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Introducing the Business Sentiment Index…  

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At the start of 2020 business confidence was hitting peak levels thanks to two key factors - Brexit uncertainty had ebbed, with the UK formally agreeing to leave the EU, while Boris Johnson’s Conservative Party won an overwhelming majority in December’s national elections.

By Anton Nebbe, Head of PR at Close Brothers Asset Finance

Consequently, the UK’s economy looked set for a period of recovery and growth after years of underwhelming performance largely because of austerity and political turmoil.

Then the COVID-19 crisis hit and business sentiment once again dipped – significantly – but only to levels we’ve seen before as recently as mid-2017…but more on that later.

Measuring business sentiment

For the last decade or so Close Brothers Asset Finance has, in partnership with an independent research firm, regularly surveyed SMEs across a wide range of business sectors on topical issues like Brexit, driverless cars, mental health, and many others.  Doing this allows us to better understand how businesses are reacting and responding to the issues of the day.  All the results since the start of 2016 are available, for free and with no need to leave your details, on our SME Data Hub.

In addition to the topical issues, we also ask participants a set list of questions on everything from their views on the economy to how likely they are to invest in their growth. From these questions, we’ve taken four key indicators and created something we call the Business Sentiment Index, which, in essence, tracks how confident businesses are feeling at a particular moment in time.  

We arrive at a score based on:

  • Investment appetite in the coming 12 months
  • Whether firms have missed a business opportunity in the last 12 months due to a lack of available finance
  • Views on the UK’s economic outlook
  • How positive business owners are about their own performance in the coming 12 months

Each measure contributes 25% of the final Business Sentiment Index score.


In April 2020, when we last surveyed SMEs, the business sentiment index – predictably - fell significantly. From a high of 28.75 it dropped nearly 80% to just 3.5.

On the face of it, the new score would suggest we’re in unchartered territory – but we aren’t. In mid-2017, a year on from the Brexit referendum, the figure sat at just ‘4’ following the triggering of Article 50 and continued uncertainty about the shape of Brexit.

Post-referendum, the business sentiment index bubbled along in the single figures for five consecutive quarters before rising strongly in the first quarter of 2018 as it appears the UK’s SMEs came to terms with uncertainty becoming the ‘new normal’ and deciding to just ‘get on with it’.  

This surge in belief continued uninterrupted for seven successive quarters, culminating in January 2020’s high of 28.75.

Unpicking the data – appetite for investment

Starting with ‘investment appetite’, the number of firms looking to secure funding for investment in the coming 12 months remained remarkably stable with an almost identical number saying they would, both post-lockdown (57%) and pre-lockdown (59%).

This measure 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 firm 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 business sentiment index score looks at whether a company has missed a business opportunity in the last 12 months because of a lack of available finance. For the last few years there has been a strong supply of cheap finance from a wide variety of sources and typically, during downturns and recessions, the number of lenders in the market reduces and we’d consequently expect the number of firms missing opportunities to increase.

The figure for ‘missed opportunities’ has remained stable, with only a nominal increase in companies missing out, although we expect this to widen the longer the economy takes to recover.

Have you missed a business opportunity in the last 12 months, due to lack of available finance?











Economic outlook

Predictably, respondents’ views about the economy contributed most to the dip.

In January, 68% of those 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 41% as the lockdown measures continued to take effect.

The UK has proven to have an incredibly resilient economy, with well-established and well-run businesses able to ride out economic storms in the face of both domestic and international pressures.

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 nearly halved from 37% to 20%, while those expecting to contract have more than tripled (7% to 25%).

Positively, the dial has barely moved in terms of the number of businesses expecting to close down altogether (1% to 3%).


What we take from these results is that expectations have shifted and for many it’s a case of metaphorically battening down the hatches until the storm has passed.  

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.

Clearly, there any many dependencies – the world may well be a very different place in some ways, but fundamentally, our economy will run in much the same way as it did before COVID-19.

We remain realistically optimistic about what the future will hold and look forward to renewing acquaintances when the time is right.