In collaboration with YouGov, the Quoted Companies Alliance (QCA) has released the latest Small and Mid-Cap Sentiment Survey which reports on the business sentiment of company directors and advisors. In its 11th year, the latest report shows that whilst there is marginal optimism for their own business prospects, companies’ general sentiment of economic performance is low and has continued to dip following the previous survey at the end of 2021.
In the first half of 2022, the general feeling for small and mid-cap directors is that the performance of the economy and their own business will not be as positive as they envisioned 6 months or 12 months ago.
The survey was conducted in April 2022 and so the impact of war in Ukraine and recent inflation are obvious reasons to have a more muted outlook than the same period last year, when it appeared sentiment was improving following the impact of Covid-19. Whilst the impact of lockdown towards the end 2021 caused a fall in confidence, this has been further exacerbated by bad news at the start of 2022.
The QCA’s sentiment survey also shows that, similar to the confidence outlook from small and mid-caps, advisers to these businesses expect less employment growth than they reported in the last survey.
A potential silver-lining is that company directors are expecting near record high turnover growth, at a similar level to when companies were expecting a “post covid boost” in H1 2021’s survey. However, this time around turnover growth may simply be down to inflationary pressures and companies passing higher prices on to customers.
In terms of access to finance there remains a sizable minority of companies that expect to seek external finance within the next year: 43%, but this is down from half in H2 2021.
Perhaps more positively, public equity has returned as the preferred and perceived easiest means of accessing external finance for public companies, after bank finance briefly overtook equity on both fronts towards the end of last year.
Tim Ward, Chief Executive, the Quoted Companies Alliance said:
“Our recent sentiment survey reflects the headwinds that businesses expect. Although company directors are still optimistic that their businesses’ performance will improve over the next 12 months, that confidence has taken a market hit in the last two surveys.
Perhaps more worryingly, the outlook for the broader economy has slipped into negative territory and it may be the case that macro-economic impacts on businesses take longer to feed through to the performance of growth companies.
Now is precisely the time the government should avoid implementing harmful corporate governance reforms and should instead be expediting positive reforms that will make our stock markets more attractive for growth businesses.
The Queen's speech next week is an opportunity for this government to set out the right path for improvements and we hope that it will deliver..”
