Close Brothers Asset Finance’s Business Sentiment Index (BSI), which measures SME business confidence among the UK’s small business owners, has fallen for the first time since May 2023, following four consecutive periods of improvement. This comes despite half of businesses expecting to benefit from the changes announced in the Budget.
The news for the Manufacturing and Engineering industry, however, is more positive as the sector continues to outperform other industries.
| Research date | UK BSI | Manufacturing & Engineering |
| Jan-25 | 22.75 | 29.25 |
| May-24 | 24.5 | 26.5 |
| Jan-24 | 23.75 | 25.25 |
| Sep-23 | 21.75 | 23.25 |
| May-23 | 20 | 26.5 |
| Dec-22 | 11.5 | 12.5 |
| Jul-22 | 14.25 | 18.25 |
| Feb-22 | 27.9 | 38.1 |
| Sep-21 | 31.75 | 40.53 |
| Apr-21 | 28.63 | 37.28 |
| Nov-20 | 14.5 | 25 |
| Jun-20 | 12.25 | 20.25 |
Appetite for investment
Despite recent economic news, firms’ appetite to invest in their business in the coming 12 months improved by 6% to 72%. In Manufacturing and Engineering, the figure was a further 6 points up, at 78% – the highest it’s been since September 2023.
Looking more broadly, this stability was notable across all sectors and was the most constant of the four indicators.
Missed opportunities
The number of companies that have missed business opportunities because of a lack of available funding rose, and is at its highest level for over 18 months:
- 45% – January 2025
- 34% – May 2024
- 39% – January 2024
- 41% – September 2023
- 45% – May 2023
- 51% – December 2022
Manufacturing and Engineering firms followed a near identical trajectory, with the conclusion being that firms want to invest but are finding it difficult because of a lack of finance.
Standard bank loans are still the most popular form of business funding for Manufacturing and Engineering firms, followed by finance lease, credit cards, and bank overdrafts.
Lack of access to finance has been identified by the Federation of Small Businesses (FSB) as a barrier to economic growth, along with uncertainty among small businesses as to where to get information about types of finance available to them.
A recent report by the Bank of England – based on their survey of 2,885 SMEs – stated: ‘Around three quarters of businesses reported that their investment levels were appropriate over the three years prior to the survey, but a fifth said that they had underinvested. Businesses that underinvested were more likely to have negative perceptions of their access to finance than those that invested appropriately’.
Overall, the UK’s small business owners remained – on balance – marginally more positive than negative about the country’s economic prospects for the coming year. This figure still trails well behind sentiment in November 2021, when 75% of respondents were positive about the economy.
Looking more closely at the sectors, Print & Packaging (36% positive) and Agriculture (34% positive) were the most concerned about the UK’s economic prospects, while Manufacturing & Engineering (53% positive) and Services (52% positive) were the most upbeat.
Q: How would you best describe your business’s economic outlook for the coming 12 months? (Please select best match):
- Confident that the economy will grow: 53% (UK: 47%)
- Concerned that the economy will slow down: 39% (UK: 42%)
- I don’t think there will be a significant change in the economy: 8% (UK: 11%)
Predicted business performance
Reflecting the overall BSI result, predictions about future business performance was relatively static and in line with recent government figures confirming the UK economy has experienced limited growth over the past few quarters.
The majority of firms – 52% (Manufacturing and Engineering: 49%) – expect to tread water during 2025, anticipating their prospects will remain unchanged. More positively, 40% of business owners (Manufacturing and Engineering: 44%) are hoping to expand their operations compared to just 7% (Manufacturing and Engineering: 65%) who think they will contract in the coming year.
“Typically, sentiment in the sectors rise and fall together, but this time there’s a real and noticeable disparity, with some trending up and others the opposite way,” said Matt Roper, CEO of Close Brothers’ Commercial business. “Various sectors dipped fairly significantly in the second half of 2024, but this was not unexpected given the challenges these industries have faced over recent months.
“Yet, that being said, there are some positives; for example, 72% of the firms surveyed will actively seek funding for business investment in 2025, and with our history of lending through the cycle, we remain well positioned to support our customers – old and new.”
Score calculation*
The BSI is based on the views of 907 business owners and senior members of the UK’s business community and calculated from data charting their:
- Appetite for investment in their business in the coming 12 months
- Access to finance and whether they’ve missed a business opportunity through lack of available finance
- Views about the UK’s economic outlook
- Thoughts on their likely performance in the coming 12 months
