The Sage Group plc : Fourth Sage Business Index

Globally, 40 per cent of Respondents Predict a Two-Speed System for Europe, Only 15 per cent Believe Eurozone Will Remain Unchanged

24th October 2012, Newcastle: Today, The Sage Group plc , releases the results of its fourth Sage Business Index- International Business Insights. Polling nearly 11,000 small and medium sized companies in 15 countries, the Index shows an across-the-board decline in confidence since the last report in March 2012.

Looking at local market (country) confidence, there is a significant fall of nearly five points, from 47.26 in March 2012 to 42.47 this time. There are also smaller falls in global economic confidence and confidence in the prospects for individual companies; although with a score of 56.46 (down from 58.86 in March 2012) small and medium sized companies still feel more optimistic than pessimistic about their own prospects.

Looking at the impact of the continued problems in Europe, 67 per cent of businesses globally say that the Eurozone crisis has had some or a significant impact on their business, with this figure rising to 90 per cent and 93 per cent of Spanish and Portuguese businesses respectively. Interestingly 73 per cent of businesses in Brazil, 71 per cent in Singapore, 46 per cent in Malaysia and 38 per cent in the US report that the crisis has had some or a significant impact on their business. Clearly, the problems are being felt beyond Europe's boundaries.

When asked about the future of the Eurozone, just 15 per cent predicted that it would remain unchanged - with Ireland being the most confident on this matter (28 per cent). The majority (40 per cent) favour a 'two speed system'. Just seven per cent thought that the Eurozone will be dismantled entirely.

There are, however, positive signs within the report especially around revenue and employment. In the last six months, 63 per cent of respondents said revenue had either increased or held steady while 82 per cent had either increased or maintained employee numbers.

Guy Berruyer , Chief Executive of The Sage Group plc said: "Taking real feedback from businesses, the Index provides an incredibly accurate picture of how small and medium sized companies are feeling, and that feeling is nervousness. With a reversal of the small increase in general confidence felt in the Index in March, these latest figures show that businesses are still worried about global and local economic issues . However, there are some positives to be taken from individual markets. Confidence levels in North America, Brazil, the UK, South Africa and Asia seems to either be improving or are on a similar level to earlier this year."

Economic Confidence - local concerns in line with macro economic trends

All countries bar Brazil registered an Index score of below 50 showing that respondents generally feel the global economy is continuing to decline. Unsurprisingly the Eurozone countries feel the most negative with Portugal registering the lowest score of just 35.36. The only country to report positivity in the global economic outlook is Brazil with a score of 50.65.

On a country level the differences to which countries are feeling the impact of continued country economic uncertainty is much clearer. Eurozone countries including Portugal (23.55), Poland (38.18), Spain (31.7) and France (33.36) are still significantly below the 50 mark of improving confidence, while Germany and Austria have also seen significant falls to 47.94 (from 52.08 in March 2012) and 45.30 (53.04 in March 2012) respectively - the first time in all four Sage Business Indices where they have dipped below the neutral mark. One bright spot is the UK where confidence in the local economy has risen half a point to 45.44, though this may only be temporary due to a successful summer of events.

Outside Europe, the picture is mixed. South Africa has seen a decline from 46.11 in March 2012 to 43.03 while the US also dropped back slightly from 49.28 to 47.86 - although this is still a big improvement from September 2011 when the Index was down at 41.57. However, small and medium sized companies in both Brazil and Singapore remain confident their country economies are improving with scores of 59.67 and 53.88 respectively.

Business confidence - businesses still looking on the bright side

When asked about confidence in their own business prospects the survey shows that whilst this is still in positive territory overall, there has been a slight decline since March 2012 and it is a mixed picture dependent on region. France has fallen from a slightly confident outlook (51 in March 2012) to a far less confident score of 45.55, perhaps reflecting negative business sentiment towards the Government. This is further borne out by the findings that 45 per cent of French businesses saw the Government's handling of current economic challenges as the least favourable aspect of doing business in their country. As with previous Index reports, Germany's confidence levels have continued to fall (from 61.62 in February 2011 to 57.81 this time) while Portugal remains the least confident at 41.06.

In Spain, arguably one of the countries worst hit by the Eurozone crisis, there has been a significant rise in businesses' confidence about their own prospects (48.12 up from 45.75 in March 2012). Additionally, Spanish businesses reported a slight rise in global economic confidence (40.27 from 39.69 in March 2012) and only a minor drop in local economic confidence (32.96 to 31.70) since March 2012. This may suggest their economy is bottoming out, although it still remains some way under the 50 mark.

Again, there are brighter notes among the findings. The UK registered its highest confidence level since the Index began with a score of 58.46, while Brazil remains extremely confident with a score of 70.31. Although slightly down from March 2012, the US and Canada are both substantially more confident in September 2012 than when the Index first began in February 2011. The US rose from 53.65 to 60.28, and Canada from 55.08 to 61.07 between September 2011 and September 2012.

Business Challenges - could decreasing consumer confidence hit plans for growth?

Decreasing consumer confidence (30 per cent) has become a top three concern for the first time, joining worries around rising costs of energy, fuel and raw materials (47 per cent) and instability in local markets (31 per cent)

Despite this, many small and medium sized companies are looking to recruit new employees including the UK (26 per cent), Germany (27 per cent) and Brazil (40 per cent). Only six per cent of businesses said they were likely to close or sell their business while 15 per cent said they would look to reduce employee numbers although this was higher in Portugal with 23 per cent and Ireland with 20 per cent.

Governments - businesses call on governments to do more

Regardless of government initiatives across the world to better support small and medium sized companies, the businesses themselves are clearly not feeling the benefits as yet. A lmost 7 in 10 feel that their government does not provide sufficient support for their business (69 per cent). Singapore was the only country to disagree - with 57 per cent thinking their Government is providing sufficient support.

What these businesses are really calling for is a reduction in bureaucracy (43 per cent), business tax (36 per cent) and more opportunity for skills development (31 per cent). And the worst areas of bureaucracy were cited as labour law and tax law, although UK businesses also cited health and safety legislation far more negatively than other countries.

Adds Berruyer: "The continued positivity in emerging markets offers potential for Eurozone companies looking to expand their export operations. However, the continued decline in confidence in Germany, Europe's best performing economy, gives genuine cause for concern. Overall, the findings serve as a strong reminder to governments that more still needs to be done to support small and medium sized companies."

NOTES TO EDITORS

About Sage

The Sage Group plc is a leading global provider of business management software to small and medium sized companies, creating greater freedom for them to succeed. Sage understands how and why each business is unique. We provide products and services that suit varying needs, are a pleasure to use and are secure and efficient. Formed in 1981, Sage was floated on the London Stock Exchange in 1989. Sage has over 6 million customers and more than 13,600 employees in 24 countries covering the UK & Ireland, mainland Europe, North America, South Africa, Australia, Asia and Brazil. For further information please visit www.sage.com

Contact information

For more information on The Sage Business Index - International Business Insights please contact Ralph Charlton,Ralph.charlton@sage.com or Jennie Whitell,Jennie.whitell@sage.com or call Tel: +44 (191) 294 3068 .

For press information please contact Jenny Tandy,jenny.tandy@redconsultancy.com or Patrick Southwell,patrick.southwell@redconsultancy.com or call Tel: 0207 0256500

Follow the latest Sage news on Twitter: @sagegroupplc

About The Sage Business Index

The Sage Business Index polled 10,861 small and medium-sized businesses across 15 countries - US, Canada, Germany, Austria, Switzerland, France, UK, Ireland, Spain, Portugal, Poland, South Africa, Malaysia, Singapore and Brazil over a two week period in September 2012. Businesses were asked a range of questions regarding such issues as business confidence and outlook, how they feel about the global and local economies and what challenges they currently face.

For the full report infographic, detailed data, and graphics, as well as to see the full results of the first, second and third Business Indices, please visit The Sage Business Index- Business Insights.

Survey Methodology

Populus provided online interviews with 10,861 decision makers in businesses in the USA, Canada, Germany, Austria, Switzerland, France, UK, Ireland, Spain, Portugal, Poland, South Africa, Malaysia, Singapore and Brazil. The businesses were drawn from two sources:

· 7,958 respondents were drawn from Sage's local customer databases across the UK, Ireland, USA, Canada, Germany, France, Spain, Portugal, South Africa, Malaysia, Singapore and Austria. Sage's local operating companies sent an email invitation to participate to specially selected databases with a survey link provided by Populus. In Malaysia and Singapore, customers were invited to participate via a letter which included the details of how to enter online. All responses were collected centrally by Populus.

· 2,903 respondents were drawn from a dedicated online panel of business people, which has 2.4 million members worldwide. 200-250 interviews were conducted in all markets apart from Malaysia and Singapore where research was undertaken via Sage local operating companies, as above. A random sample of respondents whose profiles met the client criteria were invited to take part in the survey, ensuring a spread of business sizes and industries. Respondents were then asked a screener question to ensure that they were a decision maker at their business.

*Index Methodology

As this is the fourth Sage Business Index, we have applied an index methodology which allows us to measure the changing mood of the businesses surveyed in relation to business and economic confidence. The index is based on a scale of one to 100 where 0 means a significant decline, 100 means a significant improvement, and 50 means it is no different. For the business confidence question the scale translates to below 50 as less confident and over 50 is more confident, 50 is no different.

We retrospectively applied this index methodology to the countries that took place in the first business survey in February 2011 (US, Canada, UK, Germany and France) where the questions were asked as follows:

· "Do you feel your country's economy is recovering or declining?" and "Do you feel the global economy is recovering or declining?" Index scores have been derived from this data where answer options in this study, and their index score weighting, were: "It is recovering significantly (100)", "It is recovering slightly (75)", "It is no different (50)", "It is declining slightly (25)", "It is declining significantly (0)"

· "Are you more or less confident of your business prospects over the next year?" Index scores have been derived from this data where answer options in this study, and their index score weighting, were: "More confident (75)", "No different (50)" and "Less confident (25)"

About Populus

Populus is an opinion research and consultancy firm that specialises in understanding the views of the general public, customers, businesses and key stakeholders. Best known for its social and political research as pollsters to media organisations such as The Times, the BBC and ITV News, it conducts large, regular, research programmes for a wide variety of clients, such as large multinational companies in retailing, food manufacturing, pharmaceutical, financial services and communications sectors, to public institutions, membership organisations and NGOs.

· Populus has significant experience in:

· one-to-one depth interviews with senior decision-makers and stakeholders (e.g. Members of Parliament, senior business executives, investors and analysts, specialist journalists, government advisers and civil servants, members of EU institutions, and leaders of NGOs and trade associations);

· constructing bespoke online panels for clients wishing to engage with their stakeholders, memberships, or consumers on a continuing basis;

· employing call-centre based or access panel research both nationally and internationally for polling Business to Business groups, the general population and specific sub-samples of the public;

• organising focus groups - including among hard-to-reach groups - to gain greater understanding of what drives opinion and motivates key audiences or to test messaging concepts and to use stimulus material.