LONDON: Mid-sized businesses are displaying reserved optimism about an economic recovery according to the latest figures from Grant Thornton’s International Business Report* (IBR) which gathers responses from nearly 5000 business leaders in 29 economies including the G20. This follows a challenging year, in which mid-sized companies (the mid-market) saw their revenue decrease by an average of 1% globally after they factored in the impact of COVID-19 (EU: -5%; APAC: -2%, North America: +3%, Latin America +4%)
Economic optimism among mid-market businesses has had a resurgence over the past six months with the research finding that 57% of businesses have a slightly or very optimistic economic outlook for the next 12 months. This 14-percentage point increase is in stark contrast to six months ago when government mandated lockdowns saw economic optimism fall to the lowest level since the eurozone crisis.
With optimism seeping back into the mindset of mid-market leaders, other key indicators are also sluggishly turning upwards with 45% of businesses expecting revenues to increase over the next 12 months (+11 percentage points on H1), along with profitability (44% +12 percentage points) and employment (38% +10 percentage points). However, all remain well down on pre-COVID 2019 levels.
This highlights the fact that economic uncertainty remains at elevated levels, with 62% of businesses globally indicating it is the number one constraint on their ability to grow their business. And while optimism has increased, this has not yet materially flowed through to orders, with 52% citing shortage of orders as a constraint. Businesses are also concerned about availability of skilled staff and labour costs with 50% of business citing each as a constraint on their ability to grow.
The number one investment area remains technology (with 51% expecting to increase this in the coming year), followed by staff skills (45%) and R&D (44%) as businesses continue to retool for a new world of business. With second and third waves of COVID-19 hitting many markets, the need to invest in digital business models and having people with the skills to operate in a virtual world for the foreseeable future continues to drive investment decisions.
In this latest research, however, we are seeing more traditional investment categories come to the fore. The percentage of mid-market companies looking to increase investment in new buildings, and plant and machinery both increased 10 percentage points to 32% and 38% respectively.
Funding that investment and meeting the continuing operating needs during the pandemic, however, may not be straight forward. Shortage of finance remains a significant concern for businesses, with 46% of firms identifying it as a business constraint over the next 12 months, unchanged from record highs set in the first half of 2020 when the full scale of the pandemic was becoming evident. This is despite record monetary easing and fiscal support provided by myriad governments to businesses around the world as they attempt to alleviate cash flow constraints arising from COVID-19.
In preparation for recovery, mid-market companies are prioritising the ‘use of technology to support organisational recovery’ and looking at ‘workplace safety and new workplace regulatory requirements’ – with 39% of global companies planning or implementing strategies in these areas. The next priority is what ‘financial resources will be needed’ (33%), with some attention also being given to what product or service area and markets to focus on (31%).
Francesca Lagerberg, global leader, Grant Thornton International Ltd says:
“The latest IBR data demonstrates to us that mid-market business leaders globally are being very realistic about the challenges that the first half of 2021 will bring, but they are facing this uncertainty with sensible pragmatism and resilience.
“While the outlook is showing real improvement with both economic optimism and expectations around revenue and profits on the rise, it is important to note the context of these increases. In many cases the improvements we are seeing are due to firms benchmarking the next 12 months against the very depressed economic environment of 2020 due to COVID-19.
“Even with vaccines being rolled out in some markets, the reality is it will still be some time before we return to anything approaching normality. Many businesses have already made transformational changes to their operating models and investments in this area, and this show no sign of abating as everyone looks to ensure they are able to compete in a post-COVID world.”
-ENDS-
Further enquiries, please contact:
Thor Bostelmann
Corporate Communications Manager
Grant Thornton International Ltd
D: +44 (0)20 3890 8422
M: +44 (0)77 1754 0113
E: thor.bostelmann@gti.gt.com
*International Business Report: The Grant Thornton International Business Report (IBR) is a survey of mid-market businesses. Questionnaires are translated into local languages and fieldwork is undertaken on a biannual basis, through both online and telephone interviews. The data for this release is from interviews conducted between October and December 2020 with chief executive officers, managing directors, chairperson or other senior executives from all industry sectors.
Grant Thornton is one of the world's leading organisations of independent assurance, tax and advisory firms. These firms help dynamic organisations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Proactive teams, led by approachable partners in these firms, use insights, experience and instinct to solve complex issues for privately owned, publicly listed and public sector clients. Over 58,000 Grant Thornton people, over 130 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work.
Grant Thornton International is a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales. References to "Grant Thornton" are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms, as the context requires. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by member firms, which are not responsible for the services or activities of one another. Grant Thornton International does not provide services to clients.
All references to Grant Thornton International in the press release and this “Notes to editor” section are to Grant Thornton International Ltd. Grant Thornton International Ltd is a non-practicing, international umbrella entity organized as a private company limited by guarantee incorporated in England and Wales.
Press Release
Mid-market businesses show signs of recovery after record H1 slump, but significant constraints remain
01 Jan 2021
LONDON: Mid-sized businesses are displaying reserved optimism about an economic recovery according to the latest figures from Grant Thornton’s International Business Report* (IBR) which gathers responses from nearly 5000 business leaders in 29 economies including the G20. This follows a challenging year, in which mid-sized companies (the mid-market) saw their revenue decrease by an average of 1% globally after they factored in the impact of COVID-19 (EU: -5%; APAC: -2%, North America: +3%, Latin America +4%)
Economic optimism is resurgent
Economic optimism among mid-market businesses has had a resurgence over the past six months with the research finding that 57% of businesses have a slightly or very optimistic economic outlook for the next 12 months. This 14-percentage point increase is in stark contrast to six months ago when government mandated lockdowns saw economic optimism fall to the lowest level since the eurozone crisis.
Growth expectations turn sluggishly upwards
With optimism seeping back into the mindset of mid-market leaders, other key indicators are also sluggishly turning upwards with 45% of businesses expecting revenues to increase over the next 12 months (+11 percentage points on H1), along with profitability (44% +12 percentage points) and employment (38% +10 percentage points). However, all remain well down on pre-COVID 2019 levels.
Economic uncertainty remains elevated
This highlights the fact that economic uncertainty remains at elevated levels, with 62% of businesses globally indicating it is the number one constraint on their ability to grow their business. And while optimism has increased, this has not yet materially flowed through to orders, with 52% citing shortage of orders as a constraint. Businesses are also concerned about availability of skilled staff and labour costs with 50% of business citing each as a constraint on their ability to grow.
Companies are making investments – with traditional categories making a comeback
The number one investment area remains technology (with 51% expecting to increase this in the coming year), followed by staff skills (45%) and R&D (44%) as businesses continue to retool for a new world of business. With second and third waves of COVID-19 hitting many markets, the need to invest in digital business models and having people with the skills to operate in a virtual world for the foreseeable future continues to drive investment decisions.
In this latest research, however, we are seeing more traditional investment categories come to the fore. The percentage of mid-market companies looking to increase investment in new buildings, and plant and machinery both increased 10 percentage points to 32% and 38% respectively.
Shortage of finance remains a significant concern
Funding that investment and meeting the continuing operating needs during the pandemic, however, may not be straight forward. Shortage of finance remains a significant concern for businesses, with 46% of firms identifying it as a business constraint over the next 12 months, unchanged from record highs set in the first half of 2020 when the full scale of the pandemic was becoming evident. This is despite record monetary easing and fiscal support provided by myriad governments to businesses around the world as they attempt to alleviate cash flow constraints arising from COVID-19.
Companies are starting to prepare for recovery
In preparation for recovery, mid-market companies are prioritising the ‘use of technology to support organisational recovery’ and looking at ‘workplace safety and new workplace regulatory requirements’ – with 39% of global companies planning or implementing strategies in these areas. The next priority is what ‘financial resources will be needed’ (33%), with some attention also being given to what product or service area and markets to focus on (31%).
Francesca Lagerberg, global leader, Grant Thornton International Ltd says:
“The latest IBR data demonstrates to us that mid-market business leaders globally are being very realistic about the challenges that the first half of 2021 will bring, but they are facing this uncertainty with sensible pragmatism and resilience.
“While the outlook is showing real improvement with both economic optimism and expectations around revenue and profits on the rise, it is important to note the context of these increases. In many cases the improvements we are seeing are due to firms benchmarking the next 12 months against the very depressed economic environment of 2020 due to COVID-19.
“Even with vaccines being rolled out in some markets, the reality is it will still be some time before we return to anything approaching normality. Many businesses have already made transformational changes to their operating models and investments in this area, and this show no sign of abating as everyone looks to ensure they are able to compete in a post-COVID world.”
-ENDS-
Further enquiries, please contact:
Thor Bostelmann
Corporate Communications Manager
Grant Thornton International Ltd
D: +44 (0)20 3890 8422
M: +44 (0)77 1754 0113
E: thor.bostelmann@gti.gt.com
*International Business Report: The Grant Thornton International Business Report (IBR) is a survey of mid-market businesses. Questionnaires are translated into local languages and fieldwork is undertaken on a biannual basis, through both online and telephone interviews. The data for this release is from interviews conducted between October and December 2020 with chief executive officers, managing directors, chairperson or other senior executives from all industry sectors.
About Grant Thornton International Ltd
Grant Thornton is one of the world's leading organisations of independent assurance, tax and advisory firms. These firms help dynamic organisations unlock their potential for growth by providing meaningful, actionable advice through a broad range of services. Proactive teams, led by approachable partners in these firms, use insights, experience and instinct to solve complex issues for privately owned, publicly listed and public sector clients. Over 58,000 Grant Thornton people, over 130 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work.
Grant Thornton International is a non-practicing, international umbrella entity organised as a private company limited by guarantee incorporated in England and Wales. References to "Grant Thornton" are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms, as the context requires. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by member firms, which are not responsible for the services or activities of one another. Grant Thornton International does not provide services to clients.
All references to Grant Thornton International in the press release and this “Notes to editor” section are to Grant Thornton International Ltd. Grant Thornton International Ltd is a non-practicing, international umbrella entity organized as a private company limited by guarantee incorporated in England and Wales.