The Close Brothers Asset Finance Business Sentiment Index (BSI) has continued to rebound, rising to record levels as confidence returns to key sectors, most notably Manufacturing and Engineering, which broke through the 40 point mark for the first time, while confidence in Transport and Haulage is at levels last seen in Q3 2018, in spite of the driver shortage.
Construction dipped a few points following well publicised issues with material availability, price rises, supply chain issues and labour shortages. This downward trend reflects the monthly purchasing managers’ index, which fell to 55.2 in August, down from 58.7 in July on an index where anything above 50 separates growth from contraction. The sector is worth around £117bn to the UK economy.
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 through lack of available finance
- Views about the UK’s economic outlook
- Thoughts on their likely performance in the coming 12 months
Appetite for investment
Overall, firms’ appetite to invest remained solid, increasing across most industries, particularly in Transport & Haulage, which returned the sector’s strongest figures ever recorded for this measure - nearly three quarters of firms polled indicated they plan to seek funding for business investment in the next 12 months.
Manufacturing and Engineering also returned outstanding results, although with a solid but not exceptional upturn in this measure; 76.4% of businesses in the sector intent to invest in the coming year.
Construction, driven but the factors already mentioned, saw a drop in investment sentiment by around half.
Once again, over a third (35.9%) of companies surveyed (across all sectors) have missed a business opportunity because of a lack of available finance despite the availability of government-backed loans. Many businesses now require additional finance to enable them to invest in growth and continue their recovery.
Positivity about the economic outlook remained steady after a strong increase earlier in the year.
Around 40% of UK SMEs expect the economy will continue to grow while a further third anticipate a ‘slow path to prosperity’.
Predicted business performance
After a surge in business growth confidence in April, over half of firms now predict their business performance will ‘stay the same’ into 2022; however, a large minority (38.7%) expect their business to expand – only 8% foresee a contraction.