GE Capital's study into Australia's mid-market points to a critical time in the growth outlook for a part of the economy capable of acting as a broader engine for growth.
[Melbourne, Australia]: Data from a new study shows that Australian medium sized businesses have and continue to be more focused on growth than any other sector in the Australian economy. But falling future expectations of growth are now clouding the prospects for the mid-market which generates more than one third of the economy's total revenue and hires more than 3.2 million Australians.
"The data since mid-2010 makes it clear that this sector's expectations of growth have been declining steadily and is now at its lowest point since June 2010," said Skander Malcolm, CEO, GE Capital, Australia and New Zealand.
"Our research shows that we are at an important crossroad for the mid-market. CFOs' future expectations of growth are a good predictor of the extent to which resources are devoted to grow the business or instead deal with contraction. Given the number of different industries the mid-market represents, the coverage from the relatively small to medium-sized corporations, and its presence across Australia, the findings suggest the broader economy should stand up and take notice," he said.
While in decline the mid-market's future expectations for growth are still positive, tracking close to expectations of large business and consistently stronger than the small business segment. The mid-market's fall in expectations have been driven by a combination of lower expectations of staffing growth, and falls in expectations of revenue growth, which has accelerated towards the end of 2011.
Released today by GE Capital, the study entitled "What Mid-Market CFOs think of now and the future" tracks more than 5,000 mid-market CFOs across industries including construction, retail trade, manufacturing, business and property, transport and storage, wholesale trade, education and mining. The study explores mid-market issues and concerns and compares them to the smaller and larger business sectors through an index constructed to reflect business's current orientation towards growth and their future prospects for growth.
Despite the declines in future expectations of growth, the report outlines how for the past 18 months the mid-market's view of current conditions has been consistently stronger, and less volatile than either small or large business. These organisations have devoted their efforts to ensuring their business is prepared for growth by developing their company culture, investing in technology and finding and keeping the best staff they can.
"More than any other sector we've seen mid-market CFO's recognize the solid current conditions in which they operate, and demonstrate remarkable resilience," said Mr. Malcolm. "These businesses are often small enough to operate in domestic markets and avoid some of the difficulties of foreign trade recently faced by their larger competitors, while being large enough to have control over their commercial circumstances."
"As a result these businesses are less focused on factors that are barriers to growth such as regulatory or policy challenges and are more focused on growing their revenue base, managing cash flow, and gearing up by investing in marketing activities to more effectively compete."
The study shows the biggest concern facing mid-market CFO's is the economic environment, named by one third of CFO's as among their top three concerns. This was followed by growing revenue and finding staff.
The study also provides industry and demographic data showing clear differences in business growth outlook between industries, once again demonstrating the multi-speed economy.
- Business & Property businesses remain strongly focused on growth, while Construction has seen a virtual collapse in confidence over 2011. Retail trade, while lower than the Mid-Market as a whole, is demonstrating signs of recovery.
- Manufacturing, Transport & Storage and Other Industries [including Mining] hold the most positive expectations for revenue growth, closely followed by Wholesale Trade, Business & Property and then Retail Trade. The Construction industry trailed all other businesses in their expectations for revenue growth.
- The Business & Property industry had the most positive expectations for growth in staffing. Transport & Storage along with Other Industries which include Mining followed. Manufacturing and Transport & Storage also held positive staffing growth expectations. Wholesale trade, Retail trade and particularly Construction all had relative pessimistic expectations for growth in staffing.
- The overall confidence in the sector is not evenly spread as a core group and those organisations with revenues of $20m - $40m showed the greatest decline in confidence over 2011. The smaller businesses ($10M-$20m) and larger ($40m-$250m) have held a more stable view of growth.
To download a copy of the GE Capital mid-market CFO report, visit www.australianmid-market.com.au
Anthony Spargo
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