Global middle market organizations are not showing signs of slowing down in the face of geopolitical uncertainty, reports accounting firm EY in its inaugural EY Growth Barometer report.
A third (34%) of the surveyed 2,340 middle market executives, those who work in companies with annual revenues of US$1 million to US$3 billion, say their organization plans to grow 6%-10% this year. What’s more, 14% are aiming for more than 16% rise in sales.
The company expectations are far ahead of the World Bank’s forecast growth for the global economy, which at 2.7% in 2017 is at least 3.3 percentage points lower than corporate growth ambitions.
“The global economic backdrop is much stronger than what the prevailing narrative has been telling us,” says Annette Kimmitt, EY Global Growth Markets Leader.
“Despite geopolitical risks and uncertainties, businesses being disrupted through new technologies and globalization rewriting the rules of supply and demand, middle market leaders are not only attuned to uncertainty, but are seizing it to grow, disrupt other markets and drive their growth agendas.”
Indeed, 89% of those surveyed says the uncertainties are ground for growth opportunities for their company.
Four out of ten companies in China and India (42%) are targeting growth rates of 6%-10% this year, with a quarter looking at growth plans of 11%-15%. That’s in contrast to the United States, where slightly more than a third of all companies plan modest growth increases of under 5%.
Risks to growth
Middle market leaders cited increasing competition (20%) as the number one external threat to their growth plans, followed by geopolitical instability (17%). and the cost and availability of credit (12%).
These threats were considered far more significant than financial headwinds of rising interest rates (8%), foreign exchange variance (8%), or commodity price volatility (6%).
Leaders were twice as likely to cite competition (20%) as a risk than slow global growth (10%).
Talent and technology
Executives identified technology and talent not only as the top two challenges facing the middle market C-suite today, but also as the tools by which they will overcome challenges and remain agile.
Talent (23%) is cited as the top priority ahead of improved operations (21%), cutting red tape (12%), and beneficial agreements (8%) in a ranking of what is critical to meeting current growth ambitions.
More than nine out of ten executives regard technology as a means of attracting the talent they need. The respondents say new developments in artificial intelligence (AI) are improving the recruitment and selection process for innovative start-ups to find specialist talent.
To fuel the growth ambitions of their organizations, more than a quarter (27%) of middle market executives plan to increase their permanent headcount and a further 14% plan to increase the number of part-time staff.
Reflecting the growing impact of the gig economy on work patterns and a move to a more contingent, skills-based workforce, almost one in five (18%) companies plan to use contractors to help power their high-growth plans and fill specific gaps or needs.
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