UK businesses are more confident about their future growth than they have been in the past three years, according to new research.
Santander Corporate & Commercial’s annual businesses growth survey focused on the expansion ambitions of companies with turnover of up to £20m. It revealed that businesses are predicting an average 134% increase in turnover over the next five years.
This is equivalent to 18.5% a year, and up considerably from the 88% five-year growth forecast in last year’s survey, and the 104% forecast in 2011.
In a further sign of increased confidence, SMEs also reported they are turning to acquisitions for growth, with the number reporting this to be an immediate priority doubling to 14% this year, from 7% in 2012. The number looking to grow organically also rose to 32%, compared with 29% last year. Around one in eight (13%) companies stated that hiring new staff is an immediate priority.
Despite the increase in optimism, however, businesses are still facing stiff challenges. Half (50%) of those polled reported that they are focused on ‘survival’ as an immediate priority. This is down from 54% in 2012, but still higher than in 2011, when the figure stood at 47%.
The tough trading environment remains the biggest challenge to growth by UK businesses, cited by 46% of respondents – although this is down from 50% in 2012. Access to capital was also seen as a challenge by more than a quarter of respondents (26%), up from 21% in 2012, and 18% in 2011. Meanwhile, 14% of businesses said their ability to hire and retain the right staff was a concern, up from 12% in 2012, and 8% in 2011.
Smaller companies are the most optimistic and those with a turnover of £50,000-£100,000 are forecasting 607% growth over the next five years. This is followed by businesses with a turnover of £250,000-£500,000 (204%) and £1m-£5m (117%). The largest companies were least optimistic, with businesses turning over £5m-£20m, predicting a 44% increase in turnover over the next five years.
Commenting on the results, Marcelino Castrillo, head of SME at Santander Corporate & Commercial, said: “Understandably, many businesses remain cautious given the current environment. However, our latest growth survey reveals the most optimistic five-year outlook for three years.”
GDP data released by the Office for National Statistics in July revealed the UK economy grew by 0.6% in the second quarter of 2013.
Sally Percy is editor of The Treasurer