June 2026M.INDEXOur Monthly Index on the state of UK CreditThe view from ExperianRecent economic indicators suggest the UK SME environment remains under pressure, although the pace of deterioration may be beginning to stabilise. Private sector activity contracted for a second consecutive month, with the Composite PMI remaining below 50 as weakness in the services sector continued to outweigh resilient manufacturing performance. However, survey evidence again suggests that manufacturing activity is being supported by businesses bringing forward purchases ahead of anticipated price increases, rather than reflecting stronger underlying demand. This implies that current resilience may prove temporary, with activity potentially softening further once this demand is exhausted.While geopolitical tensions have begun to ease following recent developments in the Middle East, businesses continue to operate against a challenging cost backdrop. Energy prices remain an important driver of pricing decisions, particularly across hospitality, retail, manufacturing and transport, although improving supply conditions could gradually reduce some of these pressures over the coming months. At the same time, the UK labour market continues to soften. Regular pay growth has slowed to its weakest level since early 2023, vacancies have fallen to their lowest level in over four years, and higher labour costs introduced earlier this year continue to weigh on business margins. Together, these trends point to an environment where firms are becoming increasingly cautious around recruitment, investment and future expansion.This more defensive mindset continues to shape business borrowing behaviour. Slowing wage growth and easing energy costs may provide some support to cashflow later in the year, but uncertainty around demand means many businesses remain focused on preserving liquidity rather than committing to long-term investment. As a result, borrowing demand is likely to remain concentrated in working capital facilities, with investment-led lending continuing to lag until confidence improves more materially.Experian credit data reflects this divergence between operating conditions and headline portfolio performance. Credit quality has remained resilient, with Commercial Delphi scores improving further and delinquency rates continuing to edge down. On the surface, this suggests SME portfolios remain in relatively good health. However, default rates have increased again, while debt balances across loans, revolving credit and overdrafts continue to rise. This suggests that although widespread financial distress has yet to emerge, businesses are increasingly relying on flexible borrowing to manage cashflow rather than financing expansion.This divergence remains one of the most important themes in the current market. Stable delinquency should not necessarily be interpreted as an absence of risk. Instead, rising utilisation, increasing debt balances and continued reliance on working capital facilities may represent leading indicators of financial pressure before they become visible through traditional credit performance measures. For lenders, monitoring borrower behaviour alongside conventional risk metrics will become increasingly important as the economic outlook evolves.Gareth ReesHead of Commercial Credit & Risk, Experianbusinessuk@experian.comKey UK Economic & Commercial Credit MetricsPMIs: Services activity drag deepens UK slowdown despite manufacturing resilienceUK Purchasing Managers Indices (PMIs)The latest flash UK Purchasing Managers’ Index (PMI) readings indicate that private sector activity contracted for a second consecutive month in June. The Composite PMI edged down to 49.4 in June from 49.7 in May, remaining below 50, indicating activity contraction. This decline was driven by a fall in the services PMI to 48.7 from 49.3. In contrast, manufacturing continued to expand at a solid pace, with a reading of 53.1, down slightly from 53.9 in May but still firmly in expansionary territory.Despite this continued strength in manufacturing, S&P Global (the publisher of the UK PMI) noted that anecdotal evidence suggests the expansion reflects continued ‘front‑loading’ ahead of expected goods price increases, amid supply concerns linked to the Iran conflict and higher energy costs. Although input cost pressures moderated in June, they remained elevated across both manufacturing and services, reflecting ongoing supply chain disruption amid geopolitical tensions.Source: S&P Global, CIPS ONS BICS: Geopolitical disruptions still weighs on pricing decisions despite peace deal% of businesses citing Energy Prices as a factor causing price rises in the month ahead to be consideredAccording to the ONS Business Insights and Conditions Survey, 27% of businesses cited energy prices as a factor contributing to potential price rises being considered in July 2026. Although this is lower than in May, it remains far above the level reported for March (based on responses collected in February, before the onset of the recent geopolitical disruption). Fuel prices rose sharply through March and April following the supply shock, with the average price of a litre of petrol increasing from 132p in February to a peak of 158p in mid‑April, while diesel prices also rose significantly.Rising energy costs continue to exert upward pressure on output pricing decisions, particularly in energy‑intensive sectors such as hospitality, retail, manufacturing, and transport and storage. However, with signs of easing geopolitical tensions and the anticipated reopening of key supply routes, businesses may see some relief in energy‑related cost pressures in the coming months.Source: ONS Real Earnings: Pay growth slows further as UK labour market coolsUK average pay growth (%)UK regular pay growth slowed in the three months to April, increasing by 3.4% year on year and continuing the downward trend seen since early 2025. Adjusted for CPIH inflation, regular pay was broadly flat, rising by just 0.1%, the weakest since early 2023, although total pay growth (including bonuses) was modestly stronger at 1.2%. Regular pay growth in the public sector remained strong at 5.1%, in contrast to private sector growth of just 2.9%, the lowest since autumn 2020.This weaker pay growth comes alongside other warning signs of labour market softening. The UK recorded 707,000 vacancies in the three months to May, the lowest level since early 2021. Unemployment stood at 4.9% in the three months to April, down slightly on the previous rolling period but higher than a year earlier. These developments come amid further labour costs and tighter regulation from April, alongside added pressure on firms’ margins from higher input costs linked to the recent geopolitical disruptions.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 (May): 39; Variance: 1.8%Median Commercial Delphi Score: 2019: 41; 2020: 37; 2021: 37; 2022: 28; 2023: 27; 2024: 26; 2025: 29; 2026 (May): 31; Variance: 6.9%Average credit card/revolving credit utilisation rate: 2019: 100; 2020: 84; 2021: 101; 2022: 108; 2023: 111; 2024: 107; 2025: 106; 2026 (May): 107; Variance: 0%Average overdraft utilisation rate: 2019: 100; 2020: 62; 2021: 46; 2022: 81; 2023: 81; 2024: 80; 2025: 74; 2026 (May): 76; Variance: 3.1%Proportion of current accounts overdrawn: 2019: 100; 2020: 63; 2021: 73; 2022: 78; 2023: 78; 2024: 73; 2025: 55; 2026 (May): 58; Variance: 4.5%Average asset finance debt: 2019: 100; 2020: 100; 2021: 104; 2022: 112; 2023: 148; 2024: 157; 2025: 158; 2026 (May): 159; Variance: 0.4%Average credit card/revolving credit debt: 2019: 100; 2020: 94; 2021: 157; 2022: 182; 2023: 209; 2024: 237; 2025: 291; 2026 (May): 309; Variance: 6.3%Average loan debt: 2019: 100; 2020: 110; 2021: 129; 2022: 128; 2023: 134; 2024: 125; 2025: 117; 2026 (May): 122; Variance: 4.3%Average mortgage debt: 2019: 100; 2020: 99; 2021: 108; 2022: 109; 2023: 97; 2024: 98; 2025: 102; 2026 (May): 103; Variance: 1.7%Average non-mortgage debt: 2019: 100; 2020: 103; 2021: 111; 2022: 108; 2023: 123; 2024: 121; 2025: 121; 2026 (May): 123; Variance: 1.5%Status 2+ delinquency rate: 2019: 100; 2020: 157; 2021: 117; 2022: 117; 2023: 135; 2024: 145; 2025: 139; 2026 (May): 137; Variance: -1.6%Default rate: 2019: 100; 2020: 76; 2021: 59; 2022: 71; 2023: 86; 2024: 103; 2025: 112; 2026 (May): 119; Variance: 6.0% The view from ExperianHeadline credit performance metrics remain resilient, despite a more challenging operating environment for UK businesses.Risk quality has continued to improve, with stronger Commercial Delphi scores and lower delinquency rates. However, rising default rates and increasing debt balances suggest pressure is building beneath the surface.Businesses continue to rely on overdrafts, revolving credit and other flexible borrowing facilities to manage working capital as confidence remains subdued and investment appetite weak.For lenders, the key focus should be on borrower behaviour as well as traditional performance metrics. Rising utilisation and liquidity dependence may provide earlier signals of emerging stress than delinquency 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 ;