Middle market companies across the globe are significantly more optimistic about business conditions and opportunities than last year, according to the findings of the annual EY Growth Barometer released today. Growth prospects for all major economies are finally improving in 2018, with International Monetary Fund forecasts currently at 3.9% for the year, and amid this positive background, business leaders are bullish about revenue growth.
The annual survey of 2,766 middle market executives across 21 countries and nine key middle market sectors reveals that global confidence in business growth has strengthened in the last 12 months, with 60% of companies targeting growth between 6%-9% and no respondents looking at decline, compared to 5% in 2017. Middle market company leaders are planning for higher revenues, creating more full-time jobs and implementing disruptive technologies to meet ambitious growth targets. However, despite this optimism, a shortage of cash flow, access to credit tightening or slowdown in global demand could pose significant risks in the longer term.
Growth ambitions being driven from Asia Pacific
While middle market companies are bullish on growth on a global scale, ambition is highest in Asia Pacific as the much-forecasted tilt from the West emerges from potential to reality. Four in ten companies in China, Southeast Asia and Australia are targeting double digit growth, some 13% more than the global average of 6%.
The race to embrace AI
Intelligent automation and machine learning have moved center-stage as vital enablers to ambitious middle market growth and attitudes towards new technology have evolved rapidly since last year. In 2017, almost three quarters (74%) of global middle market CEOs said they would never adopt robotic process automation (RPA), yet just 12 months later 73% of respondents say they are already adopting or planning to adopt artificial intelligence (AI) within two years.
Against this background, the Growth Barometer findings reveal that companies are recognizing the need to become more agile. However, in their eagerness to adopt revolutionary new technologies and incorporate AI into their businesses, company leaders are in danger of under-estimating the scale of cyber threats, findings show. For example, just 7% plan on investing in technology to reduce the risk of cyber-attacks in the upcoming year, and only 6% see cyber threats as a challenge to growth.
Regulation driving, not stifling, innovation
This year regulation has emerged as driving change not obstructing it. In a major shift in opinion, leaders from all sectors and regions, except in North America, regard regulation as a key driver of innovation (25%), topped only by profitability (27%). As governments use policy levers to accelerate social good (reduced sugar in carbonated drinks and less toxic pesticides, for example) company leaders are grasping these new opportunities in the market to innovate and grow, the Growth Barometer finds.
Sector convergence accelerates
Industry convergence has risen as another major disruptive force to growth, with almost one in four global business leaders (23%) seeing it as second only to demographic shifts (33%) as having the most significant impact on business. Among US leaders, convergence is the top disruptive force to growth ambitions (31%).
Hiring diverse and skilled talent key to growth ambitions
In a show of confidence that growth is sustainable, 39% of companies plan to hire full-time talent in the next 12 months. This is a significant increase from 13% in 2017. Moreover, only 1% of respondents are seeking to reduce their staff, down from 9% in 2017. In fact, attracting talent with the right skills tops the list of growth accelerators – ahead of process efficiencies and new technology.
Diversity has shot to the top of the recruitment agenda, with 41% of respondents citing it as the greatest hiring priority compared to only 11% in 2017. The report findings indicate that there is a strong correlation between CEOs prioritizing diversity as a recruitment objective and those with the least diverse executive teams.
For those companies who have already built diverse executive leadership, the focus is on talent with strong digital skills, according to the Growth Barometer. Over half (56%) of company leaders are looking to build digital competencies through new hires.
However, a lack of skilled talent is a major cause for concern, especially in those in areas of the world where talent shortages have been exacerbated by skills flight, such as Brazil and Mexico. Even in the US, 20% of business leaders consider this to be the greatest risk to growth – an 8% increase from 2017.
Concerns over cash flow and funding remain
While access to credit continues to be an issue, this year company leaders cite insufficient cash flow as a more significant challenge, with more than one in three (35%) ranking it first. The lack of working capital trumps both risks of technological disruption and lack of skilled talent. The problem is most acute in Europe where it is ranked first by 37% of respondents led by French CEOs, half of whom (50%) place it in pole position.
Meanwhile, women-led companies are significantly affected by a lack of funding, with nearly one in five (18%) citing access to capital as a major barrier to growth, compared to 11% of their male-led peers. Furthermore, one in five women-led companies have no funding plans, compared to just 3% of male-led peers.
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Rebecca joined the HRreview editorial team in January 2016. After graduating from the University of Sheffield Hallam in 2013 with a BA in English Literature, Rebecca has spent five years working in print and online journalism in Manchester and London. In the past she has been part of the editorial teams at Sleeper and Dezeen and has founded her own arts collective.
- Rebecca Clarke
- Rebecca Clarke
- Rebecca Clarke
- Rebecca Clarke
