EY Sees Mid-level Companies Shrugging Off Uncertainty, Looking to Grow

Companies are developing agile and flexible strategies to work with “uncertainty as the new normal,” report says.

Middle-level companies are not letting geopolitical uncertainty stand in the way of their growth plans, according to an EY survey, with one-third of these companies preparing for growth of between 6% to 10% in 2017.

In fact, 14% of these companies, which the business consulting firm defines as those with annual revenues in the $1 million to $3 billion range, are actually aiming for growth of more than 16% for the year. This compares with the World Bank’s forecast for global growth of 2.7%. The EY “growth barometer” survey included 2,340 C-suite respondents from 30 countries.

Annette Kimmitt, EY global growth markets leader, says, “Middle-market companies are the engines for global growth, representing nearly 99% of all enterprise and contributing nearly 45% to global GDP. But high-growth entrepreneurs are not only more ambitious in setting growth targets, but prioritize differently from other mid-market leaders and businesses. High-growth entrepreneurs are not fazed by the kinds of seismic shocks that Brexit and other geopolitical upheavals present. They are developing agile and flexible strategies to work with uncertainty as the new normal.”

Threats to these enterprises’ growth plans come in the form of growing competition (20%), geopolitical uncertainty (17%), and the availability, as well as cost, of credit (12%). Only 8% see headwinds from rising interest rates and foreign exchange fluctuations, and only 6% are focused on price volatility in commodities. Uncertainty comes in the form of how Brexit will evolve, rising levels of populism, a growing trend towards the use of artificial intelligence and automation, and a shortfall of skilled labor. 

UK-based startups – those that are less than 5 years old – are the most confident of the survey respondents, even though they are in the thick of the Brexit uncertainty, facing two years of negotiations as the UK prepares to exit the European Union.  In fact, 26% of them expect to grow by 11% to 25% this year. In contrast, US companies have very slim growth expectations, with 35% of them looking to growth of under 5%. In the emerging economies of China and India, a total of 42% of organizations are looking to growth of about 6% to 10% for the year, with another 25% preparing to grow in the 11% to 15% range.

Key to meeting these middle-market organizations’ ambitious growth plans is the ability to tap into the right talent and technology, with 23% of them citing talent as the top priority, coming in ahead of improving their operations, cutting down on red tape, and “beneficial agreements.” A majority, at 93%, of the respondents see technology as a way to attract the right talent, with newer artificial intelligence enabling them to locate specialized labor. These businesses don’t see a major fall off on human labor from the use of robotics, with 15% of them anticipating that use of automation will cut down on human labor by less than 10%.

About 25% of these firms, including 53% of startups, are looking to grow their full-time labor force this year, and 14% are looking to boost their part-time staff. Rising use of contractors to fill specific talent gaps is also in the cards for 18% of these firms. However, there are differences in global hiring plans, with 55% of US companies expecting their labor needs will hold steady, compared to 31% of all survey respondents.

According to Kimmitt, “The global economic backdrop is much stronger than what the prevailing narrative has been telling us.”






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