UK’s telco businesses set to grow four times faster than GDP in 2015

The picture is even brighter for 2016, with average expected growth rising to 13%

Barclays’ Fast Growth Tech survey, which questioned owners and CEOs of UK tech firms1, has revealed that many of the telecom industry’s bright lights are feeling confident about delivering a stellar year of growth in 2015.

The research, independently commissioned by Barclays’ Technology, Media and Telecoms team revealed that on average, telecoms businesses surveyed predicted that they will grow by 11% over the course of the year – over four times faster than the UK’s GDP forecast for 20152 (2.6%). The research showed that nearly three quarters (65%) are expecting their business to grow by up to 10%. Furthermore, 17% are expecting between 10% and 20%, while 10% predicted significant growth of over 20%.

Respondents were even more positive about the outlook for 2016, with the average firm expecting 13% growth on 2015, with 12% of firms predicting growth to top 20%.

Sean Duffy, Managing Director and Head of Barclays’ Technology, Media and Telecoms team, said: “These remarkable growth predictions reveal the optimism and drive of the UK’s world-leading telecoms sector. The fact that many firms are expecting further growth in 2016 shows that this trend isn’t transient and the UK is a real launch pad for innovative telecoms businesses. Investors are seeing the UK as an international talent magnet and a platform to grow or launch their business for a number of compelling reasons, including the culture, light-touch regulation, supportive Government policies and access to finance.”

The research quizzed firms which have seen growth in the last year of up to 10%, 10-20% and over 20%. The findings revealed that the fastest growing firms with the lowest turnover of those surveyed (£3-5m) have their own distinct characteristics, which differed to businesses with more modest growth.

Differences between small, fast growth (>20% growth) vs. standard growth firms (<10% growth):

·         93% cited strong leadership as a key catalyst for their firm’s growth in 2014 (vs. 73%)

·         84% said investment in new technology or equipment increased their growth (vs. 67%)

·         80% placed importance on the speed of decision making as a growth enabler (vs. 54%)

·         84% believed maintaining investment in their workforce helped to speed their growth (vs. 54%)

·         30% said the ability to attract and retain talent was a key challenge (vs. 17%)

·         77% want to progressively grow their business (vs. 63%), while only 5% want to maximise the value of the business in order to sell it (vs. 18%)

·         82% said the success of their business is down to careful strategic planning (vs. 75%)

·         14% expect growth of between 21-50% in 2015 (vs. 1%)

Another key difference distinguishing small, fast growing businesses from their standard growth peers is their heightened focus on reviewing their tax positions for growth – 62% agreed this was important, versus 31%. This could reflect their level of awareness and appetite for attractive Government tax benefit schemes, such as Patent Box3.

Four fifths (83%) of all the telecoms firms surveyed asserted that strong leadership was at the heart of their growth in 2014.  In terms of what was likely to be important for sustaining or accelerating growth over the next twelve months, businesses placed particular emphasis on marketing and advertising, in addition to the strong leadership that has helped them achieve success to date.  74% also agreed that developing and protecting their IP was critical to the success of the business.

When considering the challenges facing the business in 2015, increased competition (33%) and the ability to attract and retain talent (19%) were the most pressing concerns for business chiefs at telcos.

Over half (53%) of all the telecoms businesses surveyed stated that the Government provides sufficient support in enabling them to grow.. When asked about the financial challenges the business would face in 201, managing cashflow (30%) and increased costs (20%) were the biggest concerns. .

Sean Duffy continued: “Strong leadership rang out loud and clear as being critical for growth, and this is particularly important in the first few years of a business’ life.  It’s also even more relevant for fast growth businesses, which experience unique stressors and demands on their cash flow, requiring their leaders to make many major decisions at speed in order to keep pace. It takes an extremely strong and dynamic individual to have a clear vision and the energy to lead their workforce to success in this type of supercharged environment.”

About the research

1The Barclays Fast Growth Tech Survey was undertaken in December 2014 by Illuminas, and surveyed the owners, founders and CEOs of 501 growing UK technology businesses with turnovers of £3m-£50m, of which 81 operate in the telecoms industry. Respondents were broken down into the following growth categories:

20% of respondents – Growth <10%

20% of respondents – Growth 10%-20%

60% of respondents – Growth >20%

2 www.gov.uk/government/statistics/forecasts-for-the-uk-economy-january-2015

3 www.gov.uk/corporation-tax-the-patent-box

About Barclays
Barclays is an international financial services provider engaged in personal banking, credit cards, corporate and investment banking and wealth management with an extensive presence in Europe, the Americas, Africa and Asia. Barclays’ purpose is to help people achieve their ambitions – in the right way.

With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs approximately 140,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

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