Despite continued uncertainty surrounding the trajectory of Covid-19, optimism among small and middle market businesses is rebounding, according to Umpqua Bank’s 2021 Business Barometer released July 29.
More than half of middle market firms — 55 percent — said they expect economic conditions to improve, up from just 33 percent a year ago. Fifty two percent of small firms said they also expect improvement in the coming year. The survey included nearly 1,200 businesses nationwide to gauge their mood, mindset and plans for growth as the U.S. emerges from the pandemic.
Among middle market firms, 62 percent said they expect revenue to increase, 48 percent say there will be increased profitability and 53 percent anticipate an increase in prices for products and services. Small firms are slightly less optimistic than middle market organizations. According to the barometer, 96 percent of middle market companies and 65 percent of small firms said they made changes as a result of the pandemic, including adjustments to supply chains, products and services, company culture, staffing and brick-and-mortar operations. Seventy-one percent of middle market businesses said they intend to keep all, nearly all or most of the changes, compared to the 49 percent of small businesses expecting permanent changes from the pandemic.
That optimism extends to growth opportunities: Approximately half of middle market companies — 52 percent — say they are likely to acquire another company, while similar numbers anticipate increasing their real estate footprint — 47 percent. Many more expect to automate tasks once handled by workers and find new ways to digitize their business.
Western Bankers Association President & CEO Steve Andrews said economic optimism was higher one month ago before the spread of the delta Covid-19 variant accelerated. Now, that sense is guarded as the virus and inflationary headwinds pose challenges.
Throughout the pandemic, the technology industry thrived due to increased reliance on technology during periods of isolation. However, Seattle and Portland have struggled at times over the last 13 months due to social unrest. California saw strong tech growth but also business and resident outflows to states with lower taxes, Andrews said. Western businesses are also facing challenges in finding qualified staff, and wage inflation poses challenges when employers find such talent. He expects small businesses will continue experiencing supply chain disruptions.
Andrews does not expect another shelter-in-place order to be issued due to delta and instead anticipates businesses to remain open with social distancing and masking requirements while more pressure is applied for the unvaccinated to receive shots.
“We’ve weathered the storm,” he added of the perseverance Western states have shown throughout the pandemic.