Market Data Sponsored by Market Data Confidence dips among UK SMEs Published: 20th January 2025 Share Close Brothers Asset Finance’s Business Sentiment Index (BSI), which measures SME business confidence among the UK’s small business owners, has fallen for the first time since May 2023, following four consecutive periods of improvement. This comes despite half of businesses expecting to benefit from the changes announced in the Budget. The fall mirrors that reported by the British Chambers of Commerce, whose recent research showed that fewer firms expect their turnover to increase and the majority are likely to raise their prices. The decline in the BSI score hasn’t been felt across the board, with the Manufacturing & Engineering and Services sectors both gaining confidence. Sentiment in Transport & Haulage, Print & Packaging, Construction and Agriculture all declined following challenges in these sectors, with reasons for the falls ranging from seasonal dips in orders to one of the wettest winters on record, affecting farmers and consumer spending alike. Research dateBSI score% changeJan-2522.75-7.7%May-2424.5+3.11%Jan-2423.75+9.2%Sep-2321.75+8.75%May-2320+74%Dec-2211.5-24%Jul-2214.25-96%Feb-2227.9-12%Sep-2131.75+11%Apr-2128.63+97%Nov-2014.5+18%Jun-2012.25 Impact of the Budget Business owners are broadly split down the middle when asked to consider the impact of the budget on the UK’s economy and on their own prospects. There was a mixed reaction to the Chancellor’s statement, with relief at the capping of Corporation Tax and smaller than expected rise in Capital Gains Tax tempered by the increase in the national living and minimum wage, and employer National Insurance. Q: How does the October budget make you feel about the outlook for the Economy? Positive: 35% Negative: 39% I don’t think the budget is going to impact the economy: 20% Don’t know: 7% Q: Overall, do you think your business will benefit from changes in the recent budget? Yes: 49% No: 40% Don’t know: 11% Appetite for investment Despite recent economic news, firms’ appetite to invest in their business in the coming 12 months improved by 6% to 72% (May 2024: 66%). This stability was notable across all the sectors and was the most constant of the four indicators. Missed opportunities The number of companies that have missed business opportunities because of a lack of available funding rose, and is at its highest level for over 18 months: 45% – January 2025 34% – May 2024 39% – January 2024 41% – September 2023 45% – May 2023 51% – December 2022 Lack of access to finance has been identified by the Federation of Small Businesses (FSB) as a barrier to economic growth, along with uncertainty among small businesses as to where to get information about types of finance available to them. 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’. Economic outlook Overall, small business owners remained – on balance – marginally more positive than negative about the UK’s economic prospects for the coming year. This figure still trails well behind sentiment in November 2021, when 75% of respondents were positive about the economy. Looking more closely at the sectors, Print & Packaging (36% positive) and Agriculture (34% positive) were the most concerned about the UK’s economic prospects, while Manufacturing & Engineering (53% positive) and Services (52% positive) were the most upbeat. Q: How would you best describe your business’s economic outlook for the coming 12 months? (Please select best match): Confident that the economy will grow: 47% Concerned that the economy will slow down: 42% I don’t think there will be a significant change in the economy: 11% Predicted business performance Reflecting the overall BSI result, predictions about future business performance was relatively static and in line with recent government figures confirming the UK economy had zero growth between July and September. The majority of firms – 52% – expect to tread water during 2025, anticipating their prospects will remain unchanged. More positively, far more business owners (359 respondents / 40%) are hoping to expand their operations compared to just 7% (65 respondents) who think they will contract in the coming year. Q: In general, how do you expect your business to perform over the next 12 months? Expand: 40% Stay the same: 52% Contract: 7% Close down: 1% Close Brothers’ view “Typically, sentiment in the sectors rise and fall together, but this time there’s a real and noticeable disparity, with some trending up and others the opposite way,” said Matt Roper, CEO of Close Brothers’ Commercial business. “Print and Packaging, Construction and Agriculture all dipped fairly significantly in the second half of 2024, but this was not unexpected given the challenges these industries have faced over recent months. “Yet, that being said, there are some positives; for example, 72% of the firms surveyed will actively seek funding for business investment in 2025, and with our history of lending through the cycle, we remain well positioned to support our customers – old and new.” 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: 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 For a more detailed breakdown or discussion about the results, contact Anton Nebbe, Head of PR and Communications, 07736 286 144, anton.nebbe@closebrothers.com. 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