Financing improves but mid-market remains frustrated

Wednesday, May 25, 2011 | Posted by: Fiona Cullinan
Categories: Business advice, Financing , Thought Leadership | Tags: finance, research, survey, report, strategy, growth, data, CEO, FD, CFO, analysis, funding, banking, financing, FDs, financial crisis, mid-market, refinancing, David Ascott

The engine room of the UK economy is gearing up to pump again with more than half of our surveyed CEOs and FDs expecting it to become easier to finance their business activities in the next 12 months. But with the funding taps mostly being turned on for larger, blue-chip companies, many are facing another year of frustration and/or creative growth strategies. Grant Thornton’s latest survey maps the financing needs and wants of the UK mid-market.

Download your free report
Read the survey in full: The finance flow: Will money start moving in 2011? for more analysis on the business outlook, strategic considerations and financing needs of the UK’s mid-market.

This is the third report in the series; the second is also available for download: Financing your strategy.

Optimism returns (though not for all)
In the first quarter of 2011, Grant Thornton, in conjunction with Mergermarket, surveyed 200 CEOs and finance directors of UK-based mid-market firms (turnover range: £25-250 million) and discovered the following:

• 55% expect the financing environment to improve in the next 12 months.
• 31% think it will remain static until the second half of 2012 or later.
• Only 14% expect it to deteriorate.

While this presents a relatively optimistic picture of financing in the UK, the figures do mask some sector variation and the legacy of the 2008 banking meltdown continues in a number of ways.

David Ascott, Corporate Finance Partner at Grant Thornton UK, says:

“The findings of this year’s report present a fascinating, if somewhat complex, picture for the UK’s mid-market: there is growing optimism that the financing environment is improving and businesses are keen to get back onto a growth track. But the banks are still not opening the funding taps, and so more aggressive growth strategies remain on hold. The mid-market looks to be digging in for the long haul.”

Bullish on IPOs and IT
Other highlights from the report include:

• A 9% jump in number of CEOs and CFOs planning an initial public offering (IPO) on the stock market plans – up from 1% a year earlier.
• A variation in sectors. For example, the IT sector is bullish compared to the retail sector: 76% of decision-makers in technology, media and telecommunications (TMT) expect to see an improving financing environment, only 47% of retail respondents do.

A full breakdown by sector, including business support services, healthcare, retail, TMT and industrial, is included in the report.

Wider issues
Behind the headline figures are a number of issues facing UK mid-market corporates. For example, the report also looks at:

• Banking – why banks are still restricting the finance flow and why cash is still king.
• Strategic considerations – what is the priority in the current environment?
• Organic growth and creative solutions (JVs, strategic alliances, restructuring) versus aggressive M&A activity.
• Current versus future funding structures.
• The issue of refinancing the wall of debt, built up prior to 2008.
• Alternative sources of funding.

To read these features, plus further insights, case studies and expert comment, visit our downloads page for the full report: The finance flow: Will money start moving in 2011?

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