August 2026M.INDEXOur Monthly Index on the state of UK CreditThe view from ExperianUK SMEs enter a firmer but still cautious phaseRecent economic indicators suggest the UK SME environment improved further in August, with private sector growth strengthening and new orders rising at their fastest pace since before the Iran conflict began. The Composite PMI increased to 52.5, with growth increasingly led by services, supported by stronger demand and technology investment. Manufacturing also remained in expansion, although momentum softened as earlier stock-building faded and higher energy costs weighed on output. This suggests the recovery is becoming more balanced than earlier in the year, but still not fully broad-based.The wider demand backdrop remains mixed. ONS survey evidence shows falling demand remains the most frequently cited concern among businesses, particularly in manufacturing and professional services. This matters because it suggests that, despite stronger PMI readings, many firms are still facing uncertainty around customer demand and future revenues. At the same time, energy costs are re-emerging as an inflationary pressure, especially in transport, storage, accommodation and food services, while higher wage and payroll costs continue to weigh on margins.Business investment provides a more encouraging signal. Investment rose by 1.7% quarter on quarter in Q2 and returned to positive annual growth for the first time since Q4 2025. This suggests firms are becoming more willing to commit capital where demand and confidence have improved, particularly around technology and productivity-led investment. However, the recovery remains gradual, and persistent cost pressures, higher financing costs and wider uncertainty are likely to keep businesses cautious about the pace of future spending.Experian credit data reflects this more balanced but still uneven environment. Headline credit quality continues to improve, with Commercial Delphi scores higher than year-end and delinquency rates remaining slightly lower. However, default rates have risen materially, and liquidity indicators remain important to monitor. Overdraft utilisation and the proportion of overdrawn current accounts remain above year-end levels, while average revolving credit, loan and mortgage debt have all increased.Overall, the SME lending market appears to be moving into a firmer but still cautious phase. Stronger activity, improving confidence and a return to annual investment growth provide reassurance, but weak demand in some sectors and renewed cost pressures mean the recovery is not yet secure. For lenders, the key question remains whether borrowing is increasingly being used to support growth and investment, or whether some businesses are still relying on credit to manage cashflow pressure beneath improving headline risk metrics.Gareth ReesHead of Commercial Credit & Risk, Experianbusinessuk@experian.comKey UK Economic & Commercial Credit MetricsPMIs: UK August PMIs signals firmer private sector growthUK Purchasing Managers Indices (PMIs)The latest flash UK Purchasing Managers’ Index (PMI) readings point to firmer private sector growth in August, with the Composite PMI edging up to 52.5 and new orders increasing at their fastest pace since before the Iran conflict began in February 2026. Growth was increasingly services-led, with stronger demand and technology investment driving the fastest expansion since February. Manufacturing activity also grew, though momentum softened as stock-building faded and higher energy costs weighed on output. Business confidence improved for a third consecutive month, despite continued staff cuts linked to higher labour costs. Meanwhile, rising fuel and wage pressures contributed to a renewed pickup in inflation.Construction remained the weakest area of private sector activity, although the downturn continued to ease. The Construction PMI rose to 44.7 in July from 38.4 in June, its highest level since the conflict-driven slump earlier this year. While activity remained in contraction across all major subsectors, declines in output, new orders and employment moderated, supported by improving tender opportunities and more stable external conditions. Business expectations also strengthened, with more firms anticipating growth in the months ahead.Source: S&P Global, CIPS ONS BICS: Demand weakness persists as cost pressures re-emergeMain concern for UK businesses in September 2026According to the ONS Business Insights and Conditions Survey (BICS), falling demand remained the most frequently cited concern among UK businesses in September, reported by 15.2% of firms, though this was down from 16.4% a year earlier. Demand was the principal concern in manufacturing (23.0%) and professional, scientific and technical services (18.6%), highlighting continued weakness in customer demand.Taxation remained the second most cited concern at 10.7%, down from 13.3% a year earlier amid the heightened uncertainty surrounding the Autumn 2025 Budget. However, higher payroll costs and a constrained fiscal backdrop continue to weigh on sentiment ahead of the upcoming Autumn Budget. Construction stood out as the only sector where taxation was the principal concern (13.8%), reflecting cost pressures amid subdued activity.Energy costs are also re-emerging as an inflationary headwind, with the share of businesses citing them as a concern rising from 3.7% to 9.8% over the year. The impact was most acute in transportation and storage (23.7%), where energy prices were the dominant concern, and in accommodation and food services (19.6%), reflecting these sectors’ greater exposure to fuel and utility costs. Retailers, meanwhile, faced a more balanced mix of pressures from weak demand, energy costs and competition.Source: ONS UK Business Investment: Recovery gains traction as confidence improvesUK business investment and gross fixed capital formationUK business investment (BI) rose by 1.7% quarter on quarter in Q2 2026, accelerating from 0.9% in Q1 and returning annual growth to positive territory for the first time since Q4 2025, with investment 0.8% higher than a year earlier. The increase suggests firms are becoming more willing to commit capital spending despite higher labour and financing costs, elevated input prices and ongoing geopolitical uncertainty, as stronger demand and improving business confidence support investment plans. Wider capital spending (GFCF) also strengthened in Q2 2026, rising by 1.2% over the quarter and 2.7% annually.While the recovery remains gradual, the return to annual growth and improving business sentiment point to a more resilient investment outlook than earlier in the year. Nevertheless, persistent cost pressures and economic uncertainty are likely to keep firms cautious about the pace of future 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 (July): 40; Variance: 4.3%Median Commercial Delphi Score: 2019: 41; 2020: 37; 2021: 37; 2022: 28; 2023: 27; 2024: 26; 2025: 29; 2026 (July): 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 (July): 104; Variance: -2.7%Average overdraft utilisation rate: 2019: 100; 2020: 62; 2021: 46; 2022: 81; 2023: 81; 2024: 80; 2025: 74; 2026 (July): 76; Variance: 2.9%Proportion of current accounts overdrawn: 2019: 100; 2020: 63; 2021: 73; 2022: 78; 2023: 78; 2024: 73; 2025: 55; 2026 (July): 58; Variance: 5.5%Average asset finance debt: 2019: 100; 2020: 100; 2021: 104; 2022: 112; 2023: 148; 2024: 157; 2025: 158; 2026 (July): 159; Variance: 0.3%Average credit card/revolving credit debt: 2019: 100; 2020: 94; 2021: 157; 2022: 182; 2023: 209; 2024: 237; 2025: 291; 2026 (July): 310; Variance: 6.4%Average loan debt: 2019: 100; 2020: 110; 2021: 129; 2022: 128; 2023: 134; 2024: 125; 2025: 117; 2026 (July): 120; Variance: 2.7%Average mortgage debt: 2019: 100; 2020: 99; 2021: 108; 2022: 109; 2023: 97; 2024: 98; 2025: 102; 2026 (July): 104; Variance: 2.0%Average non-mortgage debt: 2019: 100; 2020: 103; 2021: 111; 2022: 108; 2023: 123; 2024: 121; 2025: 121; 2026 (July): 122; Variance: 0.5%Status 2+ delinquency rate: 2019: 100; 2020: 157; 2021: 117; 2022: 117; 2023: 135; 2024: 145; 2025: 139; 2026 (July): 139; Variance: -0.3 %Default rate: 2019: 100; 2020: 76; 2021: 59; 2022: 71; 2023: 86; 2024: 103; 2025: 112; 2026 (July): 120; Variance: 6.8%The view from ExperianHeadline credit performance metrics remain resilient, with Commercial Delphi scores improving and delinquency rates remaining slightly below year-end.Defaults have increased and liquidity indicators still point to pressure beneath the surface. Overdraft utilisation, overdrawn current accounts and revolving credit debt remain above year-end.The wider economic backdrop has improved, with stronger private sector growth and business investment returning to annual growth, but weak demand and renewed cost pressures continue to weigh on confidence.For lenders, borrower behaviour remains key. Rising defaults, higher debt balances and continued liquidity reliance may provide earlier signs of emerging stress than headline credit quality alone. For more in-depth insights, read our latest credit trends reportFind out more or contact us today to arrange a meeting ;