Welcome to Allied Irish Bank (GB)’s inaugural report into Owner Managed Businesses in the UK.

 

This is the first in a series of biannual reports where we seek to capture what drives this vital engine of our economy. Who comprises this business group? What sets them apart? What are their priorities? What are their views on the broader economy to which they contribute so much? Where do they foresee growth and what challenges do they think lie ahead?

 

The majority (56%) of UK based Owner Managed Businesses expect the UK economy to improve this year according to research conducted by Allied Irish Bank (GB). Canvassing the opinion of Owner Managers, the report also found that nine in ten (90%) are optimistic about their prospects over the next year. Overall, the report reveals the views of Owner Managers about the economy, regulation, risk environment, the health and future prospects of their own balance sheets and their attitude to financing.

 

Gerard O’Keeffe, Head of GB Business, Allied Irish Bank (GB) said:

 

“The findings from our first survey of Owner Managed Businesses across the UK, capture the current views of a key engine of our economy and important part of the UK’s social fabric. The research highlights the bravery, optimism and resilience of the people owning and running UK businesses, with the majority family owned, but it also reflects the very personal stretch and stresses that go with the territory of running your own business. These are people that need and deserve our support as they face these challenges and our whole economy and society benefits from their success.”

 

Deflation

 

“Owner Managers are clearly starting to worry about the prospect of deflation. Depending on what sector they are most exposed to, many businesses will be trying to strike a balance between lower input costs and reduced income, while they will be hoping that the interest rate environment offers an opportunity to take advantage of lower borrowing costs.”

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    Findings

    • 56% think the economy will improve in the next 12 months
    • Businesses in the North are more optimistic about economy than those in the South
    • Deflation identified as an emerging threat with one in five (19%) concerned about it
    • 90% expect to see an uptick in their business performance.
    • Around seven in ten say they are very or somewhat likely to invest in training and development (73%) or capital projects (68%) in the next year
    • Access to funding is not seen as a key challenge and though growth is on the agenda for many, only 31% of those surveyed are likely to increase their borrowing next year

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Economy

37% of Owner Managed Businesses rate the current economic environment as ‘above average’ or ‘extremely good’ and 49% see it as a key opportunity for their business this year. Unsurprisingly, the survey shows that more than a quarter (28%) of Owner Managers consider an economic downturn and the threat of recession as the greatest potential disrupter to their business.

 

Balance sheets

Despite this, Owner Managed Businesses are positive about 2015 and 67% expect to see top line revenue growth this year. More than half of Owner Managers (59%) also expect to see this translate into increased profits over the year. While many expect their sales and profits to increase, the survey found that almost a quarter of Owner Managers (23%) expect their bank borrowing to go down. Indeed, only 31% of these businesses are likely to increase their borrowing in the next year. With very few businesses (26%) expecting to grow through M&A this year, many are instead focused on expanding organically through new hires, with almost half (47%) expecting to increase headcount.

 

Threats

For Owner Managed Businesses, half (48%) see the risk of increased government regulation as a major challenge. An interest rate rise is also seen as a real risk by one in three (32%). Interestingly, almost one in five (19%) see deflation as a risk, reflecting the emergence of this theme as a key focus for the UK economy over the past few months. However, even more prominent on the risk radar is the impact of currency fluctuations with 36% of Owner Managers seeing it as a real risk for their business.

In an election year, many of these businesses will be looking at each of the political parties’ ability to drive growth and to deliver a consistent regulatory approach to business. The report shows that they are evenly split as to whether the current government is doing enough to support them, with 46% saying it is and 45% saying it isn’t.

 

Regulation, deflation and tax

For Owner Managed Businesses, half (48%) see the risk of increased government regulation as a major challenge. Of those surveyed, 33% see tax as a real risk to their business.   Interest rate rises is also seen as a real risk by one in three (32%), although lower inflation figures in Q1 may temper those fears.  
In an election year, many of these businesses will be looking at each of the political parties’ ability to drive growth and to deliver a consistent regulatory approach to business. The report shows that they are evenly split as to whether the current government is doing enough to support them, with 46% saying it is and 45% saying it isn’t.

 

North vs South

Companies in the North are more optimistic about their own businesses, plan to invest more next year and are less stressed than their Southern and London counterparts.

 

Northern businesses more optimistic about own health

In the North of England, Scotland and Northern Ireland 70% of those surveyed are positive about the overall health of their business, while 58% of those in London are positive about the overall health of their business.

 

Businesses in the North are twice as likely as those in the South to say they will invest in capital projects

Just under a quarter of Owner Managed Businesses in London (24%) and the Midlands and Wales (23%) expect to increase capital investment in the next 12 months. Whereas almost half (49%) of those in the North of England, Scotland and Northern Ireland expect to increase capital investment.


Around half (53%) of Owner Managed Businesses in London expect sales or revenue will increase in next 12 months. In the Midlands and Wales (73%) and North of England, Scotland and Northern Ireland (72%) almost three quarters expect to see top-line growth.

 

London-based Owner Managed Businesses are most stressed

Londoners feel the least satisfied with their level of stress at work (less than half - 46% are ‘satisfied with level of work stress’). Northerners, Scots and Irish are happier with their levels of work stress, with four in five (80%) saying they are satisfied with their levels of stress at work.

 

 

About the report 

The Owner Managed Business Outlook Report is based on a survey of 300 senior financial decision makers in Owner Managed Businesses in the UK. For the purposes of this report Owner Managed Businesses are defined as businesses where the owners, family members or shareholders are involved in the day-to-day decisions and activities of the entity or are directors of the company.

 

For the purposes of this report Owner Managed Businesses are defined as businesses where the owners, family members or shareholders are involved in the day-to-day decisions and activities of the entity or are directors of the company. Seven in ten of the Owner Managed Businesses (72%) surveyed say they are family owned.

 

Other key demographics

  • 30% are in a growth phase
  • 49% are based in London and the South of England
  • 23% are based in Scotland and the North of England
  • The biggest sectors are Retail, Technology and Media, Construction and Manufacturing

 

Who are Owner Managed Businesses?

Rather than being a homogenous group, Owner Managed Businesses are very different from each other in numerous ways. Our analysis identified five distinct groups:

 

Thriving techies (29%): Especially positive about the current UK economy and expect to grow their business over the next 12 months through key opportunities such as domestic growth and the introduction of new technology.

Pressed parents (12%): Mixed feelings about the health of their business, they also share a level of dissatisfaction in their levels of work stress and do not feel as if they have adequate time to recharge with the family.

Content to Cruise (25%): Positive about the economy, supported by a cautious optimism in the future health of their business. They feel particularly satisfied with their levels of work stress and with their family time.

Upward strivers (19%): Not convinced on the overall health of the economy but happy about the future of their own business. They see financial activity increasing in the near future with M&A identified as a specific opportunity for growth.

Waning and worried (15%): Most likely to have a negative view of the current economic situation with deflation identified as a major risk. Not optimistic about their business and wary of cash and profit levels dropping off.

 

For more information

Brunswick   +4420 7404 5959

 

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Owner Managed Business Outlook 2015

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