Allied Irish bank inaugural report

My blog today is inspired by the recently-published inaugural report from Allied Irish Bank (GB) on Owner Managed Businesses in the UK. The reports will be biannual and will be looking into what the drivers are for this group of businesses. The findings make interesting reading.

To start on an encouraging note, 56% of UK-based Owner Managed Businesses (‘OMBs’) are anticipating an upturn in the UK economy this year and a massive 90% are ‘optimistic’ about their prospects over the next year.

On the other hand a lot of the OMBs (one in five) are worried about deflation and what its impact will be on their business.

There’s a degree of optimism in the attitude to investment – putting their money where their mouth is – with seven in ten saying they are very or somewhat likely to invest in training and development or capital projects in the next year.  And talking about money, there’s relatively little concern about access to funding as only 31% of those surveyed said they were likely to increase their borrowing next year, despite planning for growth.

Interestingly there were a number of regional variations with companies in the North being more optimistic, and twice as likely to invest in capital projects in the next year than their fellow OMBs in the South. Must be that Northern grit we hear so much about! The report also found that 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 saying they are satisfied with their levels of stress at work. It would be interesting to investigate why this should be the case!
67% of OMBs expect to see an increase in top line revenue (turnover) this year with 59% also expecting this to translate into increased profits for the year. Even more encouraging, nearly a quarter expect their bank borrowing to reduce – although of course this may not be such good news for the banks and, as we have seen in recent years, what happens in the banking world has a bearing on the rest of the economy!  Despite this bullish mood however 28% feel that an economic downturn is the greatest threat to their business.

Other perceived threats were the risk of increased government regulation, the risk of a rise in interest rates, the risk of deflation, and the impact of currency fluctuations  (no doubt the projected referendum about remaining in the EEA will now emphasise the latter risk).

And on a political note, the report mentions the need for political parties to recognise that OMBs are looking to them to drive growth and adopt a consistent approach.

The report is based on a survey of 300 senior financial decision makers in OMBs in the UK, 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.
Key statistics emerging from the report were:

  • 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

In addition, the report 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.

I know that lots of you out there are OMBs  – which group do you see yourself in?  I’d love to hear what you think.