South: KPMG gives predictions and guidance for businesses in 2016
As 2016 fast approaches, Ian Brokenshire, head of enterprise at KPMG in the south, gives his thoughts on what businesses need to do to thrive in 2016.
What are the 'stay awake' issues for south businesses in 2016 and beyond?
According to recent KPMG research among CEOs nationally, the majority (79%) are more confident about future growth of the UK economy than last year.
However, looking towards the future, we know that 'the new normal' presents south businesses with interesting challenges and opportunities:
· Market disruption
· Rapidly changing customer landscape and growth rates
· Industrialisation of services driven by technology and data analytics
· Increasing regulations
· Climate change
· Geography shift and demographics – new market opportunities and the threat of new entrants
· Artificial Intelligence
· Mergers and acquisitions activity is expected to be very strong
· Changing customer demographics.
We anticipate these issues to be prevalent, no matter the size or stage of a business.
There is also an ongoing skills shortage in the south and while some sectors will suffer more than others in 2016, including the health and construction sectors, few businesses are immune from the effects of the shortage. This will be coupled with unsustainable salary growth as businesses continue to compete for talent. Companies in the region need to think creatively about what they are offering job seekers alongside traditional packages not just to attract the best talent, but to ensure that valued staff stay on board.
What is needed to grow in 2016?
Many companies risk missing opportunities for growth. While UK growth is around 2%, exporting goods could have a significant impact on businesses. Partnerships or joint ventures with companies overseas can make the transition into a new market much easier and accelerate growth.
In the face of this list of challenges and also increasing competition from fast-growing ambitious new businesses, companies should be looking to embrace innovation – whether that’s increasing research and development, or collaborating with others.
As businesses embrace technology they also need to be prepared for emerging cyber security threats. Going into 2016, companies need to consider investing in cyber security. Nationally, just 28% of CEOs say they are fully prepared for a cyber-event, which can lead to catastrophic losses. Instead of seeing investment in cyber security as a financial loss, companies should turn this into a competitive advantage by building security into new products.
Companies looking to change and grow should look at their research and development budget. This area is too often one of the first targets for savings. They should however set realistic expectations for investors expecting immediate results. To support growth, businesses should also look to increase their sales and marketing budget.
SMEs
Many smaller firms aren’t aware of the finance options available to support growth:
• Grants
There are over 800 vastly undersubscribed grant schemes funded by UK or EU governments. Choose the one that is right for your business, be clear to establish eligibility and have the correct supporting documentation. Done correctly it can provide a low cost route to finance.
• R&D tax incentives
With over £2 billion set aside by the Government to fund innovation the incentives are available even to loss making businesses. R&D includes developing new products, processes, software, materials, services and even packaging.
• VAT
Often one of the largest and undermanaged cashflow of a business. Try to get oversight of VAT cashflow. With minor changes to processes businesses may be able to vastly improve their VAT cash balance or cashflow for their business.
