An SME business confidence monitor has shown a modest rise overall – but with a mixed picture for some sectors.
Close Brothers Asset Finance’s Business Sentiment Index (BSI) has risen modestly for the fourth consecutive research period, nearing levels last experienced in early 2022, and level with September 2019.
Engineering and manufacturing sentiment improved for the second research period in a row while construction saw a significant recovery in confidence to reach levels last seen nearly two and a half years ago.
The improvement hasn’t been felt across the board, with transport and haulage, print and packaging, and agriculture experiencing moderate falls.
But Close Brothers says that context is important, because all three sectors had seen an improvement in sentiment at the start of 2024. As the year has progressed, various factors have impacted business owners’ confidence, ranging from seasonal dips in orders to one of the wettest winters on record affecting farmers and consumer spending alike.
BSI scores – June 2020 to May 2024
Firms’ appetite to invest in their business in the coming 12 months remained stable at 66% (January 2024: 68%).
This stability is true across all the sectors, with the biggest improvement coming in print and packaging, which improved to 82% from an already high 78%.
According to an independent report by BVA BDRC, 51% of SMEs were using external finance and steadily increased their use of finance during 2023. The report stated: “For 2019 as a whole, 45% of SMEs were using external finance, declining to 37% for 2020 as a whole. The increase in 2021 to 43% was not maintained into 2022 but recent increases in use of traditional finance coupled with better data on those still repaying pandemic funding, sees use of finance up to 51% in the current period.”
The number of companies that have missed business opportunities because of a lack of available funding continued to fall:
- 34% – May 2024
- 39% – January 2024
- 41% – September 2023
- 45% – May 2023
- 51% – December 2022
This latest figure is back in line with the more normalised levels achieved for this question, last seen in May 2022, when 37% of respondents answered ‘yes’ to ‘have you missed a business opportunity in the last 12 months, due to lack of available finance?’.
A recent report by the Bank of England – based on their survey of 2,885 SMEs – stated: “Around three quarters of businesses reported that their investment levels were appropriate over the three years prior to the survey, but a fifth said that they had underinvested. Businesses that underinvested were more likely to have negative perceptions of their access to finance than those that invested appropriately.”
Overall, small business owners remained – on balance – more positive than negative about the UK’s economic prospects for the coming year.
Looking more closely at the sectors, construction saw a 13% increase in positivity and services an 18% uptick.
Both agriculture and print and packaging experienced a decrease of 11%.
Reflecting the overall BSI result, predictions about future business performance was relatively static.
Construction (+7%) and services (+5) saw the biggest gains, while agriculture (-14%) and print and packaging (-7%) experienced the biggest falls.
Most firms expect to continue treading water in 2024, with their prospects remaining unchanged.
The BSI is based on the views of 907 business owners and senior members of the UK’s business community and calculated from data charting their:
- Appetite for investment in their business in the coming 12 months
- Access to finance and whether they’ve missed a business opportunity through lack of available finance
- Views about the UK’s economic outlook
- Thoughts on their likely performance in the coming 12 months
