; 2025: 117; 2026 (June): 119; Variance: 1.9%Average mortgage debt: 2019: 100; 2020: 99; 2021: 108; 2022: 109; 2023: 97; 2024: 98; 2025: 102; 2026 (June): 104; Variance: 2.3%Average non-mortgage debt: 2019: 100; 2020: 103; 2021: 111; 2022: 108; 2023: 123; 2024: 121; 2025: 121; 2026 (June): 123; Variance: 1.8%Status 2+ delinquency rate: 2019: 100; 2020: 157; 2021: 117; 2022: 117; 2023: 135; 2024: 145; 2025: 139; 2026 (June): 138; Variance: -0.5 %Default rate: 2019: 100; 2020: 76; 2021: 59; 2022: 71; 2023: 86; 2024: 103; 2025: 112; 2026 (June): 113; Variance: 0.5%The view from ExperianHeadline credit performance metrics remain resilient, with Commercial Delphi scores improving and delinquency rates remaining slightly below year-end.However, liquidity indicators still point to pressure beneath the surface. Overdraft utilisation, overdrawn current accounts and revolving credit debt remain above year-end levels.The wider economic backdrop has improved, with private sector activity returning to growth, but weak demand and construction pressures continue to limit confidence and investment appetite.For lenders, borrower behaviour remains key. Rising debt balances and liquidity reliance may provide earlier warning signs than arrears or default rates alone. For more in-depth insights, read our latest credit trends reportFind out more or contact us today to arrange a meeting ;