Both large and small UK businesses more optimistic towards the end of 2013

A twenty year high in optimism for the economy among business leaders of the UK’s largest companies and UK SMEs’ financial situation also improving in late 2013 compared to many EU country results.

Nearly all (93%) of Britain’s Captains of Industry, leaders of the UK’s largest businesses, think the economic condition of the country will improve over the next twelve months, according to the 2013 Captains of Industry study conducted by Ipsos in September-December 2013. This is the highest level of optimism in 20 years of this annual survey. Just 7% think the economy will remain the same. None think conditions will get worse over the next twelve months.

However, there is some caution underlying the strength of this recovery. Just over half (53%) of business leaders estimate that it will be over a year or more before the UK economy grows significantly.

When thinking specifically about their business though, only 2% of Captains think that business for their own company will get worse over the next twelve months; the majority (84%) expects to see improvement.

When making international comparisons the USA leads the way. A third of Captains (34%) select the USA as the most attractive country for investment. This is followed by China (23%), a contrast to results from last year when China was the most widely selected country. The UK is mentioned by only 9% of the Captains interviewed as somewhere top of mind for investment.

However, the UK comes second for offering the best environment to do business (25%) behind only the USA (52%). Results have improved for the UK from last year when only 14% chose it as the best environment for business. Among other European nations only Germany is mentioned – by 4% as the best country for investment and 7% as having the best business environment.

Results from the most recent European Survey of Access to Finance of Small & Medium Business Enterprises (businesses with up to 250 employees) conducted by Ipsos in September and October 2013 (on behalf of the European Commission and European Central Bank) also show some encouraging results about the financial situation of UK SMEs.

The overall EU balance of opinion among SMEs about the general economic outlook over the past six months is negative (16% say it has improved but 34% think that it has got worse, giving a net balance of -18 percentage points overall).

The net balance of opinion is positive in only seven EU countries with UK equal second (+7%) with Latvia (+7%), behind only Denmark (+16%). This reflects a considerable improvement in the UK from the 2011 survey results (when the net balance of opinion was a gloomy -40 percentage points).

UK SMEs are more positive about their firm's specific outlook than most other EU countries with respect to sales and profitability over the past six months, with a net balance of opinion of +20 percentage points that this has improved rather than deteriorated, behind only the results from Denmark (+26 percentage points).

Results from UK SMEs are also the most positive across the EU in reporting about the availability of internal funds, if needed, with a net balance of opinion of +26 percentage points that this would improve rather than deteriorate over the next six months (i.e. up to March/April 2014) compared to an EU average of +6 points, +10 points in Germany and -10 points in France.

The UK is also one of the most optimistic countries when it comes to the expected availability of various external sources of finance over the next 6 months including trade credit (+15 percentage points net balance that it will improve), equity investment (+12 points) and bank loans (+11 points).

Results from UK SMEs are also the highest across the EU for reporting that turnover had increased rather than fallen in the past six months (+29 percentage points net balance of opinion) compared to an EU level of +3 points, and even a little ahead of German levels (+26 points).

But labour costs are also clearly more likely to be judged to be rising in the UK than in many other EU countries, behind only France and Malta. Overall the net balance of opinion from UK SMEs that these have risen rather than decreased over the past six months is +54 percentage points, clearly above the EU average of +43 points.

The results for UK SMEs are not so encouraging as to profits with a net balance of opinion of only +2 percentage points that their profits have risen rather than fallen over the past six months, though this is still considerably above the EU average of -17 points and not so far behind German SME levels of +6 points. This may reflect various rising business costs in the UK, with wages among them.

In conclusion we can see that some of the generally favourable economic news in the UK as 2013 drew to a close is reflected in the results from all sizes of business, including the small and medium sized businesses that help drive the economy, as well as from the UK’s largest companies.

Technical note:

1. Established in 1981 and conducted on an annual basis, the Ipsos Captains of Industry survey is the authoritative view of senior business opinion in Great Britain today. 105 interviews were carried out with respondents selected from the FTSE 350, and top 100 by capital employed. Respondents are Chairman, CEO, MD/COO, FD or other board directors. Interviews were carried out face to face (3 were carried out over the telephone) between 9th September and 12th December 2013.
2. Results for the EU SMEs are based on 13,855 telephone interviews conducted between 28th August and 14th October 2013. UK SME results are based on 1,000 interviews. The full report can be found at: http://ec.europa.eu/enterprise/policies/finance/files/2013-safe-analytical-report_en.pdf