Financial Reports13 October 20265 min read

What Counts as a Good Gross Margin? Why There Is No Table to Look It Up In

There is no published UK gross margin figure by industry, and the reasons are worth knowing. Here are three comparisons that work instead.

The question everyone asks second

Once an owner knows how to work out their gross margin, the next question is always the same: is 34% good?

It is the right question and it has no lookup answer. A 20% gross margin is perfectly healthy for a distributor who buys and resells at volume, and would be close to fatal for an agency whose main direct cost is freelancer time. The number only means something inside a trade.

That is unsatisfying, so people go looking for a table. This is what happens when you do.

Why there is no table

We went looking for a published UK gross margin figure by industry, to put industry comparisons in the product. There is not one. Two reasons, both worth knowing, because together they explain why the tables you find online deserve suspicion.

The official statistics measure something adjacent. The ONS Annual Business Survey publishes turnover and purchases by sector, which look like the two ingredients of a gross margin. They are not. "Purchases" there covers all bought-in goods and services, including plenty you would call overheads, so turnover minus purchases divided by turnover produces a value-added measure rather than a gross margin. The ONS also publishes a "profitability of UK companies" series, which is a return on capital: a different thing again, and not a margin at all.

Most small companies never publish the number. We parsed a Companies House daily bulk file in September 2026 and found a turnover figure stated in roughly 1.5% of filings. That is not an error. Small companies are allowed to file filleted or abridged accounts, which carry a balance sheet and no profit and loss statement whatsoever. A margin average built from the filings that do state turnover would describe a biased sliver: the companies that chose to publish more than the law required.

So when you find a page listing typical gross margins by industry, look for the source. Usually there is not one.

Three comparisons that do work

Your own last twelve months. Same business, same trade, same accounting treatment, same judgement calls about what counts as a direct cost. This is the only genuinely like-for-like comparison available to you, and it answers the question that actually matters, which is not "am I normal" but "is this getting better or worse". A margin of 34% tells you very little on its own. A margin of 34% where you ran 41% a year ago is a finding.

The margin your overheads demand. This one you can actually calculate, and it beats any benchmark because it is about your business. Work backwards from your fixed costs. Say, and these figures are invented for the example, your overheads come to £18,000 a month across rent, salaries, software and insurance, and your gross margin is 34%. Every pound of revenue leaves 34p toward those overheads, so you need roughly £52,900 of revenue a month before the business makes a penny of profit. If you cannot realistically sell that much, your margin is too low for the cost base you have built, whatever an industry table says. Our break-even calculator does this arithmetic for you.

Your margin by job, product or customer. The blended figure hides the mix. An average of 34% can be half your work at 50% and half at 18%, and those two halves call for completely different decisions: raise the price, or stop selling it. No industry benchmark can tell you this. Your own invoices can.

Two things that make the number lie

Where you draw the direct cost line is a judgement. Direct costs are the ones that only exist because you delivered the work: materials, freelancers on client projects, subcontractor labour. Rent, insurance and your own salary are not. Reasonable people put some costs on different sides of that line, and consistency matters far more than theoretical perfection. Draw it once and apply it the same way every month, or your margin trend is measuring changes in your bookkeeping rather than changes in your business.

Timing can swing a single month hard. If you order materials in one month and invoice the finished job in the next, the first month carries cost with no matching revenue and the second carries revenue with no matching cost. In project businesses that is easily enough to produce a negative gross margin in a month where absolutely nothing is wrong. Read your margin over a rolling three months rather than month by month, and never act on one reading.

What to do instead of looking for the number

Track your own margin every month, know what revenue your overheads require at that margin, and look at the spread hiding underneath the average.

This is also why CFO Pal watches your gross margin as a trend and never asks you to set a target margin. There is no margin number an owner can sensibly name, the way they can name a minimum cash balance, so instead it compares your last three complete months against the three before and speaks when the direction has genuinely changed. It asks one thing of you first: marking which of your cost accounts are direct costs and which are overheads. Until you have, it stays quiet rather than guessing, because a margin calculated around a gap is worse than no margin at all.