business confidence study - bvcabvca.co.uk/portals/0/library/documents/business... · january to 5...
TRANSCRIPT
1
Business Confidence Study
Ipsos MORI
March 2016
2
Contents
1. Methodology 3
2. Executive summary 4
3. Economic optimism 5
4. Business optimism 8
5. Business concerns 17
6. Private equity and venture capital 23
7. EU perspective 29
8. Sample 35
9. Ipsos MORI credentials 37
3
MethodologyBackground:
Ipsos MORI was commissioned by the BVCA to conduct a study to measure economic optimism among British businessesbacked by private equity or venture capital investment.
Objectives:
Measure the economic outlook among private equity and venture capital backed companies. Gather feedback on how private equity and venture capital contributed to the company growth. Explore attitudes on issues such as Brexit and wider challenges facing the business and the UK economy.
Methodology:
An invitation email from BVCA was sent in advance of the research to the key decision makers companies that havereceived private equity or venture capital investment; this was followed up by specialist interviewers who conducted a 10minute quantitative telephone interview.
A total of 200 businesses participated in the research: 93 companies backed by private equity, 67 businesses with venturecapital investment and 35 companies backed by both private equity and venture capital.
Fieldwork was completed in two phases: before Christmas (1 December to 16 December 2015) and after Christmas (16January to 5 February 2016).
In appreciation of their time and participation respondents were given an option to make a donation of £25 to the charityof their choice.
Note on reporting: throughout the report we provide contextual data from the 2015 Ipsos MORI Captains of Industrystudy. Captains of Industry is widely acknowledged as the authoritative source of opinion on Britain's business elite; the studyis conducted once a year among executive board-level directors and chairmen of British companies which are in the top 500industrials by turnover or top 100 financial companies by capital employed
4
Executive summaryBUSINESS OPTIMISM
The majority (62%) of businesses with private equity (PE) or venture capital (VC) investment feel the economic conditions in the UK have improved in the last year and half (49%) believe they will improve in the next 12 months. Captains of Industry are slightly more positive about the UK economy on the whole.
The overwhelming majority (84%) of businesses with PE or VC funding feel the conditions of their own business will improve in the next 12 months. In comparison, Captains of Industry feel less positive (57%) about improvement of their own business than PE and VC backed companies.
Companies are most optimistic about creating innovation (87%) and revenue growth (88%), with more than one in three (38%) of those positive about revenue increase expecting to grow by over 30%. The majority (79%) also feel positive about increasing their headcount. Companies with venture capital investment feel particularly confident about creating innovation (60%).
PRIVATE EQUITY AND VENTURE CAPITAL
Most of businesses have grown (81%) since receiving private equity or venture capital investment, and the majority (87%) feel the investment was important to their growth (87%) . The majority (91%) would recommend the investment to other businesses.
PERSPECTIVE ON THE EUROPEAN UNION
Businesses with PE and VC investment are most concerned about the possibility of the UK leaving the EU (46%) and the availability of skilled workers (46%). Companies with venture capital are particularly concerned about Brexit (54%).
The vast majority (83%) of businesses with PE and VC investment would prefer to stay in the European Union. Captains of Industry share a similar view.
Reflecting Captains of Industry, PE and VC backed companies feel Brexit would have a negative impact on the British economy (78%). Over half of companies with PE or VC funding (53%) are also concerned about Brexit diminishing their company prospects, compared to one in three (34%) of Captains of Industry.
5
Economic optimismThe majority of businesses with privateequity or venture capital investment feelthe economic conditions in the UK haveimproved in the last year. Half also trustthey will improve in the next 12 months.
6
The majority feel that economic conditions in the UK have improved. Outlook for the year ahead is slightly less positive
62%
29%
10% 1%
Improved Stayed the same
Gotten worse Don't know
Do you think the general economic conditions of the UK have improved, stayed the same or gotten worse in the last 12 months?
Base: All (200); businesses very optimistic about creating new jobs (71) or company revenue growth (90); businesses which believe the
economic conditions in the UK improved (123) Significant difference vs total at 95% confidence level
Do you think that the general economic condition of the country will improve, stay the same or get worse over the next 12 months?
49%
35%
15%2%
Improve Stay the same
Get worse Don't know
Positive outlook is stronger among companies that are positive about the economy in the last 12 months (65%), and very optimistic about future job creation (61%) and revenue growth (59%).
.
In comparison, Captains of Industry are more likely to say the economic condition will improve
Do you think that the general economic condition of the country will improve, stay the same or get worse over the next 12 months?
0
10
20
30
40
50
60
70
80
90
100
General election
General election
General election
General election
58%
6%
Year
58%
35%
6%
1%
Improve Stay the same
Get worse Don’t know
General election
Base: British Captains of Industry (102) Interviewed Sept – Dec 2015
8
Business optimismThe overwhelming majority of businesseswith private equity or venture capital feelthe conditions of their business willimprove in the next 12 months.
Companies are most positive aboutcreating innovation and revenue growth.The majority also feel positive about aheadcount increase
9
Around two-thirds believe their business improved last year and eight in 10 trust it will improve next year
69%
18%
13% 1%
Improved Stayed the sameGotten worse Don't know
Has business for your own company improved, stayed the same or gotten worse over the last 12 months?
Do you think that business for your own company will improve, stay the same or get worse over the next 12 months?
84%
10%6%
Improve Stay the sameGet worse Don't know
This positive outlook is stronger among companies with 11 to 20 employees (97%)* and those with 21 to 50 workers (93%)*
Base: All (200); businesses positive about their business in the next 12 months (168); businesses with 11 to 20 employees (35) or 21 to 50 (45)
* Caution: low baseSignificant difference vs total at 95% confidence level
10
Increase in sales, innovation and overall company growth are the main reasons behind business optimism
24%
18%
16%
13%
11%
11%
10%
10%
Increase in customers, sales anddemand
Innovation and new products
Overall company growth and expansion
Establishing global presence
General economic improvement
Good company strategy and planning
Improved international trade, bothimport and export
Investment and funding opportunities
Why in particular do you feel that business for you company will improve over the next 12 months? (Unprompted)
Base: All companies which believe they will improve in the next 12 months (168)
% of companies
11
Why in particular do you feel that business for you company will improve over the next 12 months?
We are launching the product we have beenworking on. (Company backed by privateequity)
The biotech market (which is the market weoperate in) is improving. (Company backed byventure capital)
We're winning more and more contracts and thereis more work to be had. We just keep growing.(Company backed by private equity)
We have new strategies, and we have achievedheadway against competitors. (Company backedby private equity) Improved external focus, increase in renewable
sector. (Company backed by venture capital )
There are two principal reasons: we will have a widerproduct portfolio to offer and a wider acceptance ofthe qualities we deliver. (Company backed byventure capital)
I think access to funding and support in locatingthat funding is pretty good at the moment and alsothe amount of grants that you can apply for thatare around as well. There's a lot of support for smalland medium-sized businesses that we didn't havebefore… we are more of a global company and ingeneral terms it's a good time to be in business.(Company backed private equity)
We are in the middle of a capital raise which ismaking a difference to our sales and marketing.(Company backed by venture capital )
The development of our technology it is in demandworldwide and we are receiving enquiries rather thanhaving to go out and generate them. We have set updistribution in India and South East Asia, and withthe European Union we are well in demand.(Company backed by private equity)
Economic strength and people will be looking at morecost-efficient ways of doing IT which is what wespecialise in. (Company backed by private equity )
We are unique in what we do. We've been going fornine years to get to this position and it will attractmore investors. (Company backed by venture capital )
.
The majority of Captains predict that business for their own company will improve over the next 12 months
Do you think that business for your own company will improve, stay the same or get worse over the next 12 months?
0
10
20
30
40
50
60
70
80
90
100
General election
General election
General election
General election
57%
7%
Year
57%36%
7%
Improve Stay the sameGet worse Don’t know
General election
Base: British Captains of Industry (102) Interviewed Sept – Dec 2015
Interestingly, companies with PE and VC funding feel more positive about their own company growth than Captains of Industry, although Captains feel more positive about the future of British economy
13
Companies are most positive about creating innovation and revenue growth
Thinking about the next 12 months, how optimistic, if at all, do you feel about the following:
Base: All (200); businesses backed by PE (93); businesses backed by VC (67)
3329
33
4027
36
464445
6034
50
2725
27
4349
43
444643
3051
37
Venture capital
Private equity
Total sample
Venture capital
Private equity
Total sample
Venture capital
Private equity
Total sample
Venture capital
Private Equity
Total sample
Very optimistic Quite optimistic
Creating innovation
Company revenue growth
Creating new jobs
Expansion into new international markets
87%
79%
88%
60%
Companies backed by venture capital show a slightly more positive attitude, especially around creating innovation
Significant difference vs companies with private equity investment at 95% confidence level
14
Companies optimistic about their revenue growth have bullish predictions for the next 12 months
Previously you said that you feel optimistic about your company's revenue growth. Thinking about the future of your company how much would you say your company's revenue will grow in the next 12 months?
Base: All businesses that feel optimistic about company revenue growth (175); businesses with turnover of less than £10 million (111); businesses backed by venture capital (58);
businesses with up to 10 employees (33); PE and VC very important to company growth (98)
11%
20%
19%
9%
38%
2%
By up to 5%
6 to 10%
11 to 20%
21 to 30%
Over 30%
Not sure
Small companies with up to 10 employees (70%)*
Companies trusting private equity or venture capital investment was pivotal to their overall company growth (45%)
Companies with turnover of up to £10 million (50%)
Businesses with venture capital investment (48%)
* Caution: low baseSignificant difference vs total at 95% confidence level
Companies most likely to expect revenue growth above 30%:
15
38
33
33
31
30
Concerned about the availabilityof skilled employees
Very optimistic aboutinternational expansion
Very optimistic about innovation
Companies with less than £10million turnover
Private equity or venture capitalvery important to company
growth
Companies most likely to increase headcount a lot %
Businesses are optimistic about headcount increases in the next year
Over the next 12 months, would you say your company headcount will…
24%
54%
15%
5%1%1%
Increase a lot Increase a littleStay the same Decrease a littleDecrease a lot Don't know/not sure
Base: All (200); businesses concerned about the workforce (91); businesses very optimistic about international expansion (66) or innovation (100); businesses with turnover less than £10
million (126), PE and VC very important to growth (109)
Overall 79% of businesses believe
their headcount will increase
Significant difference vs total at 95% confidence level
But there seems to be some concern about potential shortage of skilled employees among those planning substantial recruitment….
16
Despite headcount growth the majority of businesses will not be offering any apprenticeships this year
With regards to job creation, how many apprentices will you be taking on over the next 12 months?
29%
3%
2%
1%
5%
1-5 apprentices
6-10 apprentices
11-20 apprentices
21-50 apprentices
Don't know/Prefernot to say
Base: All (200); businesses with up to 10 employees (43)
63% will not be taking any apprentices this year
77% of smaller firms* (up to 10 employees) are unlikely to offer apprenticeship
* Caution: low baseSignificant difference vs total at 95% confidence level
One in three (34%) will take on at least one apprentice
17
Business concernsBusinesses with private equity and venture capital investment are most concerned about the possibility of the UK leaving the EU and the availability of skilled workers.
Almost half of the businesses believe that the current level of regulation is harming the UK economy.
18
Overall, companies are most concerned about Brexit and the availability of skilled employees
28
19
49
45
26
36
29
35
46
46
23
21
The potential for the UK to exit the EU
The availability of skilled workers
The stability of the Chinese economy
Increasing taxation in the UK
% Not concerning (0-3) % Neutral (4-6) % Concerning (7-10)
How much of a concern, if at all, are each of the following issues for your business today, on a scale of 0 to 10, where 0 is not at all concerning and 10 is extremely concerning?
Base: All (200)
19
Companies with VC investment find Brexit more concerning than those with PE investment
Base: All (200); businesses backed by PE (93); businesses backed by VC (67)
2215
21
212323
5239
46
5435
46
Venture capital
Private equity
Total sample
Venture capital
Private equity
Total sample
Venture capital
Private equity
Total sample
Venture capital
Private equity
Total sample
Concerning % (7-10)
The potential for the UK to leave EU
The stability of Chinese economy
Increasing taxation in the UK
Significant difference vs companies with private equity investment at 95% confidence level
And how much of a concern, if at all, are each of the following issues for your business today, on a scale of 0 to 10, where 0 is not at all concerning and 10 is extremely concerning?
The availability of skilled workers
20
Almost half of businesses with PE and VC investment believe regulation is harming the economy
To what extent do you agree or disagree with the following statements?
17
14
18
29
31
31
27
28
19
20
22
18
8
4
13
1
1
0
Total
Private equity
Venture capital
Strongly agree Tend to agree Neither/nor
Tend to disagree Strongly disagree No opinion
46%
45%
49%
The level of regulation on UK businesses is harming the UK economy
Base: All (200); businesses backed by PE (93); businesses backed by VC (67)
21
Less than half of PE and VC-backed companies trust that regulators understand the industries they regulate
To what extent do you agree or disagree with the following statements?
7
4
7
31
32
31
26
24
27
19
24
10
14
12
22
4
4
1
Total
Private Equity
Venture Capital
Strongly agree Tend to agree Neither/nor
Tend to disagree Strongly disagree No opinion
Industry regulators have a good understanding of the sectors they regulate
38%
37%
39%
Base: All (200); businesses backed by PE (93); businesses backed by VC (67)
.
23 54
38
15
17
7
32
2
10 3
The level of regulation on UKbusinesses is harming the UK
economy
Industry regulators have a goodunderstanding of the sectors they
regulate
Strongly agree Tend to agree Neither agree nor disagree
Tend to disagree Strongly disagree No opinion
In comparison, Captains have a more negative view of regulation in the UKTo what extent do you agree or disagree with the following statement?
Base: British Captains of Industry (102) Interviewed Sept – Dec 2015
77%
23
Private equity andventure capital
The vast majority of businesses have grown sincereceiving private equity or venture capitalinvestment, and the majority would recommendthe investment to other businesses.
When it comes to benefits of private equity andventure capital, the investment is predominantlyassociated with financial support, followed byorganic growth or growth through acquisitions.
25
The vast majority of businesses have grown since receiving the investment
81%
9%
9% 2%
Grown Remained stable
Shrunk Don't know
Would you say that your company has grown or shrunk, in financial terms, since receiving private equity, venture capital or private equity and venture capital investment?
86 %
6%
6%
1%
76%
9%
12%
3%
Grown
Remained stable
Shrunk
Don't know
Private equity Venture capital
85% of those who have grown within
last 12 months also agree they have
grown since receiving investment
Base: All (200); businesses backed by PE (93); businesses backed by VC (67)Significant difference vs total at 95% confidence level
26
The majority believe the PE or VC investment to be paramount to their business growth
91% would recommend private equity or venture capital to other businesses
How important has private equity, venture capital, or private equity and venture capital been to the growth your business has achieved during this period?
67%
20%
8%4%
1%
Very important Fairly importantNot very important Not at all importantDon't know
Based on your experience, would you recommend private equity or venture capital to other businesses?
Base: All (200); businesses backed by PE (93); businesses backed by VC (67)
Overall 87% say private equity or venture capital was important to the company’s growth
Base: Businesses which have grown since receiving PE or VC investment: All (162); businesses backed by PE (80); businesses backed by VC (51)
27
PE and VC backed companies value the importance of the investment to their growth
How important has private equity, venture capital, or private equity and venture capital been to the growth your business has achieved during this period?
56%
71%
31%
14%
10%
8%
3%
8%
Private equity
Venture capital
Very important Fairly important
Not very important Not at all important
Based on your experience, would you recommend private equity or venture capital to other businesses?
Base: Businesses which have grown since receiving PE or VC investment: All (162); Businesses backed by PE (80); Businesses backed by VC (51)
94% would recommend private equity
90% would recommend venture capital
28
When it comes to the benefits of PE or VC, the investment is mostly associated with financial support
91
70
65
35
91
81
72
40
90
67
61
28
Financial support to help the businessgrow
Ability to help the business groworganically and through acquisitions
Strategic advice to help the business grow
Operational support and businessoptimisation
Total Private equity Venture capital
Smaller companies (less than £10 million turnover) are more likely to mention financial support (94%)
Companies with 51 to 500 employees are more likely to link the investment with organic growth or growth through acquisitions (81%)
Which of the following benefits do you associate with private equity, venture capital, or private equity and venture capital?
Base: All (200)’; businesses with less than £10 million turnover (126), businesses with 51 to 500 employees (62)
Businesses with private equity investment are also slightly more likely to mention other benefits of the investment such as organic growth or growth through acquisitions as well as strategic advice
Significant difference vs total at 95% confidence level
% agree
29
EU perspective
The vast majority of businesses with private equity or venture capital investment would prefer to stay in the European Union.
Businesses are most concerned about the overall impact of Brexit on the UK economy, followed by their own company prospects.
30
Significant difference vs total at 95% confidence level
The majority of businesses backed by private equity or venture capital would prefer to stay in the EU
Companies that feel their business will not improve in the next 12 months* show less support for remaining in the EU (66%) with 22% unsure what would be best for their business
As you may know, the Government has pledged to hold a referendum on the United Kingdom's membership of the European Union by 2017. Which outcome of the referendum do you think would be best for your business?
83%
6%
11%
UK staying in the EU UK leaving the EU Don’t know
Base: All (200); businesses backed by PE (93); businesses backed by VC (67); businesses which will not improve in the next 12 months (32)
* Caution: low base
.87%
7%
4%2%
As you may know, the government has pledged to hold a referendum onthe United Kingdom’s membership of the European Union by 2017
And which outcome would you personally prefer?
Which outcome of the referendum do you think would be best for your business?
UK staying in the EU Don’t knowUK leaving the EU Refused
Base: British Captains of Industry (102) Interviewed Sept – Dec 2015
87%
7%3%
3%
Similarly, the UK staying in the EU is the preferred outcome of the referendum for Captains
32
The majority of businesses with PE and VC investment feel Brexit will negatively impact the UK economy
Negative impact on company prospects increases among companies who are very optimistic about international expansion (64%)
Overall, if the United Kingdom voted to leave the European Union in a referendum, please can you tell me what kind of impact, positive or negative, this would have on the following?
1%
1%
1%
8%
3%
1%
13%
44%
71%
54%
40%
14%
25%
13%
12%
2%
1%
3%
The British economy overall
Your company’s prospects
Your company’s ability to attract and retain talent
Very positive Fairly positiveWould make no difference Fairly negativeVery negative Don’t know
78%
Base: All (200); businesses backed by PE (93); businesses backed by VC (67); businesses very optimistic about international expansion (66), creating innovation (100), creating new jobs (71)
Around half of businesses are also concerned that Brexit might have a negative impact on their company prospects, but when it comes to the ability to recruit talent most believe Brexit would make no difference
Negative impact on the ability to attract talent increases among businesses very optimistic about creating innovation (37%) and creating new jobs (35%)
Significant difference vs total at 95% confidence level
53%
26%
.
Captains are more concerned about the impact of Brexit on the economy than on their own companyOverall, if the United Kingdom voted to leave the European Union in a referendum, please can you tell me what kind of impact, positive or negative, this would have on the following?
7% 5% 2%15%
61% 76%
63%
28%20%
15% 6%2%
The British economy overall Your company’s prospectsYour company’s ability to attract and
retain talent
Very positive Fairly positive Would make no difference Fairly negative Very negative Don’t know
34%22%
Base: British Captains of Industry (102) Interviewed Sept – Dec 2015Responses less than 2% are not shown
78%
33
34
Sample composition
35
49%
32%
17%
1%
2%
Can I please confirm your title/role at your organisation?
63%
25%
3%
6%
1%
3%
Less than £10 million
£10 to £50 million
£51 to £100 million
£101 to £500 million
Over £500 million
Don't Know
What was the approximate turnover of your business in the last financial year?
22%
18%
23%
11%
20%
6%
2%
1%
1 to 10
11 to 20
21 to 50
51 to 100
101 to 500
501 to 2,000
Over 2,001
Don't Know
What is your overall company headcount?
47% Private equity
34%Venture capital
18%Both private equity and
venture capital
3%Received
investment but not sure what kind
Can I confirm that your business has been backed by
C-Class (e.g. CEO)
Director
Managing Director
Senior/Executive Vice president
Founder
36
Ipsos credentials
37
Ipsos MORI’s standards and accreditations
Ipsos MORI’s standards and accreditations provide our clients with the peace of mind that they can always depend on us to deliver reliable, sustainable findings. Our focus on quality and continuous improvement means we have embedded a ‘right first time’ approach throughout our organisation.
The international market research specific standard that supersedes BS 7911 / MRQSA & incorporates
IQCS (Interviewer Quality Control Scheme); it covers the 5 stages of a Market Research project. Ipsos MORI was the first company in the world to gain this accreditation.
ISO 20252:2012
This work was carried out in accordance with the requirements of the international quality standard for market research, ISO 20252:2012 and with the Ipsos MORI Terms and Conditions.
By being an MRS Company Partner, Ipsos MORI endorse and support the core MRS brand values of
professionalism, research excellence and business effectiveness, and commit to comply with the MRS Code of Conduct throughout the organisation.
MRS Company Partnership
International general company standard with a focus on continual improvement through quality
management systems. In 1994 we became one of the early adopters of the ISO 9001 business standard.
ISO 9001:2008
International standard for information security designedto ensure the selection of adequate and
proportionate security controls. Ipsos MORI was the first research company in the UK to be awarded this in August 2008.
ISO 27001:2005
Ipsos MORI is required to comply with the Data Protection Act; it covers the processing of personal data and the protection of privacy
Data Protection Act
38
Ipsos MORI’s Business Excellence System (BES) incorporates the requirements of the three international standards, the Data Protection Act, and the MRS Code of Conduct. The Business Excellence System is continually reviewed for effectiveness and improvement – we achieve this in a number of ways:
BES representatives from all areas of the business meet regularly. Their remit includes: promoting and encouraging Business Excellence within their business units; reviewing, developing and maintaining Ipsos MORI’s Business Excellence management systems and; learning and sharing best practice.
Business Excellence System (BES) Group:
Ipsos MORI has a large team of trained internal auditors from across the business. Internal audits and spot checks are carried out throughout the year to measure the effectiveness of the company’s Business Excellence Systems. Monthly metrics are reported to the UK Management Board and the BES Group. Where necessary corrective and preventative actions are implemented.
Ipsos MORI’s Internal Audits and Metrics Team:
A team of BES Reps are responsible for developing effective and engaging training. All staff receive induction and refresher training. Delegate feedback is used to further improve training where appropriate.
BES Training and Communications Team:
An external auditing company visits annually to ensure that Ipsos MORI complies with the international standards we are accredited to. Findings are reported back to the business and corrective and/or preventative measures adopted where necessary.
External Audits:
At the close of each project, an online survey is sent to the client. Returned questionnaires are reviewed and followed up where necessary. Data is used by the Audits and Metrics Team for the monthly UK Management and BES Report.
External Client Satisfaction Monitor:
This work will be carried out in accordance with the requirements of the international quality standard for market research, ISO 20252:2012 and with the Ipsos MORI Terms and Conditions.
Ipsos MORI’s Business Excellence System
www.ipsos-mori.com/
39BVCA Confidence Study | February 2016 | Internal and Client Use Only
Mike Granleese
Research Director
020 7347 3413 07814 198870
Alicja Furmanczyk
Senior Research Executive
020 7347 [email protected]
For more information