Productivity boost of £10 billion waiting to be unlocked by South East businesses

Businesses in the South East have the potential to tap into an extra £10 billion GVA (gross value added) in 2018 if they can overcome key barriers and exploit opportunities, according to a new report from Grant Thornton UK LLP.

The report, Planning for Growth, found that across the UK the potential GVA to be unlocked amounts to a staggering £72.5 billion – this level of growth could translate in to 1.4 million jobs. With the UK economy expected to grow just 1.5% in 2018, missed growth could prove game-changing in making the UK a more vibrant economy.

For businesses to succeed, they need to emulate the attributes of ‘Growth Generators’: a group of sustainable, high growth companies identified by Grant Thornton, who have recorded growth of 20% or more in the last year and sustainable growth for the last three.

The importance of the economy in the South East to the UK’s overall fortunes is clear – the region represented 15% of the nation’s total GVA in 2016, second only to London. However, the rate of GVA growth (2.5%) was in fact the second lowest in the country and at its lowest level since 2011.

Jim Rogers, Practice Leader for Thames Valley and Southampton at Grant Thornton, said: “There is no doubt that the South East – with its export links to Europe, the M4 winding through the high-tech Thames Valley, and its proximity to the capital – has the potential to be a major engine of growth within the UK economy. But the signs are that it needs to punch harder. An uplift in the South East could have a ripple effect elsewhere in the UK economy.”

Grant Thornton’s research found a clear sense that a climate of uncertainty with regards to the future is holding back growth. Only 53% of South East business leaders are confident that they will achieve their growth plans for the next 3-5 years, with over a third (35%) agreeing that political uncertainty has made them more risk averse.

The impact of this wider uncertainty has been to reduce the level of investment for growth over the last couple of years: only 3% of South East businesses have made their most recent strategic investment in revenue growth in the last year, compared to 24% in the previous one to two years and 70% in the previous three to five.

Jim Rogers commented: “While political uncertainty has not been identified as the biggest challenge for businesses, a drop-off in recent growth ambition is visible, although businesses do still harbour growth plans for the future. The key is to take advantage of opportunities and overcome existing challenges identified, without taking on too much risk.”

Looking at key areas to drive growth such as use of technology and brand and marketing, the region’s businesses face challenges here too.

South East businesses see technology as both a major accelerator and barrier to growth. However, a higher proportion say it is a significant barrier (47%) than those that say it is an accelerator (34%).

Only just over half of South East business leaders are broadly confident in their ability to overcome technology as a barrier to growth.

Like technology, brand marketing and communications are recognised as both a top accelerator and a barrier to growth. But only just over a quarter (29%) of South East leaders who said marketing was an accelerator are confident their organisation can implement this.

The Growth Generators that Grant Thornton identified – 13% of whom are based in the South East – have four key characteristics that other businesses need to try to emulate. They are purpose-driven, invested in growth, tech confident and networked.

South East businesses perform well at instilling a sense of purpose: over 90% of leaders believe that their staff and management understand and support it. However, only 52% who identified purpose as an accelerator are confident they can implement purpose as an accelerator of growth – compared to 82% of Growth Generators nationally.

When it comes to investing in growth, 70% of Growth Generators see M&A as their number one strategic growth priority in the next 3-5 years, while in the South East it was significantly lower at 54%.

Of business leaders who have identified technology as an accelerator to growth, Growth Generators are more confident in their ability to implement this (59%) than businesses in the South East (42%). Tech was the area of highest investment to reach the next stage of growth for 14% of Growth Generators compared to only 7% of South East businesses.

Like Growth Generators, a minority of South East businesses are active internationally. But both recognise the importance of growing international activity, with 37% of Growth Generators and 33% in the South East citing it as one of their top five strategies for the next 1-2 years.

Jim Rogers concluded: “We believe that if more UK businesses adopt a Growth Generator mindset, we can unlock the UK’s full growth potential and the private sector can lead the way in shaping a vibrant economy. There is no doubt that businesses in the South East have the capabilities to drive up their growth performance and move nearer to claiming that £10 billion productivity prize. It is a question of having the confidence when the right opportunities arise and being clear about the strategy for the future.”

For the full report, Planning for growth – don’t let uncertainty hold you back, please visit grantthornton.co.uk/planningforgrowth.

Photo credit: UK Edubirdie

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