The QCA Small & Mid-Cap Sentiment Index conducted over Oct/Nov 2019 shows near-record levels of negativity in many indicators for the 8+ years that we have been running it.
110 small and mid-sized UK quoted companies & 39 advisory firms operating in the space gave their views and it reflects the dearth of activity in the capital markets in this period.
Raising capital via public equity is seen as the hardest it’s been since 2013. This is for a number of reasons, but additional regulatory pressure has emerged that is deterring investment in less liquid smaller company stocks and has made a bad situation worse. This is supported by figures with regards to companies coming to the markets, with AIM having just 7 IPOs in 2019 (as of end-October). The lowest previous annual figure was 36 in 2009, in the wake of the global financial crisis (source).
Maybe there is some light at the end of the tunnel though: 44% of small and mid-caps in this survey say they are considering raising capital in the next 12 months, and companies’ outlook on their own prospects remains positive.
Key findings
1. Economic outlook is uncertain
- Small & mid-cap outlook on UK economy is neutral but net optimism is lowest in over six years (since Q1 2013)
2. Business outlook is mixed
- Companies’ outlook on their own prospects remains positive
- But, advisors’ net optimism in small and mid-caps is the lowest it’s been since 2012
- The mean expected turnover growth is 14.4%; positive but at a two-year low
3. Jobs are being created at a lower rate
- 64% of small & mid-caps expect to increase workforce, although this is the lowest since 2016
- Mean expected employment growth remains positive at 5.5%, but down from 9.4% 12 months earlier and lowest since 2016
- Only 28% of advisors think that small & mid-caps will create jobs in the next 12 months – the lowest level since 2012 and a big drop from 6 months earlier (51% in Q2 2019)
4. Raising capital is tough
- 44% of small & mid-caps are considering raising capital in the next 12 months, up from 37% six months earlier
- 60% prefer to do this via public equity and 28% via bank finance. These figures have remained largely steady in the past two years
- But companies view raising capital via public equity as the hardest it’s been since 2013
- Advisors also view raising capital via public equity as the hardest it’s been since 2013, whilst raising capital via private equity is rated as equal easiest its been in the history of this survey (back to Q1 2012)
