By Ian Barker, Managing Director of Close Brothers Asset Finance
For the past decade, Close Brothers Asset Finance has been surveying businesses in the manufacturing and engineering sector on a quarterly basis, tracking a variety of business indicators and using that data. Now, we have launched our Business Sentiment Index (BSI). This analysis certainly provides some interesting statistics.
The BSI provides a score that is calculated and based upon business owners’:
- Appetite for investment in their business in the coming 12 months
- Access to finance and whether they’ve missed a business opportunity due to a lack of available finance
- Views about the UK’s economic outlook
- Thoughts on their likely performance in the coming 12 months
Here, I will analyse both the reasons for the current score and also take a look back to 2016 and analyse the reasons for any fluctuations.
In January, the confidence of the sector was at its highest following the election and certainty around leaving the EU. This was echoed in various indices and anecdotally as well. Then came COVID-19 and unsurprisingly, the outlook changed almost 180 degrees, with the score falling to 7.5, the lowest figure registered for the sector. This even surpasses the impact of the elongated ‘soft’ Brexit uncertainty. All that being said, some things don’t change. Sentiment in our industry still tracks higher than the UK average, as it has consistently done, historically.
Unpicking the data
Starting with ‘investment appetite’, the number of firms looking to secure funding for investment remained remarkably stable with an almost identical number both post-lockdown (69%) and pre-lockdown (72%).
This is not about companies wanting loans purely to survive. Business owners are looking beyond the immediate and are still confident they want to invest to grow and that it’s in their best interests to do so. It’s encouraging business bosses are still ambitious and are thinking beyond the short and medium-term.
Missed opportunities
The next measure that forms an important component of the BSI score looks at whether a company has missed a business opportunity in the last 12 months because of a lack of available finance. The figure for ‘missed opportunities’ has remained very stable, with only a nominal increase in companies missing out; although we expect this to widen the longer the economy takes to recover.
Economic outlook
Predictably, respondents’ views about the economy contributed most to the dip in the latest BSI figure. In January, 77% of those in manufacturing who took part in the research felt positive about the prospects for the UK’s economy; by the end of April, this had fallen to 46% as the lockdown measures continued to take effect.
Predicted business performance
We ask business owners to predict how their firm is going to perform in the coming 12 months, and the differences between January and April is clear. The number of firms looking to expand has halved while those expecting to contract has more than tripled.
Summary
Yes, these are troubled times, but business sentiment has been at these levels before. We must not forget that for nearly two years from April 2018 business sentiment was high and there should be no reason why we can’t return to those levels. We remain realistically optimistic about what the future will hold and look forward to renewing acquaintances when the time is right.
How we’ve been helping…
We are among a number of funders approved to offer CBILS (Coronavirus Business Interruption Loan Scheme) loans aimed at helping firms through this difficult time.
CBILS can provide working capital for smaller businesses in the UK that are experiencing lost or deferred revenues due to Coronavirus. Under the scheme, we can offer government-backed facilities between £1,000 and £5m to businesses and professionals using our current finance facilities.
How does CBILS work?
If your otherwise viable business has been adversely impacted by COVID-19 and the provision of finance will enable you to trade out of any short-to-medium term difficulties, we may be able to provide you with additional lending that you would otherwise not have access to by using our suite of asset finance products.
The facility is underwritten, approved and managed by Close Brothers and repayments are paid directly to us, just like any other business loan. We offer CBILS facilities of up to £5m over a maximum term of six years. For eligibility criteria and further details, please visit www.closeasset.co.uk/CBILS.