New research from leading business and financial adviser Grant Thornton UK LLP (“Planning for growth”) has identified that UK businesses could leave up to £72.5 billion in untapped growth potential on the table in 2018.
Based on a survey of 1,000 UK businesses with turnover between £10m to £1bn, and supplemented with qualitative in-depth interviews with senior business leaders, the report identifies an array of barriers to growth for UK companies, which if surmounted, could unlock an estimated £72.5bn in gross value add across the UK economy. Comparatively, this equates to creating a new economy the size of Greater Manchester; or 1.4m new jobs across the economy.
Whilst UK business optimism has been on a downward trend since the months leading up to and following the UK’s referendum on EU membership, the research suggests the majority of barriers to growth remain within businesses’ ability to influence. External forces feature lower on businesses’ list of top 20 concerns, such as that presented by Brexit (ranked 14th, at 22%) and regulation (ranked 16th at 20%). The top barriers include:
- Technology (38%)
- Brand, marketing and sales capability (34%)
- Systems, processes and operating models (31%)
- Talent, skills and innovation (31%)
- Partnerships (31%)
Robert Hannah, chief operating officer at Grant Thornton UK LLP, commented: “Businesses have clearly been unsettled by the outcome of the referendum on EU membership and limited information on future trading relations with the EU and other economies. But, whilst confidence may have taken a knock, the research is telling us that there are a number of issues that remain within business leaders’ ability to address and overcome. Much of this relies on making prudent investments in their people, processes and technology.”
The report also explores the interplay between growth barriers and businesses’ stated abilities to overcome these via growth accelerators. The analysis finds that:
- Businesses have scaled back their growth ambitions over the past year. Whilst Brexit features as a barrier to growth, businesses seem more concerned with the lack of detail available to implement and execute their Brexit strategies. As more finite details of the negotiation process emerge, we can expect confidence to steadily increase – irrespective of the outcome of these negotiations – and growth ambitions to subsequently recalibrate upwards.
- Tech Crunch: with technological disruption as the new norm, businesses recognise its potential as both an accelerator (37%) and barrier (38%) to growth. Only 55% of those businesses that see technology as a barrier believe their leadership team has the ability to harness technological advances to overcome it.
- Made for Britain only: Two fifths (43%) of businesses indicate that what they sell is more suited to a UK market, than internationally. Despite limited domestic growth prospects, only 15% of respondents indicated that they are currently doing business overseas, and only 6% of businesses ranked overseas expansion as their top priority for growing top line revenue. However, businesses acknowledged that export growth could offer a handsome revenue boost, as partnerships, supply chains, networks and international connections was ranked third in terms of investment priorities.
- Mind the marketing gap: Brand, marketing and sales was ranked as a top three barrier (34%) and accelerator (33%) to growth. This also features as one of the most important skills gaps at the leadership table.
The report goes on to identify a cohort of UK businesses that have achieved at least 20% annual turnover growth in the last year. Dubbed the ‘Growth Generators’, these 12% of responding businesses have four unique characteristics which set them apart from their peers. They are:
- Purpose-driven - have an ambitious and confident mindset fueled by a purpose-driven approach
- Invested in growth - they are not afraid to take on external investment and have bold M&A strategies
- Tech confident - they build their foundations on agile technologies that grow with them
- Networked – they look beyond their own sector and domestic market for growth opportunities
Robert Hannah continued: “The assumption that double-digit growth is easier when you’re a small company isn’t exactly the case. Our research shows that the Growth Generators fall within every size bracket, from £10m to £1bn and across a variety of industry groups. They therefore offer an intriguing perspective on growth and should serve as inspiration to their peers, as it’s these dynamic companies that will likely enable a vibrant UK economy to develop over the years to come.
“Whist political and macroeconomic uncertainty could remain a market feature in the near-term, progressively-minded businesses are assessing their prospects longer-term and planning accordingly. They’re also adopting strategies which factor in international opportunities and the wider role their organisations play in society, beyond financial performance, which allows for far more sustainable results to emerge.”