UK Companies Set Sights on Growth but Face Challenges

75 percent of respondents say that the economy is in recovery – in line with EIU forecasts that real GDP growth will accelerate to 2.9 percent in 2004, supported by the continued buoyancy of consumer spending and a pick-up in business investment. But executives also display a strong streak of caution – three-quarters of them believe that Gordon Brown’s forecasts for UK growth are optimistic. To achieve revenue growth, companies are focusing hard on relationships and productivity – on driving value out of existing customers and products and on improving communication and integration with suppliers, partners, employees and customers.

Growth begins at home for most companies

The UK market will be a particularly dynamic source of revenue growth for 44 percent of survey respondents over the next 12 months, well ahead of bubbling markets in US, China and Central Europe, let alone sluggish western Europe. Risky reliance on the consumer continues. The largest group of respondents (47 percent) expects consumers to be the primary driver of revenue growth over the next year, with central and local government sitting at the bottom of the list. That could spell trouble – for the first time since 1995 private consumption is likely to grow more slowly than overall GDP in 2004, and there is a risk that consumer spending could slow sharply later in the year.

Smaller enterprises look liveliest

Financial services, technology and telecoms, and retailing are the industries expected by respondents to thrive most. Smaller companies are the focus of much attention, with 77 percent of respondents seeing companies turning over less than £500m annually as particularly dynamic sources of growth for their organisations. Tax, technology and transport top the policy agenda for growth. 60 percent think that tax cuts across the board would spur growth, 53 percent endorse tax breaks for technology investment and 50 percent want to see increased spending on the transport infrastructure.

Productivity is a critical priority

There are few easy wins. Competitive pricing pressures (49 percent) is the greatest constraint on growth for survey respondents – few will be able to inflate their revenues this way. A rising compliance and governance burden (40 percent) and the maturity of the UK market (36 percent) also set limits on expansion. Productivity is a critical priority. Companies are embarking on a number of projects to up their productivity, from improved integration (picked by 58 percent of respondents) to better customer service operations (56 percent) and enhanced collaboration with suppliers, partners and customers (55 percent). One in five respondents is planning an initiative to encourage mobile and remote working – enabling employees to work productively out of the office – and 41 percent plan to increase investments in this type of technology.

Technology is fundamental and CRM is in

Retention of customers and employees is critical. The largest group of survey respondents expects earnings to be driven primarily through sales of current products and services to current customers this year (42 percent); the smallest by selling new products and services to new ones (17 percent). As with customers, so with employees – respondents are focused on a variety of projects to retain their best staff, from training to flexible working. Technology is fundamental. 82 percent of respondents describe technology as critical or very important to their strategic business goals.
Tighter integration of business systems and processes and customer relationship management (CRM) will be the areas where ICT is expected to have the greatest impact on revenue growth. Advertising is out, CRM is in. Only a quarter of respondents plan to spend more on advertising and marketing as a means of improving sales to existing customers, and just 37 percent say they will do so to lure new ones. Instead, respondents are placing more faith in better customer relationship management and expect direct sales to produce greatest revenue growth over the next 12 months.

Source: SAP AG