The Close Brothers Asset Finance Business Sentiment Index (BSI) has shown a modest increase for the third consecutive research period, with a particular focus on the manufacturing sector maintaining a positive trajectory amidst economic challenges.
Appetite for Investment
Manufacturing firms’ appetite for investment has experienced a notable decline, dropping from 81% in September 2023 to 69% in January 2024. This shift reflects ongoing sluggishness in the UK economy and persistently high interest rates.
Missed Opportunities
The number of companies citing missed business opportunities due to funding constraints has continued to decrease, aligning with more normalized levels last observed in May 2022. The manufacturing sector’s response, currently at 40% (compared to 47% in September 2023), mirrors the broader sentiment across the UK.
Economic Outlook
Confidence in the macroeconomic outlook among SMEs, including those in manufacturing, has seen incremental improvement, marking the first positive shift in approximately two years. However, optimism remains tempered compared to pre-pandemic levels, with positivity regarding the economy declining from 75% in November 2021 to 46% in January 2024.
Predicted Business Performance
Expectations for future business performance have risen slightly in line with the overall BSI result. Nonetheless, many firms anticipate a year of stability in 2024, with prospects largely unchanged.
Steve Gee, CEO of Close Brothers’ Industrial Equipment Division, emphasized the cautious but encouraging recovery in SME confidence. He noted that industry-specific factors significantly influence sentiment and reaffirmed Close Brothers’ commitment to supporting SMEs through economic cycles, providing expert guidance and fostering long-term relationships with clients. This commitment underscores the importance of tailored support amid evolving economic conditions.