By Daniel Hunter
Britain’s biggest businesses are preparing to invest billions of pounds in growth-related initiatives this year as optimism in the UK corporate sector returns according to research by Deloitte, the business advisory firm.
In a survey of 126 companies generating revenues in excess of £1bn, Deloitte shows that 60% intend to invest at least £50m this year in growth initiatives and a further 30% will do likewise within two years. Encouragingly, 68% of business leaders expect the next three years to be a period of growth for their business, with 28% saying it is about stability and just 4% focusing on surviving.
“The low growth environment of the past five years, coupled with levels of consumer and government debt, mean that big business has to take a lead in driving a new era of wealth creation in the UK. 80% of respondents in our survey believe that business is best placed to do this," David Sproul, UK chief executive of Deloitte, said.
“Increasing corporate optimism is encouraging and is echoed in the results from the latest Deloitte CFO Survey, providing signs that big business has reached a turning point in terms of confidence.”
Two-thirds (66%) of business leaders say growth will come mainly or overwhelmingly from international markets in the next three years, with 37% forecasting overseas growth of more than 75% in this period. Just 8% anticipate their businesses growing at this rate in the UK.
A range of approaches are being considered by companies seeking to break into new markets. Forming alliances with local businesses appears to be the most popular, with 60% of respondents considering such a move. 55% are examining options for M&A activity while 44% are seeking to grow organically. These options are not mutually exclusive.
“The UK’s share of the global export market has declined in the past decade," Chris Gentle, head of research at Deloitte, said.
"This is inevitable to some extent with the rapid growth from the BRIC economies but we have even declined in services, where the UK is the world’s second largest exporter. More worrying is the fact that we underperform in the fastest growing markets. This is an issue which needs to be addressed if the UK corporate sector is going to capitalise on this opportunity.
“This will require a combination of business investment, practical help for mid-sized firms looking to breakthrough and targeted government support for our successful industries. We are already seeing some evidence of this with positive UK Trade and Investment missions to Brazil and India in the past 12 months and a joint venture between UKTI and TheCityUK to promote the financial services industry.”
Big businesses in Britain have adopted a broad range of strategies over the past five years to cope with economic turmoil. Half of the companies we surveyed had been through at least one round of cost cutting, but there has also been an attempt to create a larger and more diverse customer base (29%) and diversify the products and services being offered (27%).
“British business emerges from this hugely challenging period in reasonable health and with balance sheets bolstered to the extent where UK plc now holds in excess of £700bn in cash. This gives UK companies the firepower to invest for growth. Our research indicates that appetite is growing too," Sproul concluded.
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