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Blockchain & Crypto LAB
After the boom of the last few years, the digital asset ecosystem has managed to position itself as one of the sectors of reference and with an exponential growth forecast. At Grant Thornton, we help our clients to explore all aspects of this technology, to create tailored solutions that bring value to the business and address problems and inefficiencies in the business sector.
Global business pulse
Our future economic health, according to businesses right at its heart
Businesses raise a measured cheer for the New Year
There is cheer among mid-sized companies globally as they look towards 2021. But, this cheer is carefully measured. Grant Thornton’s latest Global business pulse reveals that firms are more hopeful about future growth, but acutely aware of the challenges that they still face due to the pandemic.
Overall, the global index, which measures the health of mid-market firms across the world, is -3.6 for the second half of 2020, a recovery from a low of -9.4 in H1. Although improved, it’s still the second-worst result since the index records began a decade ago. Also in negative territory are two-thirds of the 29 monitored countries, all but one of the G7 countries, most regions, and all but two industries - reflecting the hold that COVID-19 still has on mid-sized companies around the world.
“Mid-market companies do believe the new year will bring more opportunity, but there is sensible pragmatism among leaders. They recognise that the first half of 2021 will still be challenging and conditions are going to be hard,” comments Francesca Lagerberg, Global leader – network capabilities at Grant Thornton International Ltd.
The most recent index result is based on interviews with around 5,000 mid-market leaders between October and December 2020, and the resulting score is a measure of positive or negative business health.[i] This index provides a timely snapshot of business health amid a challenging environment in which COVID-19 dominates the agenda, vaccines are announced and where firms look to the year ahead. The sections below provide the full health report for the mid-market globally, and you can also access regional index write-ups on the ever-resilient Latin America, the rebounding North America and the gradually improving EU and Asia Pacific regions.
Headlines from the latest Global business pulse
Encouraging signs of a recovery in international ambitions
In the first half of 2020, a debate was raging among mid-market leaders about what COVID-19 meant for the internationalisation of their sales and supply chains. At a global level, and by a slim majority, the intention was to prioritise domestic sales and supply chains over international ones. In H2, this trend has reversed, with more mid-market companies now looking to prioritise international over domestic markets and adjusting their strategies and internal resources to achieve this. This trend is confirmed by research from the European Round Table for Industry which, in November, reported that 79% of industrial firms they surveyed had no plans to reshore supply chains. [ii]
There has also been a leap in the numbers of companies expecting to increase exports this year, reaching a series high of 34% (albeit this is coming off a lower base). “This flags the entrepreneurial nature of the mid-market,” notes Francesca. “Mid-sized companies are really tuned into their markets and able to see the trends. They are agile and can adapt to the opportunities. Being able to pivot at speed is so important in this type of environment.”
In upcoming commentary in 2021, we’ll assess the specific impacts of COVID-19 on domestic and international markets, examine how mid-market companies are adjusting their strategies, and highlight the current opportunities.
Rebalancing of investment priorities towards more traditional categories
Over the past year and a half, research and development (R&D) and technology have been a clear investment priority, helped recently by the rise in remote working and the move to digital channels. This accelerated pace of innovation prompted one UK think tank to claim that automation’s growth is now ‘on steroids’. [iii] In this latest research, we see more traditional investment categories outpace these areas. The percentage of mid-market companies looking to increase investment in both new buildings and plant and machinery both increased by 10 percentage points, to 32% and 38% respectively. Investment in staff skills also saw a step up, with 45% of companies looking to increase their investments in this area.
Our experts attribute this to a number of factors. Many companies have put off investment during the course of the pandemic and are catching up. Others are investing to be ready for the expected uptick. Investment in buildings is likely linked to requirements around social distancing, and the need for warehousing to hold more raw materials and finished goods as a buffer against future disruptions.
More generally, Robert Hannah, global head of strategic growth markets at Grant Thornton International Ltd, suggests that the shift back to more traditional investment categories “had to happen” given the “exaggerated” rush to technology and the fact that businesses still need old-fashioned infrastructure like plant, equipment and property. The global retailer Amazon is an example of a digital business which is making considerable new investments in property and transportation to support its growth during the pandemic. [iv]
New rules increase burden on businesses in New Year
Before COVID-19 arrived, our index pointed to growing concerns among mid-market leaders about regulation and red tape. In the COVID-19 era, this has escalated still further as all manner of regulations and incentives are used to manage the disease, support businesses and protect economies. Nearly half (49%) of all mid-market companies now identify this as a barrier to their growth – a record high.
Changing regulation is frustrating for all businesses, but particularly smaller businesses, which have fewer resources and less specialist knowledge. Grant Thornton recently published dedicated guidance to help businesses prepare for regulatory change. This article stresses the importance of keeping up to date with changes and – where possible – getting ahead of them. External help can also be very valuable here in terms of accessing knowledge on red tape as well as best practice on how to deal with it.
Global snapshot
Regional highlights
European Union (EU)
Mid-market’s mood remains low across Europe, but new year offers new hope
Industry insights
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i. GrantThornton.global - Methodology - Global business pulse
ii. FT.com - Europe on way to recovery, say leading industrialists - 25.11.2020
iii. FT.com - UK jobs could disappear as Covid puts automation on ‘steroids’ - 15.12.2020
iv. FT.com - Investors ‘back with a vengeance’ as warehouse demand surges - 12.08.2020
v. Reuters - GLOBAL MARKETS-Stocks peak on vaccine, U.S. stimulus and Brexit deal hopes; dollar slumps - 16.12.20 and City A.M. - FTSE 100 slips but global markets hit fresh highs on vaccines and stimulus - 17.12.20
Want to stay informed?
Grant Thornton’s Global business pulse is published bi-annually and brings insights into the health of mid-sized companies.
We will also publish further insights from our research throughout the year.
To be the first to hear when we publish new content please provide your contact details opposite.
You can also visit our ‘Navigating Uncertain Times’ section to see more advice from Grant Thornton, or access our new content on the impact of Covid-19 and mid-market resiliency.