- Middle Market: Optimism soars to 68% and key growth
indicators reach six-year high
- Small Business: Mood and plans hover near pandemic-era lows,
even as recession fears subside
LAKE OSWEGO, Ore., June 13, 2024 /PRNewswire/ -- Umpqua Bank, a
subsidiary of Columbia Banking System, Inc. (Nasdaq: COLB), today
released the findings of its annual Business Barometer, an in-depth
study into the mood, mindset and strategic priorities of small and
middle market businesses across the U.S. For the first time in its
six-year history, the study shows a widening gap between the
outlook and plans of middle market companies and small businesses.
Middle market optimism and key growth indicators have surged to
six-year highs, while small businesses proceed cautiously as they
manage persistent impacts of higher costs for goods and
capital.
Since 2019, middle market companies (defined as $10M--$500M in
annual revenue) are consistently more optimistic and ready to make
a variety of strategic investments than smaller businesses.
However, the difference between the two sectors' optimism—which had
been fairly narrow—widened sharply in 2024. This year, 68% of
middle market companies rate the economic outlook as excellent or
good compared to just 29% of small businesses.
According to Umpqua Bank President Tory Nixon, middle market companies are
poised to accelerate strategic investments and plans after a season
of caution, while small businesses are even more inclined this year
to hold steady as margins remain tight.
"It's a tale of two economies right now," said Nixon. "While
businesses of all sizes have proven resilient during a remarkable
period of uncertainty and disruption, middle market companies have
adapted especially well to the economic pressures of the past
couple years. They are poised to move forward with the most
confidence we've seen since our study began."
Notable findings from this year's Business Barometer include the
following:
Growing Middle Market Optimism Sparks Plans for
Growth
Nearly 7 in 10 middle market companies rank the current economy
favorably, surpassing a majority for the first time and 22 points
higher than last year. In the next 12 months, more companies than
in any previous study expect demand for products and services to
increase (70%) and greater profitability (60%). They are also more
likely than ever to invest in digitization (88%), finance expansion
plans (65%), expand their real estate footprint (60%), add
employees (54%) and consider acquiring (52%) or merging (43%) with
another business.
Economic Divide Widens Between Middle Market and Small
Businesses
In contrast to the middle market, small businesses are less
optimistic than they've been since 2020. Though fewer list
recession as a top concern this year (33%), inflation concerns
spiked again after declining in 2023. Fewer than ever expect
increased demand for goods or services (43%), and expectations for
profitability growth also dipped to the lowest level in four years
(38%). Small businesses' current mood is reflected in more limited
plans for the next 12 months: fewer than in the last three years
are likely to add employees (28%), finance expansion (25%), expand
their real estate (23%), make significant changes to products or
services (33%), or invest in tools that protect payment systems
(40%) and improve efficiency (57%).
"Middle market companies have the scale and capital to grow in
today's market. More of them are growth-minded than last year and
investing in AI, automation and sophisticated tools to safeguard
their operations and customers," said Richard Cabrera, Head of Commercial Banking at
Umpqua Bank. "With fewer resources and tighter margins,
smaller enterprises have shifted more of their attention to
managing the prolonged financial challenges and risks associated
with elevated interest rates and inflation."
Middle Market Companies Are Rapidly Embracing Generative
AI
Nearly 8 in 10 middle market companies report either moving forward
quickly to implement the technology across their organization (42%)
or for at least a few specific tasks or functions (36%). They are
also prioritizing adding personnel with generative AI experience,
with 86% likely to hire for the skillset in the next 12 months.
Investing in AI is also a top strategic priority (56%), which ranks
first across 10 other investment options. A strong majority believe
AI is having, or will have in the next 12 months, a significant
impact on profitability (70%), acceleration of new products (69%),
productivity (72%) and their competitive advantage (71%).
Small businesses are also adopting generative AI, albeit more
slowly, with 28% prioritizing broad implementation or more targeted
use across a few tasks.
A Majority of Middle Market Companies Bring Manufacturing and
Supply Chains Back to U.S.
While supply chain impacts of the
past few years have eased significantly for all businesses, most
middle market companies continue looking for new routes and
partners. In the last 12 months, 51% have moved manufacturing or
supply chains back to the U.S., continuing the onshoring
acceleration noted last year. Another 73% with operations abroad
are likely to move or shift them elsewhere in the year ahead.
Middle Market Companies Safeguard Against Cyber-Attacks and
Real-Time Fraud
Cybersecurity continues to be a
top priority for middle market companies: 41% were the victim or
target of a cyberattack in the last year. More than 8 in 10 are
likely to invest in financial tools to protect payments systems in
the next 12 months. More than 6 in 10 now leverage instant payment
technology. Of those, 93% have or are planning to implement
corresponding safeguards to protect against real-time
fraud. Instant payment adoption rates for small
businesses stand at 43%, with 66% of these having already
implemented or planning to implement corresponding safeguards in
the next year.
Small Business Delays, Middle Market Accelerates
Decision-Making Ahead of Election
Small and middle market businesses are responding differently to
the upcoming congressional and presidential elections in November.
Nearly half of middle market companies say they are expediting key
decisions before elections, with only 13% delaying them. Meanwhile,
small businesses are more likely to delay (23%) than accelerate
(14%) key decisions, with more than half indicating no impact on
decision-making.
Businesses choosing to delay decisions, regardless of size, are
most likely to postpone long-term strategic plans (63%), expansion
plans (40%) and hiring (39%).
Methodology
On behalf of Umpqua Bank, DHM Research
conducted an online survey of 1,200 owners, executives, and
financial decision-makers at U.S. small and middle market
businesses during April 22—May 2, 2024. Of middle market
respondents, 22% are minority-owned businesses, while 19% of small
business respondents are certified woman-owned and 15%
minority-owned. The margin of error is: ±2.8%.
About Umpqua Bank
Umpqua Bank is a subsidiary of Columbia Banking System, Inc.
(Nasdaq: COLB), and a premier regional bank in the western U.S.,
with offices in Oregon,
Washington, California, Idaho, Nevada, Utah,
Arizona and Colorado. With over $50
billion of assets, Umpqua Bank combines the resources,
sophistication and expertise of a national bank with a commitment
to deliver superior, personalized service. The bank supports
consumers and businesses through a full suite of services,
including retail and commercial banking; Small Business
Administration lending; institutional and corporate banking;
equipment leasing; and wealth management. The bank's corporate
headquarters are located in Lake Oswego,
Oregon. Learn more at: umpquabank.com.
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SOURCE Umpqua Bank