£1.6bn growth could be unlocked by Welsh businesses
20 Mar 2018
Businesses in Wales could miss out on £1.61 billion 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 Wales, this figure breaks down to £1.6 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 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 Wales
Wales is one of the smaller 12 UK regional economies, but it registered impressive GVA growth in 2016 of £59.8 billion, an increase of 4.1%3. This was the fourth highest in the UK.
The country benefits from a rich variety of businesses in the manufacturing, tourism and food and beverage sectors. And it is powered by the financial services and tech strongholds of Cardiff and Swansea. Given these strengths, the potential of Wales to drive up its performance is clear.
Yet only 31% of Welsh businesses are confident that they will achieve their growth plans for the next three to five years. So what is holding them back?
Top 10 barriers to growth
Scaled-down growth ambitions
Businesses in Wales have growth ambitions – M&A is one of their key priorities over the next five years. However, there has been a lack of strategic investment in top-line revenue growth in the past 12 months. A third (37%) of respondents said the last such investment was more than one to two years ago. For 41%, the last investment was three to five years ago.
Alistair Wardell, Practice Leader of our Wales team said: “A definite drop-off in growth investment is discernible. Successful Welsh businesses, however, are active in balancing risk with opportunity to avoid stagnation and meet their undoubted potential.”
Ian Hall, CEO at Cardiff-based CCS McLays, a provider of packaging and consumable outsourcing solutions for the high street and healthcare and pharmaceutical sectors, said: “One thing any business needs to be sure of before embarking on a growth strategy is that the fundamentals and foundations are correct and scalable. But very often, where people don’t grow the business, the business outgrows them.”
Welsh businesses see technology as both a major accelerator and a barrier to growth. But two-thirds of those that see it as a barrier believe they can overcome it.
Alistair said: “Cracking the tech challenge is key for almost every business. In Wales the clear majority are optimistic about their ability to overcome it as a barrier. As a nation our reputation is growing as an innovator of exciting and ground-breaking technologies. The outcome of this is stimulating growth across digital, life-sciences and fintech markets.”
Mark Crook, CEO of Henry Howard Finance, said: “We see digitisation as both a challenge and an opportunity. Our investment into evolving our HowApp (credit decisioning and online ordering solution), to continuously improve our ability to complete applications for our customers, means that our technology drives both customer acquisition and retention.”
Like technology, brand, marketing and sales are recognised by many as a top accelerator and barrier to growth. Wales embraces the accelerator aspect with 44% of respondents investing in brand, marketing and sales. However, only 39% of Welsh leaders who said it was an accelerator are confident in their leadership team’s ability to leverage it for growth.
Alistair said: “Brand and marketing is essential in driving sales and customer engagement. Insightful communications, engaging content and the omnipresence of social media create ideal platforms for sharing valued content with the market. This can make a significant contribution to businesses’ growth potential. The signs are that businesses in Wales will need to continue to work hard at successfully harnessing their marketing strategy.”
Comparing Welsh businesses to Growth Generators
Top 10 accelerators to growth
Welsh businesses (84%) perform strongly in instilling a sense of purpose – even overtaking Growth Generators (82%) – in their confidence at implementing this as a growth accelerator.
When it comes to investing in growth, Welsh businesses report that their priorities are technology (55%), brand, marketing and sales (44%) and company vision, culture and purpose (44%).
In terms of their primary purpose, they are in tune with Growth Generators, selecting economic purpose (creating jobs and opportunities) as their priority.
On investing in people, Bob James, Managing Director of AerFin, said: “Bringing the right people into the company and selecting the right skill set is one of our biggest challenges. We’ve got a very close-knit management team. One of our top priorities is ensuring that the people we employ are right for the business and bring with them the skills that we need to grow. I would advise any business not to hold back when it comes to investing in people.”
Two-thirds of Welsh leaders are confident they can use technology as a growth accelerator – higher even than Growth Generators. However, there is concern that investment does not necessarily follow. Technology is the key investment area for 14% of Growth Generators but only 11% for Welsh businesses.
Only 6% of Welsh businesses are doing business overseas compared with 16% of Growth Generators. But one-third of Welsh businesses believe growing international activity is one of their top five strategies for the next one to two years – similar to Growth Generators (37%).
There are a number of key questions that businesses in Wales need to consider to gauge their strengths across these four critical areas:
Is our firm’s 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 investment levels sufficient?
Are we properly assessing what international opportunities are out there?
Alistair concluded: “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, .
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