· News

Middle market companies confident about hiring

Middle market businesses worldwide are showing signs of optimism as they prioritise AI and attracting diverse talent, research from EY has found

Middle market companies across the globe are significantly more optimistic about business conditions and opportunities than last year, according to the findings of the annual EY Growth Barometer.

Of the companies surveyed, 39% plan to hire full-time talent in the next 12 months, a significant increase from 13% in 2017. Only 1% of respondents are seeking to reduce their staff, down from 9% in 2017. Attracting talent with the right skills topped the list of growth accelerators – ahead of process efficiencies and new technology.

Artificial intelligence (AI) and machine learning were also shown to be priorities, with attitudes towards new technology changing rapidly since last year. In 2017 74% of global middle market CEOs said they would never adopt robotic process automation, yet just 12 months later 73% of respondents say they are already adopting or planning to adopt AI within two years, according to the research.

Overall the findings suggested that growth prospects for all major economies are improving in 2018, with International Monetary Fund forecasts currently at 3.9% for the year.

The annual survey revealed that global confidence in business growth has strengthened in the last 12 months, with 60% of companies targeting growth between 6% and 9% and no respondents looking at decline, compared to 5% in 2017.

The findings suggested that companies are recognising the need to become more agile. However, in their eagerness to adopt revolutionary new technologies and incorporate AI into their businesses, the report warned that company leaders are in danger of under-estimating the scale of cyber threats. For example, just 7% plan on investing in technology to reduce the risk of cyber attacks in the upcoming year, and only 6% see cyber threats as a challenge to growth.

Annette Kimmitt, EY global growth markets leader, said that middle market leaders are "getting ahead of change" for the first time.

“We are seeing a rare synchronisation of growth across all major global economies that is boosting executive confidence, particularly led by the Asia-Pacific region. For the first time middle market company leaders are getting ahead of change and shaping their businesses through investment, expansion and prioritisation to ride the wave of opportunity," she said.

However, concerns over cash flow and funding remain. While access to credit continues to be an issue, company leaders cited insufficient cash flow as a more significant challenge, with more than one in three (35%) ranking it first. The lack of working capital trumps both risks of technological disruption and lack of skilled talent. The problem is most acute in Europe where it is ranked first by 37% of respondents, led by French CEOs half of whom (50%) place it in pole position.

Meanwhile, female-led companies are significantly affected by a lack of funding, with 18% citing access to capital as a major barrier to growth, compared to 11% of their male-led peers. Furthermore, one in five female-led companies have no funding plans, compared to just 3% of male-led peers.

Kimmitt said that only a small proportion of global organisations are working to expand businesses led by women.

“The funding gap matters because companies with high growth potential that fail to 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," she said.

EY commissioned Euromoney Institutional Investor Thought Leadership to undertake an online survey of 2,766 C-suite executives (60% CEOs, founders or managing directors) in companies from 21 countries and with annual revenues of $1 million to $3 billion.