UK businesses optimistic about growth prospects
UK businesses are optimistic about their future growth prospects in spite of the current economic situation. The average company with a turnover of £20 million or less expects to grow its revenue by 88% over the next five years – or around 13% per year - according to new research from Santander Business Banking.
While these expectations are more cautious than the 104% five-year growth targeted by companies in last year’s study, they are far more optimistic than figures published by Office for Budget Responsibility which has forecast GDP growth of around 11% between now and 2016.
Given the eurozone crisis and the UK’s return into recession earlier this year, it is unsurprising that businesses have become more cautious about their future growth, particularly in the short term. Indeed, the number of businesses focusing on survival as their immediate business priority has increased from 47% in 2011 to 54% this year.
However, there has been an increase in the number of companies looking to hire new staff in the next twelve months, with more than one in 10 (11%) firms saying that employing new people is an immediate short term priority.
The trading environment is identified as the biggest challenge facing companies looking to grow, according to half (50%) of the business owners surveyed. However, nearly one in five (18%) believe their business has never been in better shape with nothing to stop them from growing. This is particularly the case for firms in Scotland where nearly half (46%) believe there is nothing that is preventing their business from growing.
Robin Foale, Managing Director of Santander Business Banking, said: “While businesses remain cautious in the short term, focusing on survival against an uncertain economic background, they are clearly optimistic in their longer term prospects. Many people think survival is about holding onto their cash but in order to promote longer term growth, businesses need to continue to invest.
“There are many ways that companies can look to improve the quality of their business and ensure they are well placed to take advantage of opportunities to grow. Given the low anticipated growth in the UK over the next few years, companies looking to meet their aspirations will need to focus on the fundamentals such as cash flow, customer service and strategic planning to ensure they can realise their ambitions.”
Regional growth outlook:
Companies with a turnover of £20 million or less in London and the South East are particularly positive about their growth prospects, anticipating triple digit growth of around 153% and 140% respectively over the next five years. They are followed by companies in Scotland (91%). Businesses in the North West and West Midlands are less confident in their growth prospects expecting their business to grow by 49%.