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UKs Hot 100: fastest growing private companies

Ed Cottrell

03-Jul-2012

Investec has published its analysis of the UK’s 100 fastest-growing privately-owned mid-sized companies in association with Real Business. It provides hope that the country continues to develop world-class businesses that, with proprietary technology and an appetite for international markets, will be global players of the future.

For those who believe the UK no longer manufactures anything, or is too reliant on a few industries or regions for wealth generation, this year’s list of the “Hot 100” mid-sized companies will help dispel this view. The list, compiled from data filed at Companies House, shows that these companies have collectively achieved an average compound growth rate of 44 per cent over the past four years, and an average turnover of £150m in their last financial year.

The fastest-growing company is Alternergy, one of the principal wholesale/distribution companies in the solar power industry. It showed a compound annual growth rate of 130 per cent.

What lies behind their success?

The Hot 100 companies are spread across the UK and different sectors, but the research has identified three key factors behind their success:

1. Operate in a defensive sector: Discount retailing and bridging loans work when cash is tight and gold is good business when the price is high. However, this still requires great execution.

2. Work that big companies and the public sector can’t, won’t, or shouldn’t do anymore: The outsourcing revolution is in full flow. From procurement to elderly care services, from IT to laundry, SMEs are taking up work formerly done by government and the big corporate sector. You can see the beginning of the restructuring of the economy around outsourced solutions. As government cuts go on, you would expect this to continue, yielding great opportunities for entrepreneurs, and better services for customers and the UK public.

3. International focus built around proprietary and/or disruptive technology: We’re seeing the gradual emergence of world-beating UK companies. These are the hero firms that the UK so urgently needs.

These companies represent over 14 different sectors. 16 are in IT, software and telecoms, and a further 16 are in the financial and professional services industries. 13 are in the outsourcing and care services, and ten are in energy, gold and commodities. The 100 companies are based in 11 regions across the UK.

How do these entrepreneurs feel about the future?

It is encouraging that research among 24 of the Hot 100 companies reveals that they are very positive about the future. No fewer than 71 per cent expect “significant” improvement in their business prospects, and 75 per cent anticipate a slight or significant improvement in their operating profits. When asked which sources of finance they would draw on over the next 12 months, 75 per cent said “retained earnings”. Around 17 per cent intend to raise external equity finance. And 77 per cent plan to target global markets next year, but not because they fear the future of the UK economy – only 17 per cent expect it will have a significant impact on their ability to grow.

Key to success

There doesn’t appear to be a “silver bullet” in what the sample sees as the key to their success. The factors most frequently quoted are “delivering exceptional customer service”, and “innovation”, quoted by 21 per cent. This is closely followed by “focus”, “investment systems” and “team”, which were quoted by 17 per cent.

There is no consensus over what would help them grow even faster. The most common factors quoted are “access to better skilled staff”, and “access to further funding”, both raised by 25 per cent. This was closely followed by “more capable managers” and “assistance to enter new overseas markets”, quoted by 21 per cent.

The Investec Hot 100 reveals the gradual emergence of a new generation of world-class UK businesses which, with proprietary technology and an appetite for international markets, will be the global players of the future. What is clear is that the entrepreneurial spirit is still very strong in the UK.

Author

*This article was written by Ed Cottrell of Investec Specialist Private Bank, and Matthew Rock, Founding Editor of Real Business.

The opinions and views expressed are for information purposes only and are subject to change without notice. They should not be viewed as independent research, recommendations or investment advice of any nature.