The latest QCA/YouGov Sentiment Index indicates that quoted companies are less hopeful about the UK economy's prospects than at any time in the last five years, yet are far more optimistic about their own sector.
The index, which has tracked the mood of businesses since 2011, found that market-listed SMEs had an optimism rating of 45.8 last month (where 50 is neutral and 100 very optimistic) – the first negative rating since April 2013. This compares to an optimism rating of 57.5 in May 2017.
Despite small and mid-sized quoted companies' pessimism of the UK economy, many were considerably more bullish on their own prospects, with a 67.7 optimism rating, slightly down on 69.6 in May 2017.
At the same time, 70% of companies polled by YouGov expected the number of full-time employees in their businesses to increase over the next 12 months, against 74% in May 2017, while 20% predicted a decrease.
However, only 28% of companies were considering raising capital over the next 12 months compared to 39% in May 2017 - the lowest level since the QCA began tracking capital raising intentions of small and mid-size quoted companies in 2014.
Of those actually looking to raise funds to finance their growth, 60% preferred public equity funding to other means, up from 55% in May 2017 and 50% in July 2014. Most quoted companies and their advisers consider issuing shares the easiest way to raise cash.
Tim Ward, the QCA's Chief Executive said: “We are seeing continued but cautious short-term optimism of small and mid-size quoted companies towards their own business prospects. Intentions over raising capital have fallen significantly, perhaps indicating that their pessimism about the UK economy is having a real effect on their long-term planning.”
Oliver Rowe, Director of YouGov PLC, added: “These findings echo many of our other surveys. This sector is a very important part of the economy and we are seeing that small and mid-size quoted companies are looking forward relatively favourably to the next 12 months but seem to be more cautious thereafter. It is good to see that hiring intentions have held up reasonably well.”