By Daniel Hunter
UK businesses are prioritising overseas markets for growth this year, according to the latest results from the American Express/CFO Research Global Business and Spending Monitor.
The study finds that just 17 per cent of UK finance decision-makers say they will focus primarily on increasing sales within domestic markets for growth. Compared to its global counterparts, this makes the UK one of the leading markets looking to capitalise chiefly on international markets, with only Spain (9 per cent) and Singapore (16 per cent) less likely to look for growth at home.
The report, which polled 519 senior finance executives globally, finds that UK business leaders remain focused on developed markets for growth: 41 per cent say they will export more to the developed world this year compared to just 17 per cent exporting more to emerging markets.
Yet when asked where they are most likely to expand their activities, UK businesses most frequently identify India (33 per cent), China (23 per cent), Brazil (23 per cent), and South Africa (23 per cent), suggesting that in the longer term they will build stronger relationships with developing markets, too.
When asked specifically about changing their scope of work with emerging markets in the next year, 34 per cent of the U.K. businesses surveyed say they are expecting to increase sales and distribution activity, as opposed to production (20%) and sourcing (17%), proving the enormous impact the rapidly expanding consumer classes of the emerging markets are having on the world economy.
Survey respondents believe that their companies’ finance functions should play a leading role in this development, with 37 per cent saying that the greatest contribution to growth their CFO could make over the next two years would be to help identify new markets.
According to the research, UK businesses are expecting to put significant investment behind business travel to drive growth, with two-thirds (66 per cent) saying they expect to increase expenditure on business travel compared to last year. They are making this investment primarily to build customer relationships, with 28 per cent planning to spend more and 59 per cent planning to spend the same amount on travelling to meet current or prospective customers. Those surveyed in the UK also said they are likely to be spending more or the same this year on travelling to meet suppliers or vendors (85 per cent).
“UK businesses pursuing a growth agenda recognise the huge potential of overseas markets. Clearly, this has led to a willingness to increase investments in business travel in the year ahead," Brendan Walsh, Senior Vice President, Global Corporate Payments- Europe, American Express said.
"However, in the current economic environment, UK executives reveal a cautious outlook, meaning that we can expect companies to focus on getting value for money and a significant ROI for their investments.”
The research identifies how the economic climate has reshaped the finance function within companies, changing its role from financial expert to strategic business advisor. Two-thirds (66 per cent) agree that the experience of the recent global economic downturn either greatly or somewhat enhanced the finance function’s profile and influence within the company.
Specifically, they have identified that the CFO has become more of a catalyst, spurring the wider organisation to execute necessary changes (37 per cent) or become more of a steward, directing risk-management efforts to ensure the company has met its compliance obligations (37 per cent).
When asked what the three most important skills that the company’s CFO will need to build upon over the next two years, respondents cite risk management (53 per cent), strategic thinking (50 per cent) and international business acumen (37 per cent). Those questioned say the greatest contribution their CFO could make to enabling growth over the next two years would be to encourage innovation (40 per cent), alert management to new markets (37 per cent) and take a leadership role in advocating growth-seeking breakthroughs (33 per cent).
The American Express/CFO Research Global Business and Spending Monitor finds that 50 per cent of UK respondents are predicting modest to substantial domestic economic expansion in the next 12 months. However, concerns over political gridlock and uncertainty seem to be taking their toll, with 67 per cent of respondents believing this will impact economic growth.
Notwithstanding these concerns, UK executives plan to follow a modest spending agenda:
57 per cent say they expect to make modest spending and investment to support top-line growth while improving profitability, with 10 per cent expecting to increase real spending and investment by more than 20 per cent.
Key areas they say they will be spending more on are:
- Computer hardware (28 per cent)
- Labour and headcount (27 per cent)
- Advertising, marketing and PR (27 per cent)
- Production inputs (including raw materials and intermediate goods) (23 per cent)
- Enterprise-level IT systems (21 per cent)
According to the research, in the last fiscal year UK companies spent down more of their cash than they had planned (53 per cent), with 43 per cent also predicting they are likely to spend down some proportion of their cash reserves this year. They say they are very likely to use their cash reserves for acquisitions (30 per cent), paying down debt (28 per cent) and increasing spending on research and development (27 per cent).
“UK CFOs are changing their roles and having more impact around the boardroom table as a result of the economic downturn,” said Walsh. “They are also predicting some higher spending this year, which is good news for the general economy as they look to invest to grow. Working with the right partners for growth over the long term will be critical as many companies increasingly globalise and look for opportunities outside Europe.”
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