Mid-market firms still in recession – Grant Thornton

MORE than half (56%) of decision makers at British mid-market companies consider their business sector to still be in recession, according to a new report by Grant Thornton.

The survey, Finding Your Strategy, questioned 150 chief executives and chief financial officers of UK-based mid-market companies.

The results show significant differences across the different business sectors.

In construction, 87% said their sector was in recession, while 58% of those working in industrials and chemicals saw their sector contracting.

By contrast, 71% of respondents in fast moving consumer goods (FMCG) said that their sector was recovering, followed by 63% who saw growth in technology, media and telecommunications (TMT).

Ian Wilson, Birmingham-based head of Grant Thornton’s corporate finance team in the Midlands, said: “Our survey shows a bounce back in sectors with more flexible business models, as well as those that benefit from a weak currency, but the sharp rise in unemployment during the first quarter of 2010 indicates that the recession is far from over.

“Although the Midlands manufacturing base has been hit particularly hard by the economic downturn, many niche engineering businesses across the region have proven to be resilient.”

More than two thirds of respondents (67%) stated cost reduction had been a high priority underpinning their business strategy over the past 12-18 months, while 58% said it was growing market share.

By contrast, 64% intend to focus on growing market share in the coming 12-18 months, while only 59% see cost reduction as the number one priority for their business in future.

“Mid-market firms are shifting their focus from cost reduction to growing their market share,” added Mr Wilson.

“Most seek organic growth, but more than a quarter expect to complete M&A deals in the coming 18 months.

“Grant Thornton acted as lead advisors to 14 mid-market M&A transactions in the year-to-date, which shows that acquisition finance is available for compelling deals.”

He said that although there had been a significant rise in the cost of debt supporting expansion plans it was encouraging to see mid-market companies resuming their growth plans.

Half (50%) of respondents agreed that the costs of their funding and banking requirements had gone up on account of the financial crisis.