Bowmark publishes third Entrepreneurs' Index

Other survey highlights

• the Optimism Index, which tracks how positive respondents are about their own businesses, rebounded 6.4 points to 73.1 from July 2008, but there were dramatic disparities between the sectors reviewed in terms of their past performance, future expectations and access to funding;
• the majority of SME bosses surveyed expect the UK economy to make a sustained recovery this year;
• nearly three-quarters of healthcare respondents predict the government will outsource more services to the private sector; but
• 44% of respondents said that the banks had tightened their terms for working capital facilities in the past six months.

The Bowmark Entrepreneurs’ Index is a survey of the directors of small to medium-sized business in the UK commissioned by Bowmark Capital, the mid-market private equity firm. Apart from respondents’ levels of optimism, the survey tracks their financial performance and prospects; corporate activity; and attitudes to the challenges and opportunities they face in the current economic climate.

The bosses of small and medium-sized businesses want a break - and specific help - from the next government. Nearly two-thirds (63%) of companies are calling for continuing low interest rates and simplified employment law as top priorities post election, just behind the 73% who want red tape cut.

Respondents are considerably more upbeat after their mood hit a gloomy nadir 18 months ago. The Optimism Index, measuring their confidence in their own business in the next 12 months, rose 6.4 points to 73.1; while their view of prospects for entrepreneurial companies overall jumped 9.4 points to 59.1. Their outlook for their own industries also improved - up 7.6 points to 58.9. This blossoming optimism may reflect respondents’ hopes for a speedy economic recovery. Some 59% are looking for a sustained revival this year.

That would be welcome given the impact of the recession on their profits, revenue and job numbers in the past 12 months. Nearly half (47%) reported lower or unchanged revenue. Just 13% had that experience in July 2008. Similarly, 42% this time said profits were static or had fallen compared to 26% in the last survey. Jobs took the hardest hit - two-thirds of respondents said their staffing levels were the same or lower than a year ago. Just 29% were in that position in our previous survey.

Healthcare companies proved more resilient than most sectors surveyed, as might be expected, with 37% reporting 20%+ profits in the past 12 months and 27% anticipating that level of increase in the year ahead. Nearly three-quarters of healthcare respondents expect the government to outsource more services to the private sector to increase efficiency and cut costs as it struggles with budgetary pressures.

Areas healthcare companies think are ripe for public sector cutbacks include drug research and development and new treatments (33%), care for the elderly (30%) and acute care and hospitals (27%). None expect lower spending on children’s care.

The survey revealed dramatic variations in performance between the sectors with manufacturers being hardest pressed. Manufacturers’ confidence about their own businesses continued to deteriorate for the third time; two-thirds reported static or lower profits in the past 12 months; 81% said staffing levels had decreased or were unchanged and a quarter were having problems servicing their debt. But 71% expect the economy to show sustained recovery this year.

In spite of the government’s injunction to the banking sector to support business customers, 39% of respondents reported that access to acquisition finance had worsened in the past six months. Some 44% said that the terms offered for working capital facilities had tightened over that period with nearly two-thirds of manufacturers in this position.
Despite their recent experience, most respondents think that better times lie ahead for their own businesses as well as for the economy. Some 89% expect revenue and profits to grow in the next 12 months, though a third are not so positive about employment, expecting job numbers to plateau or fall in the year ahead.

Bowmark Capital’s managing partner, Charles Ind, said: "The small and medium-sized companies we surveyed have been through the wars in the past 18 months, with some sectors worse affected than others by the recession. While, historically, it can take up to three years for activity to return to pre-trough levels, the entrepreneurs in our survey are more optimistic about a faster return to growth for the economy and for their own businesses."