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£10bn growth could be unlocked by South East businesses

South East businesses could miss out on £10 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 South East, this figures breaks down to £10 billion measured as 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:

1 purpose-driven

2 invested in top-line growth and willing to seek external funding and engage in M&A activity

3 tech confident

4 networked.

Growth Generators: Regional breakdown

The growth picture for the South East

There is no doubt that the South East has the potential to be a major engine of growth within the UK economy. In 2016, it accounted for 15% of the UK’s total GVA – second only to London3. The South East benefits from its export links to Europe, the high-tech Thames Valley served by the M4 and its proximity to the capital.

Yet there is the potential for the region to punch even harder. While its GVA was the second highest of any UK region, the rate of growth (2.5%) was in fact the second lowest in the country and at its lowest level since 2011.

According to our research, only 53% of the 116 South East business leaders we spoke to are extremely or reasonably confident that they will achieve their growth plans for the next three to five years. So what is holding this region’s businesses back?

Scaled-down growth ambitions

Political uncertainty is affecting the growth of the private sector. More than a third (35%) of South East respondents said uncertainty has made leadership teams more risk averse while only 23% disagreed.

Additionally, only 3% of businesses made strategic investment in top-line revenue growth in 2017 compared with 24% in the previous one to two years and 70% in the previous three to five.

One business with ambition is Berkshire-based software and IT services provider, Advanced. Gordon Wilson, CEO, said: “We have just started our M&A engine in earnest and we’re about to acquire a number of businesses in the coming months. M&A will be a strategic driver to accelerating our cloud portfolio and become another enabler of growth. This will not just add revenues to our business, but will drive cross-sell of our products and services into our existing customer base giving them a broader portfolio to drive business advantage for them.”

Research report
Planning for growth: don’t let uncertainty hold you back Discover the barriers and accelerators to private sector growth
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Tech crunch

South East businesses see technology as both a major accelerator and barrier to growth. However, more see it is as a significant barrier (47%) than those that see it as an accelerator (34%).

Just over half of South East business leaders are broadly confident that they can overcome technology as a barrier to growth. With so much potential in the region, cracking the tech challenge must be a key area of focus for the South East’s businesses.

Top 10 barriers to growth

Mind the marketing gap

Like technology, brand, marketing and sales are seen as an accelerator and a barrier to growth. Of those who identified technology as a barrier, only 29% of South East business leaders are confident their organisation can apply brand, marketing and sales as an accelerator.

Building a brand is essential for driving sales and customer engagement – the signs are that South East businesses will need to continue to work hard at successfully harnessing it.

A company that places great emphasis on its marketing is Park Holidays, which operates across the South East. Commercial Director Tony Clish said: “We have a portfolio of many holiday parks but we don’t see them all as the same. We see them all as individual businesses so we micromanage each and market them to reflect their unique character.”

Comparing South East businesses to Growth Generators

Businesses in the South East perform well at instilling a sense of purpose: more than 90% of their leaders believe that staff and management understand and support this. However, only 52% of South East business leaders who said purpose was an accelerator are confident they can leverage this – compared with 82% of Growth Generators.

According to James Perry, Co-founder of Kent-based food business COOK, a sense of purpose has driven the business’s commercial success and value. He said: “One of our growth accelerators was working with retailers which were more aligned and could understand our broader values. Another key success factor has been engaging our people with our purpose rather than them just being a hired input.”

When it comes to investing in growth, 70% of Growth Generators see M&A as their strategic growth priority in the next three to five years, while in the South East it was just 54%.

Of business leaders who have identified technology as an accelerator to growth, Growth Generators are more confident in their ability to implement this (59%) than businesses in the South East (42%). Tech was also the area of highest investment for 14% of Growth Generators to reach the next stage of growth compared with only 7% of South East businesses.

Top 10 accelerators to growth

Like Growth Generators, a minority of South East businesses are active internationally. But both recognise the importance of growing international activity, with 37% of Growth Generators and 33% of South East businesses citing this as one of their top five strategies for the next one to two years.

Fiona Baldwin, Jim Rogers and Ellen Walsh, Practice Leaders of our South East believe there are a number of key questions that businesses in the South East need to consider in order to gauge their strengths across these four critical areas:

  • Is our purpose embedded across all areas of the business?
  • Do we have an M&A and/or external investment strategy that is fit for purpose?
  • Have we mapped our technology and systems requirements against our growth strategy?
  • Are we properly assessing what international opportunities are out there?

Businesses that are on top of these issues have the best chance to become Growth Generators themselves and help drive the wider success of the region.

About our research

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 regions4. We also conducted in-depth interviews with 15 CEOs and/or managing directors from high-growth companies, academics and market commentators5. For more about our research, please see our report, Planning for growth.

References

    1. Measured as GVA (gross value added)
    2. Based on respondents which said in the survey their turnover had increased by 20% or more in the last year
    3. Regional gross value added (income approach), Office for National Statistics, 20 December 2017 
    4. For detail on the full demographic breakdown and statistical analysis see the methodology section of our national report, Planning for growth
    5. For full list of interviewees see the methodology section of our national report, Planning for growth

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