2010 mid sized confidence report
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2010 mid sized confidence reportTRANSCRIPT
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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CIMA mid-sized business confidence monitorSurvey annual trend report 2010
The market research team of the Chartered Institute of Management Accountants and their selected research agency partners are members of the Market Research Society Company Partner Scheme, and guarantee that all work carried out complies with the MRS Code of Conduct.
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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Foreword
This is the second CIMA annual trend report. The data provided in this document
draws together the findings from our quarterly surveys of members and students
working in medium-sized businesses around the UK. Medium-sized businesses are
the backbone of the UK economy and they can be a good indicator of the broader
business community’s confidence in the current economic climate.
Reflecting the UK’s economic outlook as a whole, this report depicts a climate that
is generally gloomy but dotted with the occasional sunny spell. Overall, CIMA’s
economic confidence index showed a small decline in business optimism (1.9 index
points) between Q4 2009 and Q4 2010. Concerns about the recent VAT hike and the
possibility of a double-dip recession indicate that mid-sized businesses are gearing up
for another turbulent year.
At the start of the year, 91% of business said they were confident that they would
survive the downturn. This figure dipped slightly through the year and ended at 84%
in the final quarter. However there are also signs of a fighting spirit. Despite the
continued uncertainty over economic recovery, most businesses surveyed indicated
that they were ready to rise to the challenges ahead.
In 2010, just over half of respondents recorded an increase in company turnover and
net profits. A reduction in overhead costs was reported by almost a third of companies,
indicating that cash flow management has been critical to business success. But our
data on salaries shows that there is a notable gap between businesses that are thriving
and those that are struggling. With the additional burden of fuel and VAT increases,
this gap may widen further.
Access to capital is also still problematic - despite the continuation of the Enterprise
Finance Guarantee to encourage more bank lending to SMEs. Our survey saw
improvements in access to finance in Q2 and Q3 but in the final quarter, almost half
of businesses said they were having difficulty in securing additional finance. However,
there was some optimism that businesses would grow in 2011 with 43% expecting
company turnover to increase and 42% anticipating that net profits would rise.
Charles Tilley
Chief Executive
CIMA
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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CIMA economic confidence index 2010
Despite a strong start to CIMA’s economic confidence
index in Q1 2010, confidence in the economic prospects
facing mid-sized businesses over the next 12 months
saw a sharp decline throughout the remainder of 2010,
falling more than 17 index points from 29.6 in Q1 to just
12.2 in Q4.
While this sharp decline in confidence defied stronger
than expected UK economic growth recorded in Q2
and Q3 2010, it highlights the continued uncertainty
surrounding the recovery in the UK market.
Although year-on-year the confidence index shows little
change, with a decline of just 1.9 index points recorded
between Q4 2009 and Q4 2010, it is anticipated that
confidence in the economic prospects facing mid-sized
businesses will see a shaky start to 2011.
With further spending cuts on the way, fears surrounding
a rise in inflation and growing concerns over a double
dip recession following the shock contraction of the
UK economy in the last three months of 2010, it is
anticipated that mid-sized businesses are facing another
turbulent year in 2011.
However, it’s not all doom and gloom. In January 2011,
UK manufacturing expanded at its fastest level since
records began in 1992, showing a glimmer of hope on
the horizon for mid-sized businesses.
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
-5.00
-10.00
-15.00
Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010
Economic confidence index
22.3
14.1
29.6
18.2
20.4
12.2
Economic confidence index
Despite the continued uncertainty surrounding the UK
economy and ongoing challenges faced by mid-sized
businesses, confidence amongst mid-sized businesses
surviving the economic climate started 2010 more
positive than at any point during 2009. Confidence in
business survival peaked at 91% in Q1 2010, before
dropping off slightly to 87% in Q3 and settling at 84% in
the final quarter of 2010.
The mid-sized business survival chart on the following
page indicates a widening gap between those that are
confident and those who are extremely confident in the
survival of their business over the coming 12 months.
Furthermore, there were fewer businesses that were
extremely confident that they would survive the next 12
months in 2010 compared to 2009.
With research showing that more companies go bust
in the months after a recession than during a recession,
many mid-sized businesses would have stripped out any
unwarranted costs during this period, leaving even less
margin to make any further cost savings now.
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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Securing additional finance and access to cash in 2010
The UK Government and Bank of England economic
policy continued to provide mid-sized businesses with
as much support as it could as the transfer of power
progressed, with the coalition giving direction to banks
to support mid-sized businesses to stimulate business
activity.
In November 2010, the coalition government announced
that Enterprise Finance Guarantee (EFG), set up by the
former Labour government to encourage more bank
lending to SMEs, would continue for the next four years,
making about £2bn available, and aiming to help 6,000
SMEs access capital each year.
90%
80%
70%
60%
50%
40%
30%Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q4 2010Q3 2010Q1 2010 Q2 2010
Confidence about surviving the economic climate
83%
42%45%
46% 48% 48%
56%
51%49%
35%36%32%
43%39%39%38%
83%85%
87%91% 88% 87%
84%
Confidence totalExtremely confidentConfident
Q3 2009
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Access to cash was….
Not at all difficult Not difficult Neutral Difficult Extremely difficult
6% 11% 21% 43% 19%
16% 23% 35% 26%
5% 10% 33% 30% 22%
8% 11% 29% 33% 19%
19% 19% 29% 24% 9%
8% 23% 20% 36% 13%
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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In order to monitor the support that mid-sized
businesses are receiving, CIMA’s mid-sized business
confidence monitor survey asked whether their business
had sought to secure additional finance from a bank over
the last quarter.
CIMA’s mid-sized business confidence monitor shows
that despite improvements in access to finance in Q2
and Q3 2010, Q4 saw much tighter restrictions on
lending, and almost half of businesses were again saying
that securing additional finance from banks was difficult
or very difficult.
The notion that lending became tougher at the end of
2010 is supported by the Bank of England’s Trends in
Lending report published in January 2011, which shows
that the stock of lending by UK banks and building
societies to businesses contracted by around £5 billion in
the three months to November.
Business performance for last quarter during 2010
Each quarter mid-sized businesses rate factors which
measure their performance against 17 key business
performance indicators, comparing each indicator over
the last quarter, to identify if they had increased, stayed
the same or decreased. The following data aggregates
these indicators for all of the quarterly 2010 surveys to
provide an annual summary for 2010.
Against a backdrop of extremely tough economic
conditions, just over half of mid-sized businesses
surveyed in 2010 recorded an increase in company
turnover (52%) and net profits (51%). 46% of mid-sized
business also recorded an increase in domestic sales
turnover.
Also seeing an increase, but more prohibitive to business
growth was the cost of transportation and fuel. In
January 2010, diesel prices stood at 109.46p per litre,
compared to January 2011, when prices had risen
to 128.35p per litre; just five pence below its record
high of July 2008. And with the 0.76p introduction of
the government fuel duty on New Year’s day and the
VAT rise from 17.5% to 20% on 4 January 2011, fuel
prices are set to rise further over the next 12 months.
When reviewing the previous quarter, 51% of mid-sized
businesses recorded an increase in transportation and
fuel.
Almost half (47%) of mid-sized businesses also saw
an increase in supplier prices in 2010. This is hardly
surprising given that annual producer output price
inflation rose to 4.2% in November 2010, according to
the latest figures produced by the Office for National
Statistics (ONS).
Amongst the indicators that have largely stayed the
same during 2010 are:
• research and development budget (79%)
• skills training both internal (73%) and external (72%)
• supply of goods and services (67%)
• basic salaries (66%)
• number of full time vacancies (66%)
• marketing/advertising (58%)
• capital investments (60%)
• total salary packages (60%).
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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Although the majority of mid-sized businesses recorded
no change in earnings during 2010, three in ten recorded
an increase in total salary packages (31%) and basic
salaries (29%). This uplift in earnings is supported by
the most recent data released by the ONS, which also
showed a slight uplift in earnings, with average earnings
recording an increase of 2.1% in the year to November
2010, with average total pay rising by 1.9% to £449 a
week in the private sector, and by 2.4% to £469 a week
in the public sector.
As well as being amongst the largest increasing
indicators, company turnover and domestic sales
turnover also recorded some of the most significant
decreases amongst mid-sized businesses in 2010. This
indicates a notable gap between successful businesses
during the tough economic climate and those that are
struggling.
A reduction in overhead costs was also reported by
three in ten mid-sized businesses in 2010, which
indicates that cash flow management has been critical
to business success during the recent difficult economic
climate. One such impact will have been a reduction
in the number of full time employees, which was also
reported by three in ten mid-sized businesses last year.
With UK unemployment rising by 49,000 to almost 2.5
million in the three months to the end of November
2010, according to the latest figures from the ONS,
the government’s spending cuts appear to be having a
negative impact on employment figures.
Business performance for last quarter during 2010
Increased Stayed the same Decreased
52%
17%
31%
51%
20%
29%
51%
39%
10%
47%
42%
11%
46%
24%
30%
35%
34%
31%
31%
55%
14%
31%
60%
9%
31%
39%
30%
29%
66%
5%
27%
60%
13%
26%
67%
7%
24%
58%
18%
17%
66%
17%
12%
73%
15%
12%
72%
16%
11%
79%
10%
Com
pany
tur
nove
r
Net
pro
fits
Tran
spor
tati
on a
nd f
uel
Supp
lier
pric
es
Dom
esti
c sa
les
turn
over
Ove
rhea
d co
sts
Expo
rt s
ales
tur
nove
r
Tota
l sal
ary
pack
ages
Num
ber
of F
T em
ploy
ees
Basi
c sa
larie
s
Cap
ital
inve
stm
ents
Supp
ly o
f go
ods/
serv
ices
Mar
keti
ng/a
dver
tisi
ng
Num
ber
of F
T va
canc
ies
Skill
s tr
aini
ng (
inte
rnal
)
Skill
s tr
aini
ng (
exte
rnal
)
R&D
bud
get
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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Business performance for next quarter during 2010
Each quarter mid-sized businesses rate the same factors
to measure their performance against 17 key business
performance indicators, comparing each indicator to the
next quarter, to identify if they expect them to increase,
stay the same or decrease. The following data shows
how mid-sized businesses rated how they expect each
indicator to perform in the following quarter during
2010.
Projected business performance levels for the next
quarter followed a similar pattern to that of actual
business performance in the last quarter, although
overall, mid-sized businesses were generally slightly more
positive about the outlook for the next quarter when
compared to the last.
Overall, the factors that were expected to increase the
most in the following quarter during 2010 were:
• company turnover (56%)• net profits (52%)• domestic sales turnover (49%).
The factors that were expected to largely stay the same
in the following quarter were:
• skills training, both internal (77%) and external (78%)
• number of full time vacancies (75%)• supply of goods and services (73%)• marketing and advertising budgets (70%).
The factors that were expected to decrease the most in the following quarter were:
• company turnover (22%)• overhead costs (22%)• net profits (21%)• domestic sales turnover (21%)• number of full time employees (19%).
Business performance for next quarter during 2010
Increased Stayed the same Decreased
56%
21%
23%
52%
27%
21%
49%
30%
21%
42%
50%
8%
40%
54%
6%
33%
45%
22%
29%
60%
11%
28%
65%
7%
27%
66%
7%
26%
69%
5%
24%
57%
19%
22%
73%
5%
20%
70%
10%
16%
75%
9%
13%
77%
10%
12%
78%
10%
9%
84%
7%
Com
pany
tur
nove
r
Net
pro
fits
Dom
esti
c sa
les
turn
over
Supp
lier
pric
es
Tran
spor
tati
on a
nd f
uel
Ove
rhea
d co
sts
Expo
rt s
ales
tur
nove
r
Cap
ital
inve
stm
ents
Tota
l sal
ary
pack
ages
Basi
c sa
larie
s
Num
ber
of F
T em
ploy
ees
Supp
ly o
f go
ods/
serv
ices
Mar
keti
ng/a
dver
tisi
ng
Num
ber
of F
T va
canc
ies
Skill
s tr
aini
ng (
inte
rnal
)
Skill
s tr
aini
ng (
exte
rnal
)
R&D
bud
get
CIMA mid-sized business confidence monitor | Survey annual trend report 2010
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Topical issues
As the mid-sized business confidence survey has
monitored attitudes to the economy it has also provided
a vehicle for gauging the opinion of mid-sized businesses
on topical issues each quarter. This has provided further
insight into the decisions that mid-sized businesses have
been taking both as result of Government policy and
trading in the current economic climate.
Mid-sized businesses have been asked since the start
of the survey how important they think that the recent
Bank of England decision not to change interest rates
has been for their business. Throughout 2009 and 2010
around 40% of mid-sized businesses said it was neither
important nor unimportant for their business; with a
third saying that it is important to their business.
While at the start of 2009, half (51%) of mid-sized
businesses said that the interest rate decision had no
effect on their business, this increased to almost two-
thirds (63%) by the end of 2010.
In Q4 2010, nine out of ten mid-sized businesses
said that they were ready for the 20% VAT rate being
introduced on 4 January 2011. Over a third said the
20% VAT rate would negatively impact on the overall
performance of their business, sales and administration
costs and to a lesser extent turnover (26%).
Just over half (54%) of mid-sized businesses also said
that they will pass the full VAT increase over to their
customers, with 15% saying that they will absorb the
increase in full and 14% saying that they would absorb
it in part.
Relationships with suppliers to mid-sized businesses
improved from Q3 2009 to Q4 2010, as only a third
of mid-sized businesses had not changed supplier,
increasing to 61%. The main reasons for changing
supplier was price and value for money indicating careful
purchase and procurement of products and services
because of the economic environment.
Technical information about the mid-sized business confidence monitor
This research is completed by the market research
department of the Chartered Institute of Management
Accountants.
Each quarter, approximately 14,000 active CIMA
members working in mid-sized businesses in the UK are
interviewed via an on-line questionnaire. The interviews
last about 15 minutes and they gather opinions on past
and expected business performance and future prospects
for mid-sized businesses.
A copy of the full question set is available on request
from the market research department:
Data has been sampled to closely reflect the profile of
the UK economy for mid-sized businesses by company
size, number of employees, turnover, regional location
and industry/business sector.
How the CIMA economic confidence index is calculated
The CIMA economic confidence index is calculated from
responses to the following question:
Compared with the previous 12 months, overall, how
would you describe your confidence in the economic
prospects facing your business over the next 12 months?
Variable Score
Much more confident +100
Slightly more confident +50
As confident 0
Slightly less confident -50
Much less confident -100
Using this method, +100 would indicate that all mid-
sized businesses responding in the survey are much
more confident about future prospects, and -100 would
indicate that all mid-sized businesses are much less
confident about future prospects.
For more information contact the market research
department of the Chartered Institute of Management
Accountants.
Chartered Institute of Management Accountants26 Chapter Street London SW1P 4NP United Kingdom T. +44 (0)20 7663 5441www.cimaglobal.com
© February 2011, Chartered Institute of Management Accountants CMI003V0211