Businesses in the East Midlands could miss out on £3.5 billion1 of untapped growth in 2018.
Our research, Planning for growth, found that in 2018 businesses could leave £72.5 billion untapped potential on the table in the UK. This is the equivalent to creating a new economy the size of Greater Manchester. Or put another way, this level of growth could translate into 1.4 million jobs. In the East Midlands, this figure breaks down to £3.5 billion GVA.
The research also unveiled a sustainable high-growth group of businesses that nationally achieved 20% or more in growth in 2017 – and sustained growth for the past three years2. These Growth Generators are almost five times more likely to be achieving their one-to-two-year growth targets than the rest of the market. And they are also nearly 10 times more likely to reach their targets than low-to-no growth companies. On top of this financial performance, Growth Generators share a growth mindset based on four key characteristics.
2 invested in top-line growth and willing to seek external funding and engage in M&A activity
3 tech confident
Growth Generators: Regional breakdown
The growth picture for the East Midlands
The East Midlands generated £101.6 billion GVA for the UK economy in 2016 according to the latest Office for National Statistics figures3. This is an increase of more than 20% from the £83.2 billion generated in 2010. This made the East Midlands the ninth-highest contributor of the 12 UK regions in 2016.
The growth rate in the region’s GVA has also increased in recent years, from 2.1% in 2015 to 3.7% in 2016. This was the seventh-highest rate of the 12 UK regions in 2016.
Despite the East Midlands contributing 6% of the UK’s GVA in 2016, our research identified that just 4% of Growth Generators are based in the East Midlands. This means the proportion of Growth Generators in the region is falling well behind other regions, such as the West Midlands (7%) the South West (5%) and Wales (8%) – though it is ahead of the East of England (2%).
Given the strengths of the East Midlands – as well as its economic contribution and increasing performance – there are clear opportunities for growth.
Chris Frostwick, Practice Leader of our East Midlands team said: “The private sector plays a huge role in the region’s economy. Therefore, a high-performing private sector will be a significant driver of growth in the East Midlands.
“Our latest East Midlands Top 200 report for 2017 shows a similar picture4. This research finds a relatively small proportion of East Midlands companies are consistently experiencing sustained levels of growth.
“Growth Generators are almost five times more likely to be achieving their one-to-two-year growth targets compared with average UK businesses. By learning what it is that these high-growth firms are doing differently and adopting their growth performance and operational strategies, East Midlands’ private businesses can lead the way in unlocking the region’s huge economic potential.”
What is holding back our East Midlands businesses?
Top 10 barriers to growth
Our research has found that technology is a significant barrier for the majority of companies in the East Midlands. This reflects the wider UK picture. However, for Growth Generators, things are different.
Chris said: “Growth Generator businesses are increasingly motivated to pursue ‘digital transformation’ and understand its potential. It can reduce complexity in current business processes, increase speed to market of new products and services, and provide insight-driven data that improves the quality of decision-making. When companies crack the technology barrier, the research shows this acts as a real growth driver.”
Brand, marketing and sales also play an important role in growth and are a hugely untapped resource for many UK businesses. Embedding the right brand, marketing and sales strategy within an organisation is now critical to business success.
Plans to expand internationally is a relatively low priority growth strategy for East Midlands businesses (21%) compared with UK businesses (33%) and Growth Generators (26%).
Our research shows that political uncertainty around Brexit is putting businesses off the idea of international expansion. However, with all the external data showing some of the fastest-growing economies in the world lie outside the EU, this has to be a key area and opportunity for East Midlands’ firms to grow.
Chris said: “Growth Generator businesses tend to be more agile, bold and outward- looking. That means they are more readily able to overcome the challenges to overseas expansion. They often have established networks that they can draw on for the knowledge and skills required to navigate international regulation. There is huge opportunity for many more of our region’s businesses to do the same. Looking at Growth Generators, it is clear what a positive impact an international dimension can add to a business.”
Top 10 accelerators to growth
Power of external investment
A trait many Growth Generators share is that they consider – and have sourced – external funding to help realise their three-to-five-year growth strategies.
“Exploring investment from outside organisations can be a real boost to growth,” said Chris.
“It isn’t for everyone, but for a genuine, focused growth mindset, external investment can be a real turbocharger.
“It’s not just about the pure finance to facilitate growth – it’s the contacts and additional strategic input that a business gets in return from an external investor that can make the real difference.
“It is also clear that M&A activity can be the most effective way to deliver scale at speed – and with the right support it doesn’t have to be high risk. Given the need for firms to up their game and look outside the UK for growth, M&A can also provide the route to new markets.”
Prosperity will drive growth
Chris concluded: “There is clearly room for additional private sector growth in the East Midlands. If East Midlands businesses adopt the strategies of the high-growth firms, they could not only achieve significant individual progress, but also inject well over £8 billion GVA into the regional economy by the end of 2019.”
Our Growth 365 team has helped Pricecheck increase their exports by 45%
Our growth survey was conducted between August and September 2017. We heard from 1,000 business owners, CEOs, CFOs or CSOs at businesses with turnover of £10 million to £1 billion across all industries and regions5. We also conducted in-depth interviews with 15 CEOs and/or managing directors from high-growth companies, academics and market commentators6. For more about our research, please see our report, Planning for growth.
Measured as GVA (gross value added)
Based on respondents which said in the survey their turnover had increased by 20% or more in the last year