Optimism in smaller companies flags

22nd July 2019

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There are more than 1,200 small and mid-size quoted companies in the UK, employing over 3 million people and contributing more than £26 billion in taxes in the UK every year. It’s about time politicians took note of what they are thinking and how they see the world ahead. After all, they are the engines of real growth for the UK economy.

Since 2011 the QCA and YouGov have polled a representative sample of these companies in our Small & Mid-Cap Sentiment Index. The latest edition of the Index released last month reveals that small and mid-cap companies remain positive about their own business prospects but that this optimism is at its lowest point since 2012. So they are becoming pessimistically optimistic.

Most of them are expecting to increase their workforce over the coming year, but nearly a fifth think they may have to shed jobs, reducing employment. The number of companies thinking like this has nearly doubled in six months. If one in five companies followed this trend across the whole UK economy and started to reduce their workforce then we would be experiencing serious economic problems.

However, despite this sentiment on jobs, these companies are predicting that they will have sales growth on average of 17% over the next year. This is of course positive, but it is slightly down from 19.2% a year earlier.

Pulled together it seems that the optimism of the UK’s small and mid-caps about their own prospects, whilst still net positive, is flagging. This is a cause for concern as looking at our findings over the last eight years we have seen this confidence to be a consistent part of the DNA of small and mid-cap quoted companies.  These companies are confident in their prospects of riding out, and even prospering in, difficult economic and political circumstances. Let’s hope that the results pick up later in the year when we ask the same question again.  Our survey also shows that the outlook of these companies for the UK economy has declined steadily since peaking in 2014.

Whilst there are wider global trends affecting many of these companies, the ongoing political uncertainty in the UK is continuing to contribute to the outlook on the economy and increasing pessimism in the companies’ own prospects. Naturally, those wedded to the UK economy are likely to be the most fearful, given the current political situation.

I don’t think that we will see a quick resolution to our economic situation. Even with a withdrawal agreement, our terms of trade will need to be negotiated over many years. So maintaining the confidence of these growth companies should be the prime concern of the new Chancellor and business minister, whoever they may be.

Over 3 million people’s (and their dependents’) livelihoods are linked to the welfare of these companies. The Exchequer’s coffers attract £26 billion in taxes from them. So we trust that we can have a positive resolution to the political uncertainty and that what is achieved works for UK business and society at large. We are blessed with great companies that are eager to grow but are survey indicates that they are being hampered by the political uncertainty that has been going on for too long now.

Tim Ward, CEO, Quoted Companies Alliance

 

Read the full results of the latest Small & Mid-Cap Sentiment Index.

This article originally appeared in the Yorkshire Post.

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