United Kingdom
Global business leaders play it safe and scale back BRIC ambitions
- Despite ambitions to expand into BRIC economies, global business leaders are focusing on the quick and easy wins to be found in Eurozone
- However red tape prevents UK benefiting from investment opportunities
Ambitious businesses believe that European countries present more potential and fewer barriers to growth, despite almost half of them stating that BRIC is where they eventually want to be, according to a new report from BDO.
The international study which interviewed business leaders and international heads of globally aspiring mid-corporate companies in the UK and 9 other countries (Australia, Brazil, Canada, China, Germany, India, Netherlands, Russia, and USA) also reveals.
- Two-thirds of internationally focused mid-corporates have more aggressive expansion plans than last year and 95% are confident about international cross-border growth
- These business leaders target the BRIC markets when thinking of expansion, but Continental Europe and the USA present the most achievable prospects in the foreseeable future
- Identifying the right people on the ground to grow business is crucial, as is understanding the local culture, to making or breaking plans for international expansion
Kim Hayward, International Liaison Partner at BDO UK LLP, says: “While it is encouraging international business leaders have global expansion in their sights, the results reveal that the UK won’t be first in line to receive this injection of foreign investment. We may be kidding ourselves, thinking the UK is an easy place to do business. These findings reveal the opposite, with complex regulation and legislation cited as barriers to investment.
“These findings should act as a warning to the Government. One of the first priorities of the incoming Minister for Trade & Investment Stephen Green is to urgently look to simplify the current tax and regulatory regime to ensure that the UK’s arms are open foreign businesses looking to expand abroad.”
On UK businesses expanding abroad, Kim Hayward, adds: “Our report and our local insights tell us that the BRIC countries and beyond are still ripe for growth but you need to get in soon or risk losing out. That said, the BDO Cross-Border Growth Index indicates that the established European markets cannot be overlooked as they present the easiest prospects as they prevent the fewest barriers to international expansion in the immediate future.
The BDO Ambition Survey, conducted for the world’s fifth largest accountancy network, showed that companies are in optimistic mood, with 95% of them confident about international expansion and two thirds (66%) planning to be more aggressive in their plans this year compared to last.
Respondents were surprisingly less concerned about the challenges both red tape and corruption present, but instead felt that the keys to success when expanding abroad are people related: identifying the right local management and staff (62%), and finding a trustworthy local partner (59%). 40% of respondents said they look to a trusted management consultant, accountant or professional adviser for on-the-ground advice when expanding into new territories.
Hayward concludes:
“UK businesses with expansion ambitions should take advantage of the opportunities available to them now. While the scale of embarking on expansion may seem daunting, if you have the right people to help you navigate the local landscape, the rewards are there for the taking.”
Researchers found that the opportunity to achieve market leader status (65%) and the ability to benefit from the size of a market’s population (77%) are key factors in successful cross-border growth.
KEY STATISTICS/FINDINGS
- Business leaders from the BRIC countries are in the most aggressive mood for growth, while those from North America are the least aggressive
- The Germans are the most confident in their future international expansion plans, while the Chinese and Indian leaders are the most optimistic, both for their own country and their own sector
- China is consistently the most aspired to country for international expansion
- The main focus of investment over the next 1-2 years is likely to be people related (26%) or related to channels of distribution (25%)
- The single biggest factor contributing to cross-border growth is the size of market/population. The three least important factors are acquisition or merger opportunities, cheaper labour costs and tax incentives
- The two biggest challenges when growing abroad are finding the right local management and staff and locating trustworthy local partners & suppliers
- Brazilian businesses are particularly focusing on the Americas; Russians on Europe; Indians on EMEA and SE Asia; while Chinese companies are focusing on the widest group of countries
- Businesses expanding into Russia, Brazil and China have met with the most success. The least successful are the UK, India, and the USA
- The majority (69%) of international expansion is likely to be within a company’s core sector with only 15% of businesses expanding into a new product/area
- Ends -
Notes to editors
About the survey
The 2010 BDO AMBITION SURVEY: GLOBAL OPPORTUNITIES assesses the advantages and disadvantages of expanding into different territories, based on the experience of those who have already been there. The executive survey questioned globally aspiring companies (small to mid-cap companies US$50m to US$2bn) with international expertise.
The research was designed by StrategyOne and was conducted by way of semi-structured telephone interviews, including a mix of open and closed questions. 237 interviews were conducted across 10 countries (Australia, Brazil, Canada, China, Germany, India, Netherlands, Russia, UK and USA) with ‘C-suite’ executives, heads of international divisions and business leaders.
About BDO
BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members' names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Services Authority to conduct investment business.
The combined fee income of all the BDO Member Firms was US$5.026 billion in 2009. The global network has 1,138 offices in 115 countries and more than 46,000 partners and staff provide business advisory services throughout the world.
BDO is the brand name for the BDO International network and for each of the BDO Member Firms.
BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms.
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