Entrepreneurs are refusing to ‘sit back and wait’ for politicians to decide their fate in overseas markets.
Mid-sized TMT companies have grown international sales faster than any other major UK sector in the last five years and are striding ahead with growth plans despite Brexit uncertainty, according to research from accountancy and business advisory firm BDO.
Medium-sized companies in the sector have almost doubled (91.5%) overseas turnover since 2013 to £18bn – a much faster rate than manufacturing, consumer markets and financial services.
In the last 12 months, these companies have added £4bn in overseas revenues. BDO says tech and media entrepreneurs are overcoming Brexit jitters and refusing to sit back and wait for politicians to decide their fate.
Despite being overlooked by government as a driving force in the economy, mid-sized businesses in the sector have also increased sales faster than large (FTSE 350) and small (
Tony Spillett, head of technology and media at accountancy and business advisory firm BDO, says: “The government is missing a trick by not recognising the strength of the ignored middle of UK plc. Its focus is often on Britain’s thriving start-up tech community but it is mid-market scale-ups that are driving growth at home and abroad.
“Creating, developing and commercialising intellectual property (IP) is a key asset for these innovative mid-sized businesses. That IP is easily transferred overseas and is going down well in foreign markets.”
But expanding overseas isn’t easy. Many companies underestimate the regulatory burden in other countries as well as the stretch on management time, resources and finances. BDO says there’s a growing trend ‘to follow the client’ as a first step into overseas markets.
“We’re seeing this a lot,” says Spillett. “Companies such as those in marketing services or workplace software systems, which supply large multi-national corporates and have a slice of their huge budgets, are making the most of those relationships. They are using the client as an anchor into key markets to help smooth the way, taking space in their offices and reducing the capital expenditure needed for international expansion.”
According to the research, which comes from BDO’s New Economy report, technology and media companies in the mid-market are outperforming the UK’s top five sectors for international growth.
Professional services is the second-fastest growing sector in the mid-market with overseas turnover growth at 87.5% over five years. This is followed by consumer markets (retail, leisure and hospitality) at 52.4%.
Manufacturing is still the UK’s largest sector with international sales hitting the £50bn mark in the last 12 months. However, the sector grew at a slower rate (25%) highlighting the impact of political and economic uncertainties on manufacturing.
Mid-market financial services firms have suffered negative growth (-1%) since 2013.
Brexit doesn’t seem to be impacting overseas growth for the tech sector as much as others. Mid-sized companies have grown by 28% in the last year, adding £4bn to the sector’s overseas revenue total.
While smaller tech and media companies have also witnessed impressive growth in the last five years (54% increase), their success in international markets has stalled in the last 12 months with an increase of just 3.26%. Meanwhile, the 28 businesses in the FTSE 350 have seen overseas turnover stagnate (-0.21%) since 2013.
Tony Spillett, head of technology and media at BDO, said: “It’d be wrong for me to suggest Brexit isn’t causing uncertainty or fail to recognise that tech and media companies are in some way less-reliant on EU supply chains than other sectors. However, by their very nature tech firms are run by innovative, often unshakable, entrepreneurs who are working their way around any uncertainty and striding ahead with growth plans.
“Those that were considering setting up EU subsidiaries prior to the referendum have gone ahead with their plans. They’re not sitting back and waiting for politicians to decide their fate for them.”