Leading accountants and business advisers BDO LLP Southampton has published its fifth annual Central South Report.
It shows revenues increasing to £75bn across the top 150 companies in the region, a £10bn jump from £64.2bn last year. But profits have dipped slightly to £3.8bn from £4.1bn, proving that margins are still being squeezed across the board. The report also finds that employee numbers are holding at around 295,000 although concerns continue surrounding skills shortages, particularly in the IT and engineering sectors.
The Central South Report 2012 provides a snapshot of economic health in the region, based on the consolidated accounts for the Top 150 companies. The report urges businesses to ‘mind the gap’ that is developing between those companies that can access growth opportunities and those that are left behind to fight it out in stagnant markets. It also explores keys areas of activity, including M&A activity, private equity investment, the sustainability agenda and risk management, as well as case studies on companies both within and outside of the top 150.
Overseas expansion has been acknowledged as key to achieving sustainable growth, and so it is pleasing to note that the region’s top companies have steadily increased overseas turnover by £1.6bn to £34.7bn this year. Similarly, business leaders have increased investment levels to £3.5bn. Although still not at the heights of £9.2bn in 2009, it is positive to see companies taking investment more seriously as they look to compete on the international stage and take advantage of growth opportunities.
However BDO’s Central South Report stresses that it is still tough out there. Government budget cuts and constrained bank lending have led to a difficult period and uncertain times for many businesses in the region. Trouble in the Eurozone, alongside clear signs of slowdown in the global growth engines of India and China, also add new layers of risk for companies trading in the current climate. The top-level figures are encouraging, yet BDO Southampton is keen to remind businesses that they are retrospective and the current economic picture is looking more uncertain.
Malcolm Thixton, partner and head of BDO Southampton explains, “It is important for Central South businesses to focus less on ‘getting back to normal’ and more on investing appropriately for this market. It is possible to generate good returns for those prepared to move beyond their comfort zone to pursue new markets and with the confidence to invest.”
Growth still on Central South’s agenda Looking forward, it is necessary to consider the uncertain fate of the Eurozone, as it continues to weigh heavily. Banks, still in the process of rebuilding their balance sheets, will no doubt come under further pressure and this is unlikely to help businesses secure the capital needed for growth. With no end in sight to the economic uncertainty, the need to win market share by staying one step ahead of the competition will become ever more important.
But as Thixton concludes, “Central South companies have demonstrated great resolve in the last year and there is every reason to believe they will do so in the future. For those who ‘mind the gap’, growth may still be firmly on the agenda.”