Thincats: Corporate Advisers Survey Shows Continued Rise in SME Confidence Amidst Increasing Activity Ahead of Potential CGT Hike

ThinCats, a leading finance provider to mid-sized SMEs, has today published results from its half yearly survey of more than 100 leading debt advisors across the UK, providing insight into activity among UK lower mid-market companies. The survey shows a boost in confidence over the last six months, with market activity continuing to pick up following a challenging number of years.

While there is a general sense of positivity, broader feedback reflects a focus on the outcomes from the Chancellor’s Budget on 30 November. Advisers highlighted that the lack of clarity on potential changes to Capital Gains Tax and what level it could reach is creating uncertainty for business owners. 58% of advisers say they expect an increase in M&A activity following the Budget. Anecdotal commentary highlighted that deals were being forced through in advance alongside concerns around reduced activity.

The key findings show:

• 62% of advisers stated they were seeing higher levels of activity in their pipelines in the last six months, an increase from 36% a year ago. Only 12% stated there was less demand.
• Almost half (46%) believe there is growing demand for funding specifically from owner-managed businesses compared to six months ago.
• Whilst sentiment is broadly positive, macroeconomic issues are cited as the biggest constraint to deal activity, with valuation expectations and deal quality the next most significant challenges.
• The general view on business valuations is that they either haven’t changed (58%) or that they have decreased (31%) in the last six months.

A majority of advisers (66%) say they are seeing more activity from SMEs than they were six months ago this compares to just 26% a year ago. There is especially a growing appetite for funding from owner-managed businesses.

When asked about the constraints to deal activity, for the first time in 18 months, interest rates are no longer cited in the top three biggest constraints to deal activity. Wider macroeconomic issues relating to confidence as well as inflation was identified as the biggest issue. Valuations continue to be a blocker with 60% of advisers reporting they are unchanged from six months ago. Deal quality is also highlighted as an issue too.

When asked about funding sources, non-bank lenders are stepping in to meet the increased demand, with 30% of participants reporting higher levels of credit appetite from SMEs. One-quarter (24%) of advisers said that more funding is available from the high street banks than there was six months ago, compared to 33% in the last survey.

Mike Hackett, Chief Commercial Officer, ThinCats: “Advisers have their fingers on the pulse and they will see day-to-day how changes in the economy and regulation affect how businesses act. While it is positive to see that advisers are reporting growing appetite to lend and to borrow across the market, clearly there are concerns and activity afoot as business owners get ahead of any potential CGT increases in the budget. Business owners will be watching the Budget closely.”