Business Sentiment Index – confidence among SMEs continues to edge up
Our Business Sentiment Index (BSI), which measures SME business confidence, has risen modestly for the fourth consecutive research period, nearing levels last experienced in early 2022, and level with September 2019.
Manufacturing and Engineering 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. Context, however, is important, because all three sectors had – at the start of 2024 – all seen an improvement in sentiment, but 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.
Appetite for investment
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’.?
Missed opportunities
The number of companies that have missed business opportunities because of a lack of available funding continued to fall:
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’.
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Economic outlook
Overall, small business owners remained – on balance – more positive than negative about the UK’s economic prospects for the coming year. That being said, it’s worth remembering that in November 2021, 75% of respondents were positive about the economy.
Looking more closely at the sectors, Construction saw a 13% increase in positivity and Services an 18% uptick.
Both Agriculture and Print & Packaging experienced a decrease of 11%.
Predicted business performance
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 & Packaging (-7%) experienced the biggest falls.
What hasn’t changed is that most firms expect to continue treading water in 2024, with their prospects remaining unchanged.
Score calculation*
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:
Methodology
*All figures, unless otherwise stated, are from a Censuswide survey conducted in May 2024. The survey canvassed the opinion of over 900 SME owners across the UK and Ireland and across several industries on a range of issues affecting their businesses.?