UK economy at risk as businesses look to sell instead of scale
New research indicates that 33% of medium-sized enterprises are ready to sell, rising to 51% by 2017
Medium-sized businesses in the UK are under pressure to sell rather than scale their companies, according to research carried out by law firm Mills & Reeve.
The study of 500 leaders of mid-market enterprises revealed that many business owners are looking to sell, despite possibilities of scaling up and increasing the value of the business in the long term, which could negatively impact the UK economy.
One third (33%) of respondents said they were actively planning to sell their company, with 51% of those expecting a sale by April 2017 and over half (55%) having experienced increased interest from investors.
Although it could be argued that this is a sign of a dynamic mid-market, 29% of business leaders looking to sell felt that they were “forced” into the decision by factors beyond their control. Additionally, 39% fear missing the opportunity to make a successful sale if they don’t exit immediately and deal activity dies down; a further 34% are worried they will exit before their business has realised its full value.
Elsewhere, the study revealed that 69% of business leaders felt the UK economy would be stronger if more companies decided to scale up instead of sell, while 63% are concerned about the country’s economic future if its most promising companies are sold before they reach their full potential. Two fifths (43%) also said that business exits have had a detrimental impact on the local economy.
Despite the importance of scaling up to the UK economy, 44% of British business owners claim it has never been this hard to grow, and 40% believe scaling is more inherently risky than selling. Almost half (48%) of respondents said they would change their business strategy from growth to survival if the UK economy starts to deteriorate.
Claire Clarke, partner at Mills & Reeve, commented: “The mid-market currently accounts for a quarter of the UK’s turnover. Not only is this stalwart of the economy capable of delivering even more growth and jobs; from its ranks will emerge Britain’s next generation of world-leading large enterprises.
“While selling may be the right choice for some companies, scaling up can, with the right support, offer greater returns for business owners, shareholders and the UK economy as a whole.”