The majority of small and medium sized businesses expect to achieve profit and sales growth in the next financial year without increasing workforce size, according to a report by professional services firm Deloitte.
Business confidence high in the middle market sector
Of the 487 companies surveyed, over half (53%) said that improving profitability was their primary focus. Nearly 70% believe that this is achievable within the next year and a quarter of those expect it will be in excess of 20%.
Only a third (38%) anticipated growing their workforce in order to increase profits, implying that businesses view improving productivity as a key to increasing profitability.
'Small and medium sized companies are predicting profitability which suggests they are confident that the economy is becoming more favourable. To achieve this companies are looking at their existing resources and seeking to manage them more effectively.
'With employment costs forming a considerable proportion of business spend, it is not surprising that companies are focusing on getting more from their investment in people in order to get ahead of the competition,' comments Andy Swarbrick, Deloitte partner.
Three quarters of survey respondents predict sales growth and a quarter expect it to be in excess of 20%. Most companies view 'expanding market share' as the most important factor in achieving future growth. The construction and real estate sectors are most confident, with 90% expecting sales growth this year, whilst the West Midlands, North West and Wales are the most confident regions.
'The middle market sector is already fiercely competitive and this is set to continue as companies seek to increase their market share. Successful companies will continue to focus on low prices and innovative marketing and sales techniques,' comments Andy Swarbrick.
Respondents were asked which issues negatively impacted their ability to grow. Red tape, including growing volumes of legislation and over regulation were the most commonly cited issues. Only one in five companies indicated that not being in the Euro was having a negative impact.
'Companies want the Government to help them by reducing their administrative burden which they believe is limiting their ability to grow. Clearly there is frustration among many smaller companies and the perception remains that, while there are opportunities, support is often too complex to find,' concludes Andy Swarbrick.
The report, 'Growing Pains', surveyed 487 members of the Institute of Directors from all over the UK in every major sector in Autumn 2003. Half of the respondents represented companies with an annual turnover of 2.5m or below. Nearly 10% had a turnover of more than 100m. The findings support those of the latest Economic Outlook by the Institute of Directors, which can be found on www.iod.com.
In this press release references to Deloitte are references to Deloitte & Touche LLP.
Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of 1,228 million in 2002/2003. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.
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The information contained in this press release is correct at the time of going to press.
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