America's Middle Market Businesses Share Bleak Outlook Post Election

Only 16 percent of U.S. companies with $25 million - $4 billion in annual sales are confident in their ability to thrive post election, according to KeyBank study

Dec 13, 2012, 15:51 ET from KeyCorp

CLEVELAND, Dec. 13,  2012 /PRNewswire/ -- It's business as usual – and not in a good way - for middle market executives parsing 2012 presidential election results and post-election headlines for signs political gridlock is giving way to a unified plan for economic progress.

According to the latest KeyBank Middle Market Business Sentiment survey, more than two-thirds (67 percent) of middle market executives have a fair to poor outlook for the US economy in the next 12 months. Only 16 percent of those surveyed are more confident in their businesses' potential to thrive post-election.

In addition, the percentage of middle market business executives planning on increasing cash reserves nearly doubled. Pre-election surveys indicated 23 percent planned on increasing already robust cash reserves. That percent increased by 23 percent, according to post-election surveys.

Executives were surveyed between Nov. 7 and 12. KeyBank has tracked middle market business sentiment over the past six months.

"Middle market business executives need certainty to make plans," said Cindy Crotty, KeyBank executive vice president and head of KeyBank's Commercial Banking segment.

"Before they can switch gears from saving to expanding, they need to see our leaders in Washington avoid the fiscal cliff," she said. "More importantly, middle market executives want assurance our leaders will work together to create an economic path to progress."

The election did little to shift power in gridlocked Washington, and Crotty said the survey results reflect middle market executives' concern that partisan politics takes precedence over developing a non-partisan economic policy.

"Right now business need to see clear policy on important issues such as tax rates and regulation – even if that policy means more taxes or increased regulation," Crotty said. "They might not like the policies, but at least they would know what to expect and be able to plan accordingly," she said.

Crotty, who has been a professional in the banking industry for more than three decades, said KeyBank's middle market clients have strong balance sheets and that there are middle market executives taking advantage of the low-rate environment – but only when they see certain opportunity.

"Given the low rates, we would have anticipated more businesses borrowing money to make investments and maintaining their cash reserves for other uses," Crotty said. "The middle market will continue to sit on cash reserves and delay investment until there is proof positive that our government can pull together and create a plan for robust and sustainable growth."

Other Notable Findings:

  • Seventy percent of middle market businesses are extremely or very concerned about the fiscal cliff given the outcome of the election.
  •  When asked how their perspective on the fiscal cliff has changed post-election, nearly half (47 percent) of businesses are more concerned.
  • There has been a nine percent decrease in business owners planning to add employees since August. Crotty said middle market businesses, which are significant employers, have become accustomed to running leaner and may remain as such for the long view.

About the KeyBank Middle Market Business Sentiment Survey:

KeyBank partnered with Lieberman Research Worldwide on the Middle Market Business Sentiment survey to understand what businesses sentiments are impacting each organization's business strategies and tactics, identify how business costs are expected to change and determine which regulatory and global economic issues are affecting them. The survey for the current Middle Market Business Sentiment was conducted from Nov. 7- Nov. 12 among 320 financial decision-makers in middle market businesses ranging from $25 million - $4 billion annual revenues.

About KeyBank

KeyCorp (NYSE: KEY) was organized more than 160 years ago and is headquartered in Cleveland, Ohio. One of the nation's largest bank-based financial services companies, Key has assets of approximately $87 billion as of September 2012.

KeyBank provides deposit, lending, cash management and investment services to individuals, small and medium-sized businesses in 14 states under the name of KeyBank National Association. Key also provides a broad range of sophisticated corporate and investment banking products, such as merger and acquisition advice, public and private debt and equity, syndications and derivatives to middle market companies in selected industries throughout the United States under the KeyBanc Capital Markets trade name. For more information, visit KeyBank is Member FDIC.