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Scotland: Industry update issue 2

Welcome to the Close Brothers Asset Finance Scotland business update.

Normally, we would ask business owners questions on a range of topical issues; however, with the COVID-19 crisis impacting every facet of both our business and personal lives, this time we instead asked only four questions focusing on:

  • Business owners’ appetite to invest
  • Missed business opportunities
  • Economic outlook
  • Future business performance expectations  

We compare the results with those from a more extensive survey we ran in January 2020, which also contained these questions.

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 a near-identical number saying they would, both post-lockdown (52%) 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 we looked at is 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.

Economic outlook

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

In January, 60% 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 nearly halved to 32% as the lockdown measures continued to take effect.

Historically, 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, and we’re hopeful this will continue to be the case.

Predicted business performance

We asked 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 fallen by more than two-thirds from 30% to 8%, while those expecting to contract have more than tripled (10% to 29%).

Positively, the dial hasn’t moved too much in terms of the number of businesses expecting to close down altogether (1% to 7%).

Summary

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