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Business Sentiment Index – Construction

The Close Brothers Asset Finance Business Sentiment Index (BSI) remained flat for the Construction sector and but ahead of the overall UK level, even as the full impact and duration of the pandemic has become better understood.

Click here to view the BSI update in full size

The latest figures have been taken from our regular Business Barometer survey of 900 senior SME leaders.

After falling sharply to 7.25 in April 2020 from 26.5 at the start of 2020, the index rose strongly to 18.25 in July of the same year, before remaining steady at 18.5 in December 2020.

The Construction sector has been more resilient than most during the pandemic, with many building sites and supply centres remaining open throughout, but that confidence has been tempered by stretched supply chains and delays at UK ports, resulting in the fastest rate of input cost inflation since April 2019.

The BSI is calculated and based on 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 firm’s performance in the coming 12 months 

Appetite for investment

Construction firms’ willingness to invest remained stable when compared to the figures from July 2020, with over half (54%) of respondents saying they plan to seek funding for business investment in the next 12 months. 

The initial shock of the pandemic has dissipated and with government-backed schemes having been extended, business owners are becoming more bullish with their investment strategies.

Many have also diversified, finding opportunities that may not have been explored in the past.

One obstacle that may stand in the way of investment is some funders’ closing their books to new business

Missed opportunities

A third of companies surveyed have missed a business opportunity because of a lack of available finance, despite the availability of CBILS (Coronavirus Business Interruption Loan Scheme) and Bounce Back loans.

Part of the reason for this is because many lenders are reluctant to accept new business because of provisions that need to be made for bad debt, making them less willing to be exposed to the risk of non-payment.  

Economic outlook

Construction SMEs are moderately positive about the macro economic outlook, and while sentiment has remained static, it is still tracking ahead of the UK average.

There are currently too many unknowns, ranging from the continued impact of the pandemic to Brexit, for business owners to be fully comfortable with where the UK economy is headed and whether it will recover in 2021.

Predicted business performance

In the main, Constructors are cautiously optimistic about their own firm’s prospects, with 29% hoping to expand in the coming 12 months, ahead of other sectors surveyed who have fared significantly worse during the economic downturn brought about by Covid-19.

Over half (54%) expect performance to ‘stay the same’ in the same period while 15% anticipate ‘contracting’.