Business growth forecasts highest for three years

UK businesses are more confident about their future growth than they have been in the past three years, according to the latest annual business growth survey by Santander Corporate and Commercial.

The survey, which looked at growth expectations for companies with turnover of up to £20 million, reveals that businesses are predicting turnover growth of an average 134 in the next five years, equivalent to 18.5 percent a year, and up considerably from the 88 percent five-year growth forecast in last year’s survey, and the 104 percent forecast in 2011.

This high level of confidence is reflected by Office for National Statistics GDP statistics released in July, revealing that the UK economy grew by 0.6 percent in Q2 2013.  The figures were also matched by a stronger outlook for employment, with around one in eight (13 percent) companies stating that hiring new staff is an immediate priority – the highest it has been since 2011.

In a further sign of increased confidence, SMEs reported they are turning to acquisitions for growth, with the number reporting this to be an immediate priority doubling to 14 percent this year, up from seven percent in 2012 and up from five percent in 2011. The number looking to grow organically also rose to 32 percent, compared with 29 percent in 2012 and 30 percent in 2011.

Despite the increase in optimism, businesses are still facing stiff challenges. Half of those polled reported that they are focused on survival as an immediate priority; this is down from 54 percent in 2012, but higher than in 2011 when the figure stood at 47 percent.

The tough trading environment is still seen as the biggest challenge to growth by UK businesses, cited by 46 percent of respondents, although this is down from 50 percent in 2012. Access to capital was also seen as a challenge by more than a quarter of respondents (26 percent), up from 21 percent in 2012 and 18 percent in 2011, while 14 percent of businesses said their ability to hire and retain the right staff was a concern, up from 12 percent in 2012 and 8 percent in 2011.

Smaller companies are the most optimistic, with those with a turnover of £50,000 to £100,000 forecasting 607 percent growth over the next five years. This is followed by businesses with a turnover of £250,000 to £500,000 (204 percent) and £1 million to £5 million (117 percent). The least optimistic were the largest firms; businesses with a turnover of £5 million to £20 million predicted a 44 percent increase in turnover over the next five years.