Growing British Business Foreword
Steve Box Head of Trade and Receivables Finance, UK HSBC Commercial Banking
Despite the current climate, and noise aplenty about With 38% of businesses planning to increase their the ongoing doom and gloom we face ahead, there’s exports over the next five years, and fluctuations in a new undercurrent in British business that fosters exchange rates, unreliable currencies and fears over hope. Forward-looking and thinking business leaders non payment rating highly in business’ concerns when across the UK - many of them our clients - have a fresh it comes to international trade, getting the right financial determination to drive the nation back into economic mechanisms in place to support export is critical to prosperity by taking matters into their own hands. success.
Inspired by their determination, we commissioned this That’s why HSBC recently increased its support of report to explore what these business leaders are doing businesses with international trade ambitions through and why. To investigate strategies that others can learn our International SME fund by providing an extra from and drivers that we can all help to nurture to drive £1 billion of funding, having reached our initial £4 billion Contents growth. target in the first nine months of 2012. The fund offers lending to businesses with a turnover of up to Introduction 4 The report reveals that 60% of business leaders expect £25 million that trade, or aspire to trade, internationally. their company to grow in the next two years by their 01 Beacons of Hope 6 actions, rather than chance. These ‘Growth Pioneers’ as In fact, HSBC’s trade finance lending to underpin exports the report terms them, have specific plans in place to rose 87% last year alone, demonstrating that not only 02 Recession Positives 10 achieve their goals and are well on the way to entering is the aspiration there but that many British businesses 03 Strategies for Growth 12 new markets, investing in staff or diversifying their offer. are now becoming truly global as they embark on their These plans for growth are created by businesses that mission to get our economy moving. 04 Regional Powerhouses 24 have become more flexible and more innovative. And underpinning these new operating models is a forward- The UK business landscape is constantly evolving and 05 Super-cities of the Future 28 thinking approach to how businesses finance their as 2012 draws to a close, we are working with our growth. clients to help them formulate plans which will see them 06 Conclusion 34 thrive and prosper in the year ahead. Each business we These businesses are thinking ahead and putting the work with is unique, and each faces a different set of 07 Appendix 36 right finance tools in place, such as trade and receivables challenges and opportunities, however as our Growth finance, to ensure they have the flexibility they need to Pioneers tell us there is a world of opportunity out there Glossary 40 make the most of opportunities to grow – both at home for British business. and overseas. Consultant Experts 40
2 Growing British Business Growing British Business 3 Introduction
Introduction Key findings
An inspiring and yet largely unreported success story But Edwards – whose business importing and selling To inform this report, Future Poll, the research Visionary business leaders are investing in growth is taking place in factories and offices across Britain. Chinese-made electric motors has grown from scratch department of The Future Laboratory, conducted an The report reveals that 95% of businesses predicting Behind the doom and gloom of the economic headlines, to a £10 million-a-year turnover in the midst of the online survey of 500 business leaders between 17 and growth in the next two years have specific expansion visionary business leaders are leading the way back to ferocious economic downturn – is one of a growing band 25 August 2012. Statistics contained within this report, plans, with innovation, investment in talent and exporting growth – and challenging others to follow. of British business innovators who are, as he puts it, unless stated otherwise, are from this survey. to emerging economies being key priorities. ‘pulling up our boot-straps and getting on with it.’ This report, commissioned by HSBC and carried out The quantitative research is supported by extensive desk Businesses using smart ways to access finance by The Future Laboratory, explores the attitudes and He resisted the temptation to downsize his workforce research, and further informed by qualitative interviews are more confident about their success aspirations of these forward thinking UK business and consolidate his existing order book. ‘My gut instinct with a broad range of leading experts and business The research shows that 78% of companies that use leaders. told me not to follow the accepted wisdom for trading leaders. Conducted to understand the context of the trade and invoice finance expect to grow over the next in a recession,’ Edwards says. ‘Instead we expanded quantitative data and the overall conditions facing UK two years compared to 60% of businesses that do not ‘This recession is a golden opportunity for business, not to allow us to keep our skilled staff and maintain our firms, experts include Martin Beck, Chief Economist, use smart finance products. In addition, businesses a time to batten down the hatches,’ says Scott Edwards, capacity so that we can hit the ground running when the Capital Economics, Graham Clark, Academic Director using smart finance are significantly more confident managing director of TEC Electric. ‘Think sharp, think upturn arrives.’ of the full time MBA at Cranfield University, and Tony about growing their exports and are much less likely to clever, and foster some of that legendary British grit and Greenham, Head of Finance and Business at the New have reduced their business’ headcount since the onset spirit. You won’t just survive – you’ll grow and prosper.’ In fact, Edwards is one of a growing number of Growth Economics Foundation. of the recession in 2008. Pioneers – business leaders that are facing up to the This up-beat assessment of the growth prospects for downturn by adopting clever growth strategies that How businesses will grow varies from company to A new wave of business leaders are spearheading UK PLC runs counter to the mood music of our times. explore new domestic markets, diversifying product company. An export-led recovery is one of the Prime UK growth Indeed, UK business leaders could be forgiven for feeling offerings, incorporating exports to new emerging Minister’s key growth strategies. As he said recently: The report unveils three new groups of business leaders differently. economies, and using smart finance tools to turn their ‘If we could increase the number SMEs in the UK that adopting innovative business practices to steer their order books into a source of instant liquidity. sell overseas from around a fifth to just over a quarter, we company, and the overall economy towards growth. Headlines are dominated by financial bad news. UK could add £30 billion to the UK economy, create 100,000 GDP, battered by the continuing Eurozone debt crisis jobs and pretty much wipe out our trade deficit.’ 1 It also shows the emergence of key city hubs across the and government’s austerity program, fell by 0.5% in UK which are providing the infrastructures and economic the second quarter of 2012, confirming a double dip The survey suggests that David Cameron’s ambitions ecosystems that ambitious business leaders need to recession, according to the Office for National Statistics. could be realised with 38% of companies saying they succeed. will export more over the next five years, and 55% The British Chambers of Commerce called for an urgent saying their exports will stay steady. This report explores rebalancing of the UK economy focused on exports as how businesses expect to achieve these figures and the country’s trade deficit widened from £2.7 billion to their strategies for growth. £4.4 billion in June 2012.
1 David Cameron, 26 July 2012
4 Growing British Business Growing British Business 5 Beacons of Hope
s 2ECESSIONARY PRESSURES ENCOURAGING NEW business attitudes
s .EW WAVE OF VISIONARY BUSINESS LEADERS steering the country towards growth
s 'ROWTH 0IONEERS HAVE CLEAR PLANS TO MEET their targets
Recessionary pressures, far from crushing UK business leaders, are encouraging forward-thinking companies 01 to re-shape and re-think their business culture and attitudes to take advantage of domestic opportunities for expansion and new export market opportunities.
‘The recession was a huge shock and it would have been easy to just throw my hands in the air and give up,’ says Lash Saranna, Managing Director of luxury car exporters Autobahn International Ltd. ‘But like lots of British Beacons business leaders– I’m not made that way.’ Instead, Saranna employed a key technique of successful Growth Pioneers. He took stock of his company’s positive assets and went back to the drawing board to find new and profitable ways to deploy them.
‘We were essentially a domestic car sales company with a very small export division,’ he says. ‘After pondering of Hope our position I realised that exports were our future.
‘So, I threw out my old business model, turned a domestic car sales company into an international business targeting the emerging markets in Asia, and found a way back to growth and profit.’
66 GrowingGrowing BritishBritish BusinessBusiness Growing British Business 7 Beacons of Hope (cont.)
It’s this kind of positive thinking by innovative business leaders that expert analysts such as Mark Gregory, Chief Economist at Ernst and Young, believe could lead the UK into a new phase of growth and development.
‘I think the UK is at a fork in the road. We are now entering a new model of low growth due to high government and consumer debt, and the effects of the Eurozone crisis, hitting consumer demand.’
New low growth parameters will dictate that different sectors of the economy will prosper in comparison to the pre-recession era, according to Gregory.
The UK’s Growth Pioneer businesses know they have reached an economic juncture and are adopting positive strategies to ensure they choose the path to growth, according to Graham Clark, Academic Director of the full time MBA at Cranfield University.
‘A much more considered global strategy is being developed by the most forward thinking UK-based organisations – and they will be the ones to survive,’ he says.
‘I think what happens is that some businesses have gone into their shells and are cutting costs to survive. But the future market leaders have really thought about innovation, new products and new services to attract ‘A much more new markets.’ considered global Adopting new strategies to take advantage of the altered economic realities of 2012 and beyond means taking calculated risks, clearly a daunting prospect for the 51% strategy is being of UK companies that the Future Laboratory survey shows are more risk averse than they were five developed by the years ago. most forward- However, this new research suggests that the companies who will spearhead growth are taking a thinking UK-based level headed approach to creating environments and workforces that manage and measure risk and organisations – and transform it into opportunity. they will be the ones Comprehensive risk scenario plans, critical event early warning systems and Board-level risk education to survive’ programmes are strategies that post-financial crisis CFOs are adopting in ‘Risk Intelligence’ corporate Graham Clark cultures, according to consultants Deloitte. Academic Director, Cranfield University
8 Growing British Business GrowingGrowing British British Business Business 99 ‘We didn’t see the 2008 crisis as a threat. We used it as a time to up-skill our workforce’ Clive Scott Recession Positives Managing Director, Aero Stanrew
‘As a result, our turnover has increased from £10 million a s 'ROWTH 0IONEERS REPORT UNEXPECTED BENElTS year in 2011 to more than £12 million this year.’ from recession An increasing number of Growth Pioneers share Scott’s s /UTLOOK CULTURE AND ACTIVITIES HAVE CHANGED positive take on recession opportunities. Six out of 10 (62%) of business leaders feel that the economic crisis s 3MARTER lNANCE STRATEGIES BUILD BUSINESS has had unexpected benefits, with survey respondents confidence citing saving on operating costs, identifying and targeting new markets and customers, and finding it easier to recruit new talent as having a positive impact on their The UK’s Growth Pioneers see the potential for growth business throughout the economic crisis. where other business leaders see only recessionary gloom, and are adopting smart finance and staffing A similar gap is evident on overseas orders with 58% of strategies to turn their expansionary visions into a reality. companies plugged into reliable smart finance packages, including trade finance and invoice finance, saying their This talent for spotting positive possibilities hidden inside exports will grow over the next five years compared to apparently negative circumstances has been uncovered, 38% of those who are not. 02 with an impressive 87% of business leaders saying the economic crisis had created unexpected opportunities An understanding of the smarter ways to access finance for their organisation. for growth seems to be the foundation upon which this confidence is built. Business leaders who use funding An overwhelming 95% of businesses said that their tools such as trade and invoice finance are significantly outlook, culture and activities have been re-shaped - more likely to say that their company will grow over the often in a positive way - by the recession. Almost two next two years - 78% compared to 60% for companies Recession thirds (63%) had cut operating costs while 57% had who don’t take advantage of trade finance options. emerged as leaner, more efficient organisations from the shockwaves of 2008. It’s easy to see why companies who have failed to source clever funding alternatives such as services that As Clive Scott, Managing Director of aerospace help businesses manage risk and improve cash flow, are manufacturers Aero Stanrew, says: ‘We didn’t see the also less likely to grow in the current climate. Six out of 2008 crisis as a threat. We used it as a time to up- 10 (62%) have been forced to make efficiency savings skill our workforce and emerged stronger and could during the double dip recession. This figure fell to 36% effectively leapfrog some of our competitors. for businesses using funding routes such as trade finance Positives and receivables finance. ‘We used finance strategies, such as invoice financing, to give us access to the funds represented by our order In addition, 44% of companies who have never used books within 48 hours of invoicing. That gave us the smart finance tools had to cut head count in comparison working capital and the confidence to focus on growth. to 29% of businesses who have.
1010 GrowingGrowing BritishBritish BusinessBusiness Growing British Business 11 Strategies for Growth Broadening business horizons The British Chambers of Commerce finds that UK businesses actively exporting goods and services rose from just over a fifth (22%) in 2011 to nearly a third (32%) s 'ROWTH IN 5+ EXPORTS IMPORTANT TO PROSPERITY in 2012.
s "RITISH HERITAGE AND EXPERTISE VITAL IN GAINING ‘Exports have been a key driver in the upsurge in a foothold in international markets manufacturing and this shows no signs of changing, even with the Eurozone in turmoil,’ says David Caddle, s !T HOME BUSINESSES ENCOURAGED TO SUPPLY London Area Director for MAS. the goods they import ‘Unusually, UK exports to non-EU countries were higher 03 than exports to the EU according to figures released Forward-thinking business leaders are using a wide in July 2012. This shows that exporters are adjusting palette of strategies to generate growth. The Future to global reality: growth in the Eurozone continues to Laboratory survey found 95% of businesses predicting stagnate so the main opportunities for our exporters will growth over the next two years have specific expansion remain outside Europe.’ plans. Strategies ‘If this positive trend continues, the unjustified pessimism A uniquely British surrounding the economy will be dispelled,’ says David Kern, the British Chambers of Commerce’s Chief industrial heritage Economist. ‘British businesses have huge untapped potential, especially in exports.’ and mind-set will Certainly, statistical evidence supports his bullish tone. Nearly three-quarters (71%) of manufacturing firms plan play a leading role for to increase their international orders, with more than one in 10 expecting to use exports to boost turnover in allowing UK by 50% between now and 2013, according to the 2012 Manufacturing Advisory Service (MAS) National businesses to gain Barometer report. a foothold in new Growth emerging markets.
1212 GrowingGrowing BritishBritish BusinessBusiness Growing British Business 13 Strategies for Growth The UK motorsport industry employs 40,000 people, (cont.) including 25,000 highly-skilled engineers, according to the Department of Business, Innovation and Skills. It Encouragingly, UK businesses’ decisions to target generates global sales of £7 billion annually and invests emerging economies are increasingly informed by long- £1 billion in R&D every year. term strategies for building future markets and customer bases, rather than to simply cut production and operating However, Greenham believes that the UK will only be able costs by moving manufacturing and services overseas. to reap the benefits of specialised excellence within a low-carbon national plan for growth. ‘It’s being done not as a cost-cutting exercise but as part of a strategy that says “We need a presence on the In order to take full advantage, some co-ordination of ground in that part of the world,”’ says Graham Clark, industrial strategy at national level might be needed, he Academic Director of the full time MBA at Cranfield says. ‘For such innovation to flourish, a stable long-term University.s regulatory framework for decarbonising the economy is essential to encourage private investment.’ ‘These companies are establishing a presence for the future, not just to create short-term efficiencies. That’s Rethinking Domestic much more difficult to do, but I’m beginning to see some Domestic expansion will play a key part in the UK’s more considered organisations with global ambitions recovery from recession too, relying on business leaders and strategies, rather than the opportunistic “me too” freeing up working capital to fund hiring, building and approach to emerging markets.’ infrastructure strategies.
A uniquely British industrial heritage and mind-set ‘To rebalance the British economy, UK business needs to will play a leading role in allowing UK business to get better at supplying goods that we currently import,’ gain a foothold in new emerging markets. ‘There’s says Tony Greenham. something in the creative British temperament that likes to poke fun at the traditional way of doing ‘The most obvious way to attack our trade deficit is to tap things and, in doing so, finding new solutions to into domestic opportunities as well as exporting. Many problems,’ says Clark. goods could be produced here much more competitively.‘
‘In addition, we have an old and deep-seated engineering Brands including children’s suitcase manufacturer Trunki heritage – the Rolls-Royce aerospace heritage - that gives are bringing manufacturing back to the UK, while fashion us a special kind of national branding which provides brand Mulberry has pledged to keep at least 30% of its great leverage in new markets.’ production in this country.
Leading analysts believe that growing confidence among The Future Laboratory survey shows that half (48%) smart companies is beginning to make the UK realise its believe that technology and IT will be a key growth natural advantages over its competitors. generator over the next five years, with media / communications and construction both the second most A long history of excellence in areas such as applied and popular choices. material science will give forward-thinking companies an advantage over international competitors, says Tony One in four (27%) businesses point to medical and health Greenham, of the New Economics Foundation. as the most likely sector for growth, while 26% picked out science and R&D and oil & gas. He points to the development of ultra-light, ultra-strong materials for use in Formula One. ‘British companies have developed all sorts of innovative new materials,’ says Greenham.
‘Now this sector can be applied to other fields, for example, in the construction of buildings. It’s easy to Domestic expansion see how the expertise built up in Formula One could be transferable, allowing the UK to create a sector will play a key part specialising in the construction of ultra-light, ultra-strong buildings that would be cheap and easy to build and in the UK’s recovery would be much in demand in emerging economies with rapidly-growing populations.’ from recession.
14 Growing British Business Growing British Business 15 How Growth Pioneers are growing
Innovation, investment in talent, and exports to emerging economies are key strategies for Growth Pioneers who are expanding despite the recession:
s &OUR OUT OF ARE INNOVATING BY ENTERING NEW PRODUCT MARKETS AND ARE diversifying their offer to customers
s ARE INVESTING IN STAFF AND ONE IN FOUR ARE RECRUITING TALENTED NEW EMPLOYEES
s /NE IN FOUR ARE AT THE FOREFRONT OF THE HOPED FOR EXPORT LED RECOVERY FOCUSING THEIR efforts on international and emerging markets
s 4HREE QUARTERS OF MAJOR COMPANIES with £100 million+ annual turnovers see emerging markets as important expansion opportunities.
Growth Tribes
A new breed of business leaders are rolling up their sleeves, spotting the opportunities for growth hidden beneath the dark clouds of recession – and seizing them.
Our research has identified three distinct new UK business groups, each with their own inspiring and effective strategies for not merely surviving, but for prospering and expanding in tough economic times:
Confident Capitalisers: Preparing for the future by investing in growth
.EW Exportentials: Driving the UK’s export led recovery
Co-operationals: Collaborating for success
16 Growing British Business Growing British Business 16 GrowingGrowing BritishBritish BusinessBusiness 1717 Confident Capitalisers ‘It meant we didn’t have to shed staff either. Instead, we were able to hire the best people available and build This canny emerging tribe is hugely confident about a the strong team that will be 50% of the battle when the better future. These leaders are concentrating on putting recovery comes.’ their business in the perfect position to capitalise on the post-recession opportunities they are sure will come. Confident Capitalisers understand that investing in the future is the key to growth which will play a Scott Edwards, Managing Director of TEC Electric leading part in the economic recovery of the UK. typifies this feisty breed: optimists with a firm grip on the realities of business planning whose motto is: JCB, for example, recently opened a £60 million factory Be Prepared. in Brazil that will generate more than £100 million of orders per year for components manufactured in Their aim is to build for the future by making their Staffordshire, Derbyshire and Wales. company fit for purpose, responsive and flexible. As Graeme Leach, Chief Economist at the Institute of Edwards has never doubted that an upturn will come. ‘It Directors, says: ‘Business battening down the hatches never occurred to me to hunker down and simply try to in a recession is bad news for the economy at large survive. I know better economic times will come, and I because decisions to invest money or take on more staff saw it as my duty to make us ready to take full advantage are being postponed until things look up. of them,’ he says. ‘Low confidence leads to delayed decisions, and delayed Confident Capitalisers are realists as well as optimists. decisions further undermine economic confidence – it’s a Typically, like Edwards, they ensure that their self- vicious cycle.’ belief has a firm financial footing. ‘I hired a hard-headed accounts team who scrutinised my plans for future and asked ‘Can our cash flow wear it?’ he says. ‘It keeps us focused and stops us over-trading. The Future Laboratory survey found that Confident Capitalisers are breaking this low confidence cycle: they ‘Another essential element of our business plan was are significantly more likely to say that their company will access to a lot of capital right from the start. So, we were grow over the next two years – 78% compared to 60% ‘It never occurred careful to agree a trade finance package with our bank of UK companies. that gave us access to 85% of the value of an order within 48 hours of issuing an invoice.’ This approach has enabled these companies to ride the to me to hunker economic storms: only 36% have been forced to make ‘This gave us the confidence to invest in a new £2 million efficiency savings compared to 62% of other UK firms, down and simply try property as part of a growth strategy for the next two or and only a third have reduced their head count in the three years, even though we don’t need it right now,’ he post-2008 period – compared to 44% of all businesses. says. to survive. I know better economic times will come’ Scott Edwards Managing Director, TEC Electric
18 Growing British Business Growing British Business 19 New Exportentials
An export-led recovery is at the top of the wish list of every British politician and business group. The New Exportentials are the ones who will make the wish come true.
This tribe of digitally-enabled natural networkers who think beyond borders were first identified in the 2011 HSBC Future of Business report. Now their keen vision and global mindset is coming to the fore.
Clive Scott, of aerospace manufacturers Aero Stanrew, has all the key New Exportential characteristics. Constantly networking, in person and online, with potential contacts in promising new overseas markets, he has seen his annual turnover rise from £10 million to in excess of £12 million in two years.
‘We’ve built up a lot of contacts in North America because that is going to be a key market for expansion for us. We’ve also just started supplying customers in China and India.
‘Our strategy gives us an edge in international trading. So our invoice financing facility contains a foreign currency element, allowing us to trade more profitably in dollars without difficulty.
‘We have set ourselves ambitious goals for expansion that don’t recognise borders, only markets. That’s probably why we are already world leaders in product areas such as magnetic technologies.’
.EW %XPORTENTIALS RECOGNISE THAT A lRM CONTROL OF cash flow to ensure ready working capital is key.
‘We set up invoice financing facilities with our bank that ‘We have set gave us more funding as our turnover increased,’ says Scott. ‘It gave us the financial headroom we needed to ourselves ambitious ensure that our cash flow kept pace with our order book.’ goals for expansion The UK’s business schools have spotted the emergence of the New Exportentials and they are gearing up their training to give this important tribe the skills they need to that don’t recognise compete in a global economy: a deep understanding of finance and risk, better language skills, and the ability to BORDERS ONLY collaborate. markets.’ ‘They are much more mobile than previous cohorts, just as ready to work in South America as St Albans,’ says Clive Scott Clark, of Cranfield University. ‘That can only be a positive Managing Director, Aero Stanrew for UK Business.’
20 Growing British Business Growing British Business 21 Co-operationals
A transformative cultural change has been recognised and harnessed by this visionary tribe: collaboration is the key to future growth, profits and customer loyalty.
The Future Laboratory’s Consumer Attitudes Audit for Autumn/Winter 2012 shows the power of this trend in society. Three quarters (76%) of people want to see companies working together rather than put each other down.
4HREE QUARTERS THINK COMPANIES ARE TOO COMPETITIVE AND SHOULD COLLABORATE MORE POOLING resources and cutting waste to reflect the straightened economic conditions.
It’s this grass-roots revolution that Co-operational businesses have been quick to adopt. One in five businesses say that working in partnership with other businesses has become more important since the recession. Co-operationals work with companies that might be perceived as competitors to form partnerships, broaden networks and foster a collaborative mindset. Their motto is: Two heads are better than one.
In doing so, they reduce risk and increase business opportunity, building the global supply chains which support the world’s economy. Today’s products and services are very much ‘Made in the World’, rather than developed from start to finish in one individual market.
Andrew Malcher, Executive Chairman and Co-founder of High Street TV, is a classic Co-operational. His multi- channel TV sales business, launched in the midst of ‘Competition is global financial turmoil in 2009, is expected to have a £60 million a year turnover in three years time using a OLD FASHIONED co-operative business model. pointless and High Street TV recently entered into a long-term partnership with the Ideal World shopping channel, turning a potential rival into a vital ally in a fiercely self-defeating competitive business. where co-existence ‘We can place their products on our channels and represent them internationally. We get to put our best- can bring benefits selling products in front of potential consumers who might never otherwise see them. Both sides win. to both parties.’ ‘Competition is old-fashioned, pointless and self- Andrew Malcher defeating where co-existence can bring benefits to Executive Chairman and Co-founder of both parties.’ High Street TV
22 Growing British Business GrowingGrowing BritishBritish BusinessBusiness 2323 Regional Regional Powerhouses Super-cities and regional powerhouses are providing the infrastructures and economic eco-systems that these tribes need in order to survive and grow.
The 2009 and 2011 Future of Business reports commissioned by HSBC Commercial Banking found regional economies would be led by a number of upwardly mobile cities that were vigorous centres for Powerhouses growth industries. Seven were identified:
.EWCASTLE A science city producing world-class scientific research
Leeds: A provincial hub of financial companies and ancillary services
Liverpool: A dynamic centre of creative digital businesses
Brighton: The capital of the UK’s rebellious, 04 alternative economy London: A city state, where the creative sector will take a pre-eminent position
Glasgow: A leading international force in the renewable energy sector
Bristol: Pioneering new materials to become a centre of advanced manufacturing
4HIS LATEST RESEARCH SEES BUSINESS LEADERS AND experts highlighting four of these cities in particular as fostering Growth Pioneers.
In Newcastle, Bristol, Liverpool and London there are inspiring collaborations between industry, academia and government creating dynamic clusters of specialist innovation and creativity in key cities that have a positive catalyst effect regionally, nationally, and even globally.
2424 GrowingGrowing BritishBritish BusinessBusiness Growing British Business 25 2011 Super-cities Regional Powerhouses Renewable Energy Regenerative Healthcare Orkney Sea Power Edinburgh Science Triangle (cont.) Glasgow Green Supercity Newcastle Science City Humber Marine Energy Park York Regenerative Health Hub North Wales Solar Atlantic Gateway Biomedical Cornwall Wave Hub Nottingham BioCity Newcastle Cambridge Re-gen Fen Clusters of outward-looking manufacturing companies can become a self-perpetuating driver of exports to Advanced Composites Creative Industries emerging economies, targeting China, Russia and Brazil West Midlands Composites Dundee Digital Gaming Bristol Composites Cluster Manchester MediaCityUK in particular. Creative Cardi! ORKNEY East London Tech City UK Trade and Investment pinpointed increases in exports of specialised machinery, cars and power generating machinery as the fastest growing sectors in the city. Super-cities : Low-Carbon Transport : Brighton Sunderland Low-Carbon : Bristol Norwich Low-Carbon : Glasgow Bristol : Leeds Space Industries : London Thames Valley Space : Liverpool An exciting synergy of academic skills development and : Newcastle next wave manufacturing technologies is transforming Bristol into a hub for a new industrial revolution. Biochemicals Strathclyde Dundee Yorkshire Biochemicals The launch of the National Composites Centre is putting Humber Biochemical Cluster Bristol at the centre of a growing high-tech national web. Glasgow: Super-city The global potential of a New Materials knowledge and Edinburgh Plastronics skills hub in Bristol can already be seen as industrial and Durham Printable Electronics creative academic projects begin to blossom in the city. Cambridge Plastronics Newcastle: Swansea Plastronics Hub Super-city London Plastronics Hub Liverpool Sunderland Photonics Durham Strathclyde Photonics A city of digital entrepreneurs, backed by an imaginative West Midlands Photonics support network of funders and creative zones, are Cotswolds Cyber Security helping Liverpool to turn its back on a troubled past of Thames Valley CyberCrime Southampton Hyper Highway industrial decline. Regeneration focusing on the creative, Leeds: Super-city York cultural and digital sectors has been the aim of the Manchester Humber Liverpool Creative Growth Initiative that helped launch 100 new creative businesses between 2009 and 2011. Atlantic Gateway Liverpool : Super-city 2009
2011 Additional Nottingham London Norwich
West Midlands An overwhelming majority of UK business leaders (75%) Cambridge see London as being the best-placed city to prosper. This proportion is even higher amongst Londoners with 92% Cotswolds saying the capital is better positioned than its regional rivals to take advantage of emerging opportunities. London: Super-city Swansea Thames Valley Cardi! However, London can’t rest on its laurels, even with Bristol: London’s tech start-ups, with many businesses in East Super-city Southampton Brighton : Super-city London’s Tech City currently looking to fill over 1,600 vacancies, according to Adzuna and Deudil research.
Cornwall
26 Growing British Business Growing British Business 27 Super-cities of the Future 05 Super-cities of the Business leaders in the survey named Manchester, Manchester – A £650 million Enterprise Zone at Manchester Airport Cambridge and Birmingham as the UK cities after City will create 10,000 full-time jobs in the region by Future London most likely to prosper in the current economic Investing in infrastructure 2027, and provide a direct connection to China to plug climate. These three centres were also named as into the £245 billion business travel spend projected The super-city phenomenon is gathering pace, with top cities outside the capital that are implementing for growth for the country by 2013 by the Global Business Travel other UK cities preparing to realise their potential as innovative business practices to drive success. Association. drivers of growth, The Future Laboratory research Manchester will sit at the centre of a network of reveals for the first time. More than a quarter (28%) of decision-makers INNOVATIVE KNOWLEDGE BASED INDUSTRIES EMPLOYING The city is also in the running for a £24 million award pinpoint Manchester as a future super-city that is likely NEW RESIDENTS BY from the government’s innovation agency, the A nationwide export renaissance can be seen in The to prosper in the current economic climate, while 25% Technology Strategy Board, to turn Manchester into Future Laboratory survey with 45% of companies in the say the same about Cambridge. Birmingham comes A coding school to train the next generation of world- a technologically integrated Future City. South East, 35% in the North, and 31% in the Midlands a close third, with business leaders identifying it as a beating software talent has been announced by the city’s planning to increase overseas business in the next five city with strong export potential. digital tsar Sara Tomkins, alongside plans to retain a large years. proportion of the area’s 64,000 students after graduation And further research with our panel of experts to form a pool of high-tech talent. This indicates that the best is still to come from suggests that Aberdeen also has the capacity to take many areas. Over three-quarters (79%) of business advantage of the growth potential offered by global Major infrastructure improvements will provide the leaders believe Manchester can boost its commercial demands for the technologies and skills needed to support structure for Manchester’s knowledge economy. performance still further through innovation, 91% feel harness the power of renewable energy. It will be one of the first cities in the UK to get the same way about Liverpool and Leeds. superfast 4G mobile and ultrafast broadband: The research unpacks the infrastructure and support £12 million of government funding will help bring the network developments that are turning these four ultrafast broadband to 6,200 businesses by 2015. cities into the growth hubs of the next decade.
28 Growing British Business Growing British Business 29 Super-cities of the Future (cont.)
Cambridge – Birmingham – Connected companies in Building for future Aberdeen – a high tech hub businesses A new centre for energy
A cluster of high-tech companies, drawing on a pool of Diversity and drive characterises Birmingham businesses Aberdeen is predicted to become a ‘world class energy international talent at the city’s world-famous university, and its building for the future. The city’s new economic capital’, offering leadership in oil, gas and renewables, is pushing Cambridge towards super-city status. zones, designed to bring £1.5 billion into the city by 2017, according to consultants PWC. will generate nearly 50,000 jobs. Brimming with biotech, clean tech and IT innovators, ! PROPOSED a MILLION %UROPEAN /FFSHORE 7IND Cambridge has more patents per 100,000 residents than The additional 1.8 million square metres of floor space Development Centre near Aberdeen is predicted to the next six UK cities combined, according to research by in centres – including an Advanced Manufacturing Hub deliver 7 billion in value to the UK economy and make the Centre for Cities. at Aston Regional Investment Site, a Food Hub at the Scotland and the UK world leaders in offshore wind. former IMI site in north Birmingham and the Longbridge ‘This multiplicity of clusters, all of them strong and all IT, electronics and communications Park – will help turn Aberdeen is home to the majority of the UK’s subsea of them areas in which the UK still has comparative Birmingham into the Midlands’ first super-city. industry, which develops the technology and equipment advantage and can play effectively on the international for exploring, drilling and developing oil and gas fields in stage, is probably what lies behind the strength of With the largest concentration of businesses underwater locations. It is a sector that generates £6 billion the economy,’ says Alex Plant, Executive Director of OUTSIDE ,ONDON "IRMINGHAM IS FAST BECOMING AN in revenues, supports 50,000 jobs and is expected to grow Economy, Transport and Housing at Cambridgeshire INTERNATIONAL BUSINESS HUB /NE MILLION PEOPLE IN by 40% by 2014, capturing more than third of the global County Council. THE CITY HAVE FOREIGN LANGUAGE SKILLS ACCORDING TO market worth £20 billion, according trade body Subsea UK. "USINESS "IRMINGHAM AND ARE mUENT IN TWO Companies such as Owlstone Nanotech are typical or more languages. Infrastructure is fast becoming an Aberdeen success story. of Cambridge’s cutting edge. Support from the area’s It’s an ultra connected city, with the highest broadband networked culture and mentors enabled them to raise West Midlands universities are investing in training uptake in the UK at 74% of the population. In addition, more than £9 million in investment to design miniature for the twenty first century too with the University of plans are underway for an ‘airport city’ to boost transport electronic sensors or ‘electronic noses’ for detecting Birmingham and the University of Warwick ranking in links and create an extra 1,100 jobs in the area by 2030. chemicals. the top 100 QS World University Rankings. Aston is the first university to sponsor a University Technical ,IKE -ANCHESTER #AMBRIDGE IS ALSO LOOKING TO #HINA College where students from 14 to 19 can specialise to help fuel growth: clean technology companies in engineering and science alongside core subjects in are primed to tap into China’s ‘Green Decade’ as English, mathematics, languages and business. the world’s biggest economy pushes towards sustainability targets. With Birmingham-based technology companies now employing more than a fifth (21%) of the UK’s games workforce, the city is also host to the £25 million Birmingham Ormiston Academy, the first digital media academy of its kind in the UK.
30 Growing British Business GrowingGrowing BritishBritish BusinessBusiness 3131 Growth Pioneer 4OP 3TRATEGIES City Hubs for Growth of Northern businesses are Energy exploiting growth opportunities and are targeting new markets as a top financial priority Manufacturing ./24( Aberdeen Infrastructure
Digital Entrepreneurs %NTERING NEW PRODUCT MARKETS )NVESTING IN STAFF Advanced %NTER NEW GEOGRAPHICAL MARKETS Manufacturing of Midlands businesses are exploiting growth opportunities It Innovators/Biotech/ and are targeting new markets Clean Tech as a top financial priority
Tech Start Ups Newcastle of Eastern businesses are exploiting growth opportunities -)$,!.$3 )NVESTING IN STAFF Academic Skills and are targeting new markets 2. Working in partnership with as a top financial priority BUSINESSES IN OTHER MARKETS 3. Entering new product markets
Manchester %!34 %NTERING NEW PRODUCT MARKETS )NVESTING IN STAFF Liverpool $IVERSIFYING THEIR OFFER
Birmingham of London businesses are Cambridge exploiting growth opportunities and are targeting new markets as a top financial priority London Existing Bristol of Southern businesses are super-cities exploiting growth opportunities and are targeting new markets Emerging ,/.$/. )NVESTING IN STAFF as a top financial priority. super-cities %NTERING NEW PRODUCT MARKETS 3. Enter new geographical markets 3/54(
%NTERING NEW PRODUCT MARKETS )NVESTING IN STAFF %NTER NEW GEOGRAPHICAL MARKETS
32 Growing British Business Growing British Business 33 Conclusion
The growing band of Growth Pioneers is an inspiring and optimistic light amidst the recessionary gloom currently enveloping UK PLC, leading the way back to growth with a refreshing combination of collaboration, flexibility and innovation.
The Future Laboratory survey pinpoints financial and structural flexibility and a willingness to engage and collaborate rather than compete as common attributes of these forward-thinking business leaders.
A third (33%) say they were more adaptable, a quarter (25%) said their staff had become more productive, and 22% felt that working with other businesses had become a more important part of their strategy.
A quarter (25%) have introduced more flexible working practices and a more proactive approach to problem recognition and solving, and 26% are now making an effort to stay at the cutting edge of new business methods in order to foster competitive dynamism.
Backed by confidence-building smart finance packages and operating from a growing number of regional , these emerging tribes of Confident Capitalisers, New Exportentials, and Co-operationals, are seeing recession as a time of opportunity.
Their positive attitude points the way to Britain’s Conclusion economic recovery.
3434 GrowingGrowing BritishBritish BusinessBusiness 06 Growing British Business 35 Appendix
Five Growth Pioneers explain in full how they were able to buck the UK’s recessionary trends and go for growth: Appendix TEC Electric Aero Stanrew Economic conditions were less than auspicious when The aerospace company – revitalised by a management TEC Electric began importing Chinese-made motors buy-out in January 2012 – expect to see turnover rise into the UK in 2008. The financial crisis was at its most from £10 million to in excess of £12 million by the end of intimidating, and funding wasn’t easy to find. the year, and will need new UK manufacturing capacity in the near future to cope with demand. But Managing Director Scott Edwards proved he was a natural financial counter-intuitive, pushing for growth Exports have grown from less than 10% of the business and hiring talent as his competitors down-sized and in 2009 to more than 25% in 2012 helped by focusing on consolidated. new overseas markets in the US, China and India.
From a sales background and so naturally confident, Managing Director Clive Scott expects his company to Edwards’ first move was to ensure that he had the increase turnover by 10% in 2012 and then post double- finance in place to back his expansive ambitions. ‘I digit growth for the next five years. wanted us to go from scratch to £200,000 a month almost overnight,’ he says. ‘I had to be sure that we ‘A key thrust of our strategy is identifying long-term civil had a steady cash flow to avoid over-trading.’ aerospace and oil & gas programs at companies such as Boeing, finding which customers are responsible for His answer was to arrange an invoice finance package which parts of the programme, and then working with with his bank that gave TEC Electric access to 85% of them on specifics products.’ the value of each invoice within 48 hours of issuing it. The management team realised that becoming the ‘The availability of “cash at hand” via invoice finance perfect partner was vital for growth in a competitive has given us the ability to plan for short and long term sector. ‘We take customer satisfaction very seriously growth, whether we need to increase stock in the short and work hard to take on board customer requirements. term for a strategic push in the market or long term plan We employ quality cost and delivery metrics to precisely to purchase a commercial property,’ says Edwards. measure levels of customer satisfaction,’ says Scott.
The results were spectacular. ‘We expanded by 25% in ‘That’s allowed us, for example, to have 100% on time 2009 and 40% in 2010,’ says Edwards of TEC Electric, delivery and zero faults in parts per million over the past an electric motor distributor based in Worcestershire. two years in a project that we are delivering with Rolls- ‘We did that by taking the opposite approach to our Royce.’ competition. They concentrated on holding on to what they already had. Their success has been under-pinned by a carefully formulated plan for financial stability. ‘An invoice finance ‘We went for growth. We invested in bringing in industry facility with our bank HSBC guarantees increased funding experts and then told them to go all out for more market as our level of commercial activity increases,’ says Scott. share. That has paid off and put us in a strong position.’ ‘We’ve always known that we have the finance available to grow without putting our cash flow under too much pressure.’
36 Growing British Business 07 Growing British Business 36 Growing British Business 37 Autohbahn High Street TV International Ltd Launched in September 2009 amid the turmoil of global financial crisis, the inspirational multi-channel retailer A terrible blow hit Autobahn International as the 2008 now has a staff of 70 and an annual turnover of £20 financial crisis unfolded. But Managing Director Lash million that is expected to grow to £60 million within Saranna combined a global face-to-face charm offensive three years. with a daring change of direction to turn his ailing company’s fortunes around. Andrew Malcher, Executive Chairman and Co-founder, pinpoints success to ’a positive attitude, scaleability ‘I knew we had to change fast to survive, and I had a gut and recognition that the way people consume retail has feeling that exports were the way forward. I realised that changed.’ we could buy luxury cars at very good prices in Europe because the recession had resulted in so many cancelled High Street TV sells a range of homewares, clothing, orders for other dealers. fitness, beauty and wellbeing and DIY products through branded TV advertising, direct to consumers, and by ‘Then I could sell those cars for a good profit in Asia and wholesaling ‘As seen on High Street TV’ products the Far East where economies were still booming’, says through retail partners such as Boots, Tesco, Argos and Saranna. John Lewis. Warwick Music Saranna began simply jumping on planes and making Solid and dependable finance was intrinsic to his growth personal calls to luxury car dealerships in Asia, laying model. ‘We recruited a top CFO with experience from a Innovation driven by passion, and backed by a willingness affordable plastic instrument that is that comes in funky out his company’s offer in person. £300 million business, and then used a subtle blend of to put personal capital on the line, allowed Midlands- colours to appeal to children,’ says Greenall. ‘But most share investment and bank trade finance facilities,’ says based Warwick Music to transform a niche business into importantly it’s a proper musical instrument that sounds ‘I leased out the entire domestic operation to another Malcher. an international success story. just like the real thing.’ company, and concentrated on expanding our small overseas business in person.’ ‘That gave us the financial confidence to be aggressive, The traditional music publishing company decided that The company knew they were taking a risk. ‘It was a to pursue both multi-media growth and growth with expansion was a necessity. ‘We were a small, disparate massive gamble,’ says Greenall. ‘We had a lot of our His strategy worked and Autobahn International, backed retailers.’ business servicing small numbers of customers in 40 own capital invested in the project as well as a lot of by a trade finance package to ease cash flow and provide countries,’ says Chairman Steven Greenall. ‘We needed outside investors’ money.’ working capital, is flourishing in emerging markets across Collaboration and co-existence are growth essentials by a new product that would allow to increase our profits by Asia. High Street TV. ‘Our long-term strategic partnership with harnessing economies of scale.’ Instant success via a YouTube video came with its own the Ideal World shopping channel is indicative of the way challenges: finding the working capital to pay their ‘Flexibility is the most important attribute for any we work,’ says Malcher. Greenall and his team commissioned Easy Jazzy ‘Tudes, a Chinese manufacturers to meet the flood of orders. ‘A businessman looking to expand in this financial climate. jazz tunes book for children that proved a hit, selling 8,000 five year distribution deal with the US music company Ten years ago you had to evolve your business once ‘We’re not interested in competition for its own sake. We copies a year worldwide. Steinway came with financial assistance for the first a decade. Now we’re talking about month-by-month look for opportunities to work with other companies in year,’ says Greenall. evolution. If what you’re doing didn’t deliver the targets our sector to find collaborations that benefit both of us. In ‘The book sales took us to the next level and gave us the you set last month, then change it – and change it now’, this case, Ideal World and High Street TV reached slightly confidence to begin thinking about a genuine innovation,’ ‘An invoice finance deal with our bank, who also says Saranna. different audiences that we might not have access to says Greenall. ‘Working with young inventor, Hugh provided great support and advice, gave us the capital normally – so we’re both winners.’ Rashleigh, we created the world’s first plastic trombone.’ to fund our expanding order book. We’ve doubled our workforce from three to six, we’re planning a mini- International expansion is a natural progression for the Trombones and their music had always been a company version of the pBone for younger children in 2013, and company and Malcher is looking at South America and speciality, and the team were keen to increase access to we’ve got plans for other innovative instruments in South Africa as future markets. the instrument among young musicians. ‘We created an development.’
38 Growing British Business Growing British Business 39 Glossary: Confident Capitalisers: business leaders investing now to improve their chances of capitalising on post-recession opportunities
Co-operationals: businesses who collaborative with companies that could be perceived as competitors, in order to achieve mutual benefit
New Exportentials: business leaders who prioritise the search for new audiences abroad, particularly in emerging markets, in order to grow their businesses
Growth Pioneers: forward-thinking companies identified by our research who are re-shaping and re-thinking their business to position themselves for growth
Super-city: a dynamic urban area that is the preeminent centre of a regional economy and a centre of gravity for growth industries and world-class research.
Consultant Experts: HSBC: www.hsbc.co.uk/business Dr Michael Apter, Apter International, Risk Expert and https://twitter.com/HSBCUKBusiness Fellow of the British Psychological Society For media enquiries or a copy of the report please Martin Beck, Chief Economist, Capital Economics contact:
Steve Box, Head of Trade and Receivables Finance, UK Kate Woodyatt HSBC Commercial Banking HSBC Global Communications Media Relations UK Commercial Banking Graham Clark, Academic Director of the full time MBA +44 (0)20 7991 8471 at Cranfield University. [email protected]
Tony Greenham, Head of Finance and Business, New Consolidated PR Economics Foundation Elspeth Rothwell/Jenny Szweda/Kate Mallett +44 (0)20 7781 2300 Mark Gregory, Chief Economist at Ernst and Young [email protected]
Methodology: .OTE Future Poll, the research department of The Future Whilst every effort has been made in the preparation Laboratory, conducted an online survey of 500 of this report to ensure accuracy of the statistical and business leaders between 17 and 25 August 2012. other contents, the publishers and data suppliers cannot Statistics in this report, unless indicated otherwise, accept liability in respect of errors or omissions or for any are from this survey. losses or consequential losses arising from such errors or omissions, The information provided in this report In addition, desk research, expert interviews and is not intended as investment advice and investors interviews with businesses were conducted to should seek professional advice before making any understand more about the conditions facing UK firms. investment decisions.
40 Growing British Business