Defying Gravity How ambitious businesses can achieve growth in the age of uncertainty
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About the study An introduction from our managing partner A mid-market facing downward pressure Businesses take measures to deal with Brexit pressures Leveraging international opportunities New horizons Find a way forward for your business
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about the study Our Defying Gravity report series will help to explain how medium sized businesses (MSBs) can achieve high performance in complex and uncertain times. Research is based on interviews conducted in 2017 with 500 leaders of UK MSBs across a representative range of industry sectors.
about Foresight
about Mills & Reeve
Foresight is forward looking and insightful content produced by Mills & Reeve. Designed to help our clients better understand the key issues they face, it offers broader commercial acumen in addition to legal expertise.
Mills & Reeve is a national law firm with more than 500 lawyers and 900 staff across six UK offices. We’re one of the most successful law firms in the UK as a result of our highly commercial approach, the deep relationships we develop with our clients, and the quality of our people and culture.
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A “medium sized business” is defined as having a turnover of between £10 million and £300 million while a high growth or high performance business is defined as having achieved turnover growth above 20% last year. Participants were CEOs, CFOs or Board Directors.
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We’re the only firm to have been named in the Sunday Times 100 Best Companies to Work For 14 years running, and 97% of our staff would recommend Mills & Reeve as a good place to work.
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an introduction from our managing partner We are living in increasingly complex and uncertain times. As the impact of Brexit threatens to destabilise the economy and political landscape, and globalisation and disruptive technology bring rapid change, how are businesses meeting the challenge?
We set out to understand how these businesses can achieve high performance in challenging times, speaking to 500 mid-market leaders who shared their growth and investment plans, international expansion strategies and innovation priorities.
The mid-market is the unsung powerhouse of the UK economy, with pre-referendum studies forecasting that MSBs are set to be the fastest growing segment of the economy over the next three years. Our own research reveals the impressive resilience of the UK’s middle: two thirds of MSBs (66%) grew turnover last year, at an impressive average rate of almost 20%.
Our campaign, Defying Gravity, explores the issues that leaders are facing and possible steps to success through a series of reports and roundtable events. This second report in our series examines the impact of the EU referendum on the mid-market and finds that leaders are preparing for life beyond Brexit by also looking to countries outside Europe.
But can the mid-market continue to defy gravity in the face of deteriorating market conditions? And how has this unstable external landscape impacted mid-market leaders’ confidence in their ability to invest in and generate growth?
Despite very real and recent hurdles, it is encouraging to see mid-market leaders remaining defiantly ambitious about growth, determined to beat market conditions and to hold their position as the driving force of the British economy. More than four in five (83%) mid-market businesses plan to increase turnover in this financial year (2017/18) by a confident average of 22%. Defying gravity indeed!
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At Mills & Reeve, we want to champion these MSBs and help unlock new opportunities for growth to help them achieve their full potential. As a mid-market business ourselves, we understand the landscape and experience many of the same challenges as the leaders we spoke to.
In 2015, our Full Scale Ahead report explored paths to growth for mid-market businesses and the question of whether to scale or sell. Now, following a period of upheaval and disquiet, there are many other considerations on the minds of mid-market business leaders. We would like to thank everyone who participated in our study. I hope their insights help you to find a way for your business to defy gravity in these challenging times. Claire Clarke Managing Partner Mills & Reeve
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a mid-market facing downward pressures Our study reveals defiant ambition in the UK’s mid-market. However, far from being bullish about their operating environment, mid-market business leaders are concerned about a number of gravitational factors pulling them down.
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a mid-market facing downward pressures More than half of business leaders do not believe that the UK economy is “strong and stable” and two thirds express frustration that the economy in its current state presents hurdles to growth.
...the pound’s fall in value following the Brexit vote is having a significant impact on the day-to-day trading of British businesses. Two thirds of MSB leaders believe that while major corporates have the resources to navigate turbulent times, economic uncertainty will disproportionately affect the mid-market.
Brexit is exerting substantial downward pressure, with the referendum outcome and uncertainties surrounding Britain’s future trading relationship with the EU already hitting the pockets of mid-market businesses.
falling demand following the Brexit vote, rising to 69% of companies that have suffered a decrease in turnover. Over half of MSBs have experienced increased issues with late payment since the referendum.
In particular, the pound’s fall in value following the Brexit vote is having a significant impact on the day-to-day trading of British businesses, increasing the price of imports and narrowing margins. Although a weak pound is good news for exporters, dramatic currency fluctuations can make it difficult to manage foreign exchange risk, and over half of leaders feel that currency volatility is damaging their business.
The mid-market is clearly feeling the pinch, and businesses are concerned about what the future holds. Nearly two thirds (60%) of mid-market leaders say that single market access is ‘critical’, and a similar proportion are concerned that failing to reach a deal with the EU would cause significant damage to their business. Whether a deal is reached or not, MSBs are bracing for impact: 61% expect that the administrative burden of regulatory or legislative change will cost their business significant time and money.
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59% of mid-market leaders do not believe the UK economy is “strong and stable”
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On top of this, businesses are dealing with declining demand and cash flow issues caused by late payment. More than half of businesses have experienced
64% are frustrated that the economy keeps presenting obstacles to their growth
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of mid-market leaders say that currency volatility is damaging for their business
66% believe that economic uncertainty will disproportionately affect the mid-market 6
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