Gresham Monitor reveals an upturn in business optimism

UK middle market managers are more optimistic about the prospects for their business than at any other time since July 2002. The results from the Gresham Monitor research point to a brighter outlook for the year ahead, as mid-market firms consolidate turnover and profitability after a difficult period and look forward with increased optimism to the next twelve months.

The UK service sector and Northern firms are particularly buoyant and the outlook for corporate activity seems promising across the UK.

The Monitor is a twice-yearly survey of UK middle market firms conducted by Gresham, the regionally-based UK private equity firm. The January 2004 Monitor is the eighth survey Gresham has carried out and looks at levels of confidence, financial performance, threats and opportunities for mid-market firms.

Highlights of the survey include:

Increased levels of optimism about business prospects for the year ahead amongst mid- market firms - 62% of companies said they were very or fairly optimistic about 2004, the highest level since July 2002
Corporate activity could be on the rise in 2004, with 54% of mid-market companies expecting to undertake a transaction in the next 12 months - 90% of these are confident that their deals will go ahead.
Twin track economy is still in evidence - manufacturing companies lag behind the service sector in profits and revenue growth, confidence levels and expected corporate activity, but optimism is growing in both sectors.
Three quarters of companies expect to raise external finance in the next twelve months to fund growth.
Companies based in the North are more optimistic and more expect to undertake corporate activity in the year ahead than those in the South or Midlands

Mike Henebery, director of Gresham's London investment team, said:

"Since we first surveyed the UK mid-market in 2000, mid-market companies have been subjected to unprecedented levels of economic uncertainty. But as we go forward into 2004, the sector appears to be regaining confidence - and optimism levels are at highs not seen since early 2002."

"Encouragingly, the return of cautious optimism is matched by the determination to pursue growth, with 75% of companies planning to seek external financing to fund their growth ambitions in 2004. It is clear is that mid-market businesses are adjusting to benign inflation and lower growth; consequently corporate finance activity will be based on more realistic and traditional fundamentals, such as cashflow."

"As optimism strengthens in the mid-market, we anticipate a busy year for the sector, and already have a strong pipeline of deals for early 2004. We look forward with growing confidence to the year ahead and to working with a wide range of management teams to realise their ambitions for growth."