Small and mid-cap companies

November 19, 2012, 4:49 PM GMT+0

Small and mid-cap companies are stuck in a holding pattern that may be preventing growth in the sector despite demonstrating improved confidence over the last quarter, according to a YouGov survey commissioned by the Quoted Companies Alliance (QCA) and BDO LLP.

An increase in confidence in small and mid-cap companies, which has seen firms’ optimism about their own prospects increase to 60.6 from 58.0, has failed to translate to growth plans over the last quarter. In this time, hiring intentions have decreased, with just over four in ten (43%) companies expecting to grow their workforce in the next year. Expectations for turnover growth among companies has also weakened, with the mean expected turnover growth dropping to 7.9% from 9.7% in July.

Lack of confidence in the market

Our poll also reveals that small and mid-sized quoted companies believe there are several obstacles to growth in the sector.

  • 46% of small and mid-cap companies say a lack of confidence in the market in general is hampering company’s growth
  • Nearly two in ten (17%) companies think the lack of finance available is the main obstacle to growth
  • 16% believe regulatory requirements is the key blocker to growth in the sector

Ways to improve growth

Small and mid-cap companies believe that a range of reforms could encourage growth within the sector.

  • Four in ten (41%) companies think that equity market regulation is the top reform needed to encourage investment
  • More than one fifth (22%) say that “National Insurance holidays”, which would subsidise employment for UK companies, would encourage growth in the sector
  • 22% also think the development of large infrastructure projects would drive growth
  • More than one third of companies (34%) and advisors (37%) believe that allowing AIM and ISDX shares to be included in ISAs is the fiscal policy with the largest potential positive impact on the sector

Tim Ward, Chief Executive of the QCA, said: “We need to re-fuel and kick-start our stalling economy – at the moment companies are stuck in a holding pattern. This sector is a crucial engine for growth and has identified the best incentives to achieve that – now we need incisive policy decisions to turn them into a reality.”

Scott Knight, Partner, BDO LLP said: “Confidence is not translating into action so small and mid-cap companies are in a state of stasis - wary of hiring and protecting working capital. There’s precious little confidence at the moment – small and mid-caps are merely looking to survive and not thrive and these are traditionally seen as growth stocks.”

The QCA is an independent membership organisation that champions the interests of small to mid-size quoted companies

BDO LLP is a business advisory and accountancy firm and is a member of the BDO International network

See the full survey details and results here