REFLECTIONS - LDC

TOP TABLEIn what business areas cancompanies achieve growth andbuild value this year?AB: Online businesses appear to be doingvery well, along with niche manufacturers,and will continue to do so. There arebargains to buy out there if you have cash.ME: From our perspective, we are a 100per cent export driven business and havegood forward order books.MF: A number of service sectors,defence, healthcare.TS: For manufacturers, the best opportunityfor growth remains the emerging markets.Despite slowdowns in China and India,both still represent significant growthpotential, whilst areas such as the MiddleEast and Brazil continue to grow strongly.UK companies should be looking toexpand market share in all these countries.EEF believes that the Government shouldset an economic growth ambition toincrease the number of companies forwhom exports represent at least 25 percent of their turnover. This would in turnhelp drive policy and direct the mosteffective use of taxpayers’ money tosupport exports.What are the key barriers togrowth for businesses andhow can they be overcome?AB: Sluggish consumer spending anda lack of confidence among potentialcorporate purchasers, together withhigh finance costs. It is important thatbusinesses move into growing marketsand identify smarter ways of deliveringgoods and services. If a business can’tsecure traditional finance, they should tryalternative lenders.ME: Any investment that requires thirdparties to commit is difficult to achieveat present, but we believe that this isindicative of the overall state of the marketand European situation, rather than areflection on our own business.MF: There is still a real issue with a lackof access to finance for many businesseslooking to finance investment. As the CBIhave pointed out, around £170bn ofprivate sector investment is needed overthe coming years, and overcoming thislack of capital is crucial to kickstarting theeconomy going forward.TS: A range of barriers exist for companieslooking to grow but two stand out. Firstly,skills shortages remain a perennialissue and are a factor constantly raisedby companies. This is especially acuteat apprentice, craft and technicianlevel where we are now suffering froma generation gap. This was wherecompanies stopped investing in suchschemes and where we saw a divide openup between the academic and vocationaleducation routes.Whilst considerable effort is going intoraising the awareness of a career as anapprentice and changing the image ofvocational education and manufacturing,it will take time to produce benefits and itis unlikely that the skills tap will be turnedon overnight. Another important issueis the lack of access to finance. This isparticularly acute for SMEs which havestruggled to source capital to supportinnovation and growth.In particular, what shouldcompanies be doing to gain accessto international export markets?AB: They need to be using the internet,joining trade missions and partneringwith larger companies that they supply, ifpossible. Many SMEs enter internationalmarkets that way.MF: Businesses should work with UKTI andif you need help with getting in touch withthem let us know here at the BVCA.TS: There are a range of facilities to helpcompanies gain access to internationalmarkets. First and foremost is UKTI whichhas altered its strategy in recent yearsto focus on a number of faster growingmarkets which offer UK companies thebest export potential. Currently, UKTIhas representatives in over 90 overseasmarkets and the feedback we get frommember companies on the level of supportoffered is generally very good. Formanufacturers there are specialists whocan advise how to break into specificmarkets and mentors who can offer bestpractice advice on how to break into newmarkets. Companies should also look towork with their supply chains, both upand down, to examine how they can takeadvantage of other customers which theirpartners might already have.How can the private equity industrycontribute to UK economicdevelopment in 2013?AB: Private equity can help contribute byfocussing on underperforming companies,For manufacturers,the best opportunityfor growth remainsthe emerging markets.Despite slowdownsin China and India,both still representsignificant growthpotential, whilst areassuch as the Middle Eastand Brazil continue togrow strongly.or those struggling, because there is nobank support in that area. The industry canapply expertise to help companies becomemore international.ME: It is vital that private equity continuesto invest in management teams to providethe financial backing and strategicsupport to help businesses to realisegrowth opportunities.MF: Our industry is currently investingaround £20bn in around 1,000companies each year, and evidence showsthat private equity-backed companiesperform better than non-private equitybacked companies on a range ofmeasures. As confidence returns to theindustry, we’ll see increasing amounts ofcapital being invested into UK businesses,and that can only be a good thing for ourlong term economic development.TS: Private equity can be a very importantsource of capital for companies of all sizes.It is particularly important and, in manycases, it is the only route for ambitiousmanagement teams to take ownership oftheir companies. Private equity can alsostrengthen a company’s sheet and thuscreate headroom for further expansionwith extended banking facilities. Whilethe issues of the duration of any investmentand the level of financial leverage of anyequity investment must be consideredand balanced, there is ample evidenceto suggest that private equity-backedcompanies, often with new expertexecutive support, perform above theindustrial average.14REFLECTIONS