IT leasing races ahead as UK’s Tech businesses predicted to grow four times faster than GDP in 2015

Duffy sean

During 2014 members of the UK Finance & Leasing Association (FLA) reported a 5% increase in IT equipment finance to a total of £1,624 billion.

However, in the final three months of the year the pace of funding raced ahead. Lenders reported a total of £570 million financed – a massive rise of 25% in new business levels compared to the same quarter the year previously.

At the same time, IT equipment leasing companies watched with interest as Barclays’ Fast Growth Tech carried out a survey of owners and CEOs of UK tech firms.

The research revealed that many of the industry’s “bright lights” are feeling confident about delivering a stellar year of growth in 2015.

The Media and Telecoms team revealed that on average, businesses surveyed predicted that they will grow by 11% over the course of the year – over four times faster than the UK’s GDP forecast for 2015 (2.6%).

The research showed that over half (58%) are expecting their business to grow by up to 10%. Furthermore, 18% are expecting between 10% and 20%, while 9% predicted significant growth of over 20%.  

Respondents were even more positive about the outlook for 2016, with the average firm expecting 15% growth on 2015, with 16% of firms predicting growth to top 20%.

A real launching pad

Sean Duffy, managing director and head of Barclays’ Technology, Media and Telecoms team, said: “These remarkable growth predictions reveal the optimism and drive of the UK’s world-leading technology sector. The fact that many firms are expecting further growth in 2016 shows that this trend isn’t transient and the UK is a real launch pad for innovative tech businesses.

“Investors are seeing the UK as an international talent magnet and a platform to grow or launch their business for a number of compelling reasons, including the culture, light-touch regulation, supportive government policies and access to finance.”

The research quizzed firms which have seen growth in the last year of up to 10%, 10-20% and over 20%. The findings revealed that the fastest growing firms with the lowest turnover of those surveyed (£3-5m) have their own distinct characteristics, which differed to businesses with more modest growth.

Differences between small, fast growth (>20% growth) vs. standard growth firms (<10% growth):

• 93% cited strong leadership as a key catalyst for their firm’s growth in 2014 (vs. 73%);

• 84% said investment in new technology or equipment increased their growth (vs. 67%);

• 80% placed importance on the speed of decision making as a growth enabler (vs. 54%);

• 84% believed maintaining investment in their workforce helped to speed their growth (vs. 54%);

• 30% said the ability to attract and retain talent was a key challenge (vs. 17%);

• 77% want to progressively grow their business (vs. 63%), while only 5% want to maximise the value of the business in order to sell it (vs. 18%);

• 82% said the success of their business is down to careful strategic planning (vs. 75%); and

• 14% expect growth of between 21-50% in 2015 (vs. 1%)

Strong leadership at the heart of growth

Four fifths (79%) of all the firms surveyed asserted that strong leadership was at the heart of their growth in 2014.  In terms of what was likely to be important for sustaining or accelerating growth over the next 12 months, businesses placed particular emphasis on marketing and advertising, in addition to the strong leadership that has helped them achieve success to date.  73% also agreed that developing and protecting their intellectual property was critical to the success of the business.

When considering the challenges facing the business in 2015, increased competition (29%) and the ability to attract and retain talent (25%) were the most pressing concerns for business chiefs.

Another key difference distinguishing small, fast growing businesses from their standard growth peers is their heightened focus on reviewing their tax positions for growth – 62% agreed this was important, versus 31%. This could reflect their level of awareness and appetite for attractive government tax benefit schemes, such as Patent Box.

Nearly half (46%) of all the technology businesses surveyed stated that the government provides sufficient support in enabling them to grow, this increased to 55% for small, fast growth firms. When asked about the financial challenges the business would face in 2015%, increased costs (21%) and managing cashflow (19%) were the biggest concerns for respondents overall.  

Sean Duffy added: “Strong leadership rang out loud and clear as being critical for growth, and this is particularly important in the first few years of a business’ life.  It’s also even more relevant for fast growth businesses, which experience unique stressors and demands on their cash flow, requiring their leaders to make many major decisions at speed in order to keep pace.

“It takes an extremely strong and dynamic individual to have a clear vision and the energy to lead their workforce to success in this type of supercharged environment.”