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Business Sentiment Index – Manufacturing

The Close Brothers Asset Finance Business Sentiment Index (BSI) continues to track steadily upwards for the Manufacturing sector and well 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 7.75 in April 2020 from 28.75 at the start of the year, the index rose strongly to 20.25 in July, followed by a steady uptick to 25 in December 2020.

As the results suggest, the Manufacturing sector has been more resilient than most during the pandemic, with many factories remaining open and continuing to be productive. Tempering the figures are a combination of Covid-19 effects and Brexit.

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

Firms’ willingness to invest nearly doubled, reaching levels last seen in mid-2019. The initial shock of the pandemic has dissipated and with government-backed schemes having been extended, and business owners 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

Close to two fifths (38%) 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

Manufacturers 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, Manufacturing SMEs are cautiously optimistic about their own firm’s prospects, with 30% hoping to expand in the coming 12 months. This is well ahead of other sectors who have fared significantly worse during the economic downturn brought about by Covid-19.

Half expect performance to ‘stay the same’ in the same period while a fifth anticipate ‘contracting’.