Working capital challenges most acute in Europe

A survey of middle-market executives across 21 countries found that companies across the globe are significantly more optimistic about business conditions and opportunities than last year. EY's annual Growth Barometer report, based on a survey of 2,766 executives, shows that 87 per cent companies have a growth target of more than six per cent this year, compared to 64 per cent of companies in 2017. The survey also found that no respondents in 2018 expect a decline in growth, compared with 5 per cent in 2017.

Cash flow concerns

The survey highlights the problem of insufficient cash flow, which it says is a significant problem and is the main challenge for 35 per cent of respondents. Cash flow and working capital challenges are most acute in Europe, the survey found, and it also noted a correlation between companies in higher growth bands and those that rank insufficient cash flow as a key risk to growth.

The report found that women-led companies are significantly affected by a lack of funding, with 18 per cent citing access to capital as a major barrier to growth, compared to 11 per cent of their male-led peers. However, 30 per cent of female-led companies are targeting growth rates of more than 15 per cent in the next 12 months, compared with just 5 per cent of male-led firms, even though more than half the women-led companies (52 per cent) say they have no access to external funding.

EY's Annette Kimmitt commented: “The funding gap matters because companies with high-growth potential that do not secure early investment can have a harder time scaling-up, and much of the time, these companies are led by women. Financial support for women-led businesses represents a major challenge and only a handful of organisations around the world are focused on supporting the growth of women-led businesses.”

The report also highlighted the following findings:

• middle-market company leaders expect higher revenues and to create more full-time jobs in 2018;
• they are implementing disruptive technologies to meet ambitious growth targets;
• they remain concerned that cash flow shortages, tightening credit or slowdown in global demand could pose significant risks in the longer term;
• there is a global tilt towards Asia-Pacific, with four out of 10 companies in China, Southeast Asia and Australia targeting double-digit growth, significantly outpacing the global average of 6 per cent;
• 73 per cent of respondents say they are already adopting or planning to adopt artificial intelligence (AI) within two years;
• but just 7 per cent plan to invest in technology to reduce the risk of cyberattacks in the upcoming year, and only 6 per cent see cyber threats as a challenge to growth.