More than half (60%) of small and mid-cap quoted companies say that the capital markets are hindering their growth plans, according to the inaugural QCA/BDO Small and Mid-Cap Sentiment Index from accountants and business advisors BDO LLP and the Quoted Companies Alliance (QCA), the representative body for the UK’s small and mid-cap quoted companies.
Of those saying markets are hindering their projected growth, more than three quarters (76%) of small and mid-cap quoted companies cite a lack of liquidity as the principal reason for this. Just 14% say that capital markets are helping.
In spite of this, they feel optimistic about their prospects over the next 12 months, with an average optimism score of 64.1 However, this is offset by general pessimism towards the UK economy’s outlook, with a significantly lower average score of 39. The divergence reflects a trend where companies, despite feeling secure about their own projected growth, are questioning the state of the UK’s broader economic health and the implications for this.
Scott Knight, Partner BDO LLP said: “Mid-cap companies evidently feel hamstrung – our clients tell us they’re delivering to their targets and their growth plans are sound but this isn’t reflected in the valuations they get. The capital markets must recognise results and give appropriate valuations to ensure businesses have a chance of achieving their growth potential at a time when the economy needs it most.”
Small and mid-cap companies’ lack of confidence in the UK’s economic recovery is exacerbated by a perceived absence of governmental support. A paltry 4% of companies surveyed believe that the UK government views small and mid-cap companies as a priority.
Tim Ward, Quoted Companies Alliance CEO commented, “It's clear that small and mid-cap quoted companies believe that the Government could do much more to foster an environment to help them raise the finance they need to grow and create jobs. The majority of companies feel that regulation is going to increase over the next 12 months which is at odds with the Government's current anti-red tape agenda. Real change is required from our policymakers and market providers to improve the channels of finance to these companies which are a key source of growth for the UK.”
As well as frustration with government policy, the research also illustrates small and mid-cap quoted companies’ disgruntlement with banks and their lack of lending. Increased lending was cited by small and mid-cap quoted companies and advisory companies as being the action most desired from banks in the next 12 months.
Scott Knight continued, “We’re hearing that the banks have gone back into the mode of only being prepared to lend an umbrella when the sun is shining – a further obstacle to growth.”