Middle-Market Executives Long for Growth as Uncertainty Casts Pall Over New Year

As 2012 draws to a close, business observers have offered few uplifting points of view when it comes to the outlook on middle-market business sentiment in 2013.

Cindy Crotty, middle market business watcher and head of KeyBank’s commercial banking segment, recently shared with Middle Market Executive some of the findings from a recent KeyBank survey of middle-market businesses, as well as a few observations about the current sentiment among middle-market executives.

“We were looking to see if the cloud of uncertainty over middle-market sentiment had lifted — and if anything, it was worse,” explains Crotty, who says that the majority of middle-market executives remain pessimistic — a sentiment she characterizes as having a paralyzing effect on growth.

“The data would suggest that middle-market businesses are waiting on the sidelines for more certainty when it comes to taxes, regulation, or health care. These businesses need more clarity before they can make investment decisions,” says Crotty, who adds that the survey’s findings revealed that 50 percent of middle-market businesses are planning to increase their cash reserves next year.

“We see a lot of cash on company balance sheets already, and the question is what it will take for businesses to take that money and buy equipment and really invest it back in their businesses,” notes Crotty, who says that pessimism is also derailing human capital investment.

According to the Crotty, since August there has been a 9 percent drop in middle-market businesses that plan to add employees. She attributes this to middle-market business employers becoming accustomed to running leaner and believes that this will remain the case long-term.

“Earlier this year — in the Midwest in particular — businesses were saying that they were ready to hire if they could find the right people. I think that this is a real concern going forward and an area we’ll be looking to study a little more closely,” says Crotty, who adds that KeyBank will likely survey middle-market executives again in the first quarter 2013.