UK businesses remain uncertain as economy hit by market fundamentals

03 April 2018 Authored by Consultancy.uk

UK business face various uncertainties, partly related to the outcome of Brexit talks. New analysis from Grant Thornton shows that businesses face various barriers to growth, although many also see those barriers as offering opportunities for acceleration.

The Grant Thornton study, titled ‘Planning for growth: Don’t let uncertainty hold your business back’ is based on a survey of 1,000 business owners, CEOs, CFOs, and CSOs, at businesses with a turnover of between £10 million and £1 billion.

The number of businesses in the UK has risen steeply since 2012, with more than 2.7 million enterprises in 2017, up from 2.2 million. Exports continue to see relatively favourable conditions, with low exchange rates and a rise in exports in the coming 12 months.

Labour productivity

However, while exporters are projected to see strong results, concerns around the wider UK economy continue to mount in the short-term, with GDP growth rates remaining lower than that of mainland allies such as Germany and France. Overall, GDP saw an 0.4% increase in Q4 2017, while in Germany and France 0.6% was recorded. GDP growth for the coming year is estimated at 1.5%, well below the 2.7% estimated for the US and 2.2% for the Euro area.

Productivity

Productivity remains an issue, with the UK seeing relatively low growth rates over the past five years. Following a slight dip into the negatives in Q2 2016, following the referendum results, productivity climbed to around 1% growth by the following quarter. However, the latest quarter again saw a relatively low result, at 0.4% growth, at a time when France and Germany have seen strong increases to 1.5% growth. Business confidence in the UK also remains at relatively low levels, at a net 12% positive, down from 26% in 2016, while the global average has seen a sharp uptick, from a net 38% to a net 58% last year.

Number of years since investment decision

The research found that companies are in a period of acute, going on to chronic, insecurity – which has increasingly led, according to the survey, to a risk-averse leadership (41% of respondents). The study shows that the most recent investment aimed at growth was by and large between 3-5 years ago in terms of people, operating profit and top-line growth. Those in the 1-3 year segment account for around a quarter in the three segments, while in the past 12 months, figures for this segment have been particularly low – 9% for people investment, 5% for operating profit and 7% for top-line growth. 

Barriers

Technology is cited by 38% of respondents as the biggest hurdle facing their firm, while 34% cited brand, marketing and sales as the top going concern. Partnerships took third place, on 31% of respondents, while systems and processes stood at 31% of respondents. Talent and innovation, meanwhile was cited by 31% of respondents. Interestingly, inclusion and equality and Brexit strategy were not in the top ten (21% and 22% respectively), while governance and local prosperity come in last on 13% and 14% respectively.

Barriers to growth (%)

In terms of the companies’ confidence in overcoming barriers, around half said that they expect to overcome technological issues, while 43% said that they are suited to deal with brand, marketing and sales issues. Most companies say that they will be able to deal with the increasingly contentious issue of inclusion and equal pay.

Technology is cited as the biggest accelerator by 37% of respondents, equal with those who that say partnerships could act as an accelerator. Brand, marketing and sales come in at 33% of respondents, while 32% say systems and processes could accelerate their business.

In terms of the area in which companies say that they can implement an accelerator, technology and talent and innovation are cited by 55%, while healthcare and wellbeing are noted by almost 70% of respondents as an area in which they have the ability to act. Vision, culture and purpose are also areas in which respondents note their ability to intervene, at 70%, while inclusion and equality was cited by 74% of respondents as an area in which they are well suited.

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