West Midlands’ businesses could leave up to £5.2bn of untapped growth on the table in 2018, according to new research findings by business and financial advisers Grant Thornton UK LLP.
Grant Thornton’s report, Planning for Growth – don’t let uncertainty hold you back, studies the barriers and accelerators to private sector growth and identifies the characteristics possessed by the country’s most sustainable growing businesses. As a result, the firm estimates that the UK could be missing out on £72.5bn of Gross Value Added (GVA) growth this year, a figure that could translate into 1.4 million jobs.
In the West Midlands provisional figures from the Office for National Statistics (ONS) for 2016 show that GVA was £129bn, up 4.2% from 2015 and the third highest growing region in the UK. GVA growth per head in the same period was also third highest in the UK at 3.3%.
Economic growth largely depends on the prosperity of the private sector, yet Grant Thornton’s report highlights the fact that only 16% of businesses2 in the UK meet the Organisation for Economic Cooperation and Development (OECD) definition of ‘high growth’ – 20% turnover growth in the last year and sustainable growth for the last three3.
David Hillan, practice leader at Grant Thornton UK LLP in Birmingham, said: “Our research suggests that the majority of barriers to growth remain within businesses’ ability to influence. External forces, such as Brexit and regulation feature lower on businesses’ list of concerns. If we learn what sets ‘Growth Generator’ businesses apart we could release this significant latent potential for growth, which could be game-changing for the region and the UK.”
Grant Thornton’s research found that Growth Generator businesses have four common characteristics, as Hillan explained: “Growth Generators are driven by a purpose that everyone in the company buys into; they’re not afraid to take on external investment; they see technology as an accelerator to growth and place a high value on collaboration. This last point is particularly interesting, as putting people together to create mutually beneficial connections has become an important part of our work in the region in recent years.”
Key findings for the West Midlands include:
- Technology was identified as one of the top barriers to turnover growth and operating profit for regional businesses – cited by nearly half (46%) of respondents. Growth Generators do not rank technology as a top five barrier to growth
- Other key barriers to growth were brand, marketing and sales capability and market disruption, both named by 33% of locally-based businesses surveyed – both issued ranked higher than Growth Generators
- Talent and skills were highlighted by 24% of regional businesses as a top five barrier to growth, lower than Growth Generators who regard talent and skills as a key barrier to growth alongside systems, processes and operating models
- New product or service development is one of the key priorities behind their growth strategy over the next three to five years, cited by 72% of businesses in the West Midlands. For Growth Generators, mergers and acquisitions are their key focus.
Hillan continued: “Issues relating to technology feature heavily in our research and it’s a concern that nearly half of businesses surveyed in the region feel technology is holding their businesses back. Many local businesses we meet don’t appreciate the incentives available to help them develop and implement new technology or processes. Although such incentives are unlikely to cover the full cost of a project they can provide a timely financial boost to businesses which have to innovate to achieve their growth ambitions.
“Our research shows that if more businesses adopt a Growth Generator approach the private sector can lead the way in shaping a vibrant economy.“
