Introduction
There is no doubt that the Covid-19 crisis has been challenging for many businesses. In fact, when we first thought about the 2020 Growth Index, after more than a decade of producing the report, it felt like perhaps this simply wasn’t the year to be talking about growth at all.
Yet our experience across the ECI portfolio has shown us how impressively businesses have navigated those challenges. This has been further evidenced in the businesses we surveyed, that whilst growth may have slowed, a large subset of growth companies have demonstrated resilience by adapting to extremely challenging market conditions.
Our research suggests that these businesses share some common characteristics, which we investigate in this report. Some questions we look at include:
- Why were some sectors able to absorb shocks better than others?
- Are international businesses more resilient, and where are they looking to expand?
- How has technological capability and investment facilitated growth?
- What are going to be the short-term and long-term obstacles to recovery?
It is suggested that it’s better to live in ‘uninteresting’ times, but I suspect – even with the rollout of a vaccine on the horizon – a period of calm and stability may still be a way off. As we move into 2021 and beyond, it is these resilient businesses that will be fundamental to shaping future growth. It is part of the privilege of our role that we can work with and invest in such companies, helping them to weather the storm and make the most of the opportunities that emerge even in choppy water.
Key findings: Growth
Before the onset of the pandemic, 88% of the 403 business leaders we surveyed were anticipating revenue growth for the coming year. This number inevitably took a dip post-March, but while confidence has dropped, it is encouraging to see that two-thirds of respondents were still projecting revenue growth despite the shock of the pandemic.
Confidence in access to finance has similarly reduced slightly from last year, with 60% of respondents suggesting it will be easy to access the finance that they need to grow versus 70% in 2019. We saw a similar dip after the Brexit vote in 2016 and it will be interesting to see if the recovery in confidence after this crisis will be as quick.
Key findings: Growth
Before the onset of the pandemic, 88% of the 403 business leaders we surveyed were anticipating revenue growth for the coming year. This number inevitably took a dip post-March, but while confidence has dropped, it is encouraging to see that two-thirds of respondents were still projecting revenue growth despite the shock of the pandemic.
Confidence in access to finance has similarly reduced slightly from last year, with 60% of respondents suggesting it will be easy to access the finance that they need to grow versus 70% in 2019. We saw a similar dip after the Brexit vote in 2016 and it will be interesting to see if the recovery in confidence after this crisis will be as quick.
Sector resilience
At ECI, resilience is one of the key attributes we look for when investing in companies, and this year has demonstrated the importance of resilient business models as companies face the unprecedented challenge of Covid-19.
Assessing business resilience is, of course, complicated and nuanced with different measures applied to different sectors. For the purposes of this report we have analysed the effect of Covid-19 on the revenue projections of the businesses surveyed, using this as an indicator of resilience. Those businesses who had predicted 2020 growth which showed little or no negative impact on revenue projections were judged to be resilient with those predicting a reduction in revenues due the pandemic falling into the less resilient camp.
76% of respondents fall into the resilient category, showcasing the ongoing importance to the UK economy and their leading role in the recovery from Covid-19.
TMT businesses have proven the most resilient, with many operating subscription-based or high recurring revenue models that would enable them to service clients during the crisis and have visibility of future revenues. Significantly TMT businesses were the most likely to be international, and of those operating overseas, over half had a North American presence. A presence in the US, where a country-wide lockdown was not implemented, appears to be a strong contributor to continued growth during 2020.
Business services is a far-reaching sector, so some pockets will have seen more growth than others, but overall it has performed well during 2020 with 77% of respondents in the resilient category. Large segments of the market are non-discretionary services, and the sector has been moving towards a managed services model for a while, which would enable it to better weather the storm.
72% of respondents in the consumer sector fall into the resilient bucket which might seem surprising with so many businesses in the sector bearing the brunt of lockdown restrictions. However, there are sizeable segments of the consumer space that are more resilient in the face of macro-trends such as grocery, or products aimed at children or pets. Whilst news coverage of the consumer sector has been overwhelmingly gloomy, it is encouraging to see that so many of the respondents to this survey believe in their future growth.
Sector resilience
At ECI, resilience is one of the key attributes we look for when investing in companies, and this year has demonstrated the importance of resilient business models as companies face the unprecedented challenge of Covid-19.
Assessing business resilience is, of course, complicated and nuanced with different measures applied to different sectors. For the purposes of this report we have analysed the effect of Covid-19 on the revenue projections of the businesses surveyed, using this as an indicator of resilience. Those businesses who had predicted 2020 growth which showed little or no negative impact on revenue projections were judged to be resilient with those predicting a reduction in revenues due the pandemic falling into the less resilient camp.
76% of respondents fall into the resilient category, showcasing the ongoing importance to the UK economy and their leading role in the recovery from Covid-19.
TMT businesses have proven the most resilient, with many operating subscription-based or high recurring revenue models that would enable them to service clients during the crisis and have visibility of future revenues. Significantly TMT businesses were the most likely to be international, and of those operating overseas, over half had a North American presence. A presence in the US, where a country-wide lockdown was not implemented, appears to be a strong contributor to continued growth during 2020.
Business services is a far-reaching sector, so some pockets will have seen more growth than others, but overall it has performed well during 2020 with 77% of respondents in the resilient category. Large segments of the market are non-discretionary services, and the sector has been moving towards a managed services model for a while, which would enable it to better weather the storm.
72% of respondents in the consumer sector fall into the resilient bucket which might seem surprising with so many businesses in the sector bearing the brunt of lockdown restrictions. However, there are sizeable segments of the consumer space that are more resilient in the face of macro-trends such as grocery, or products aimed at children or pets. Whilst news coverage of the consumer sector has been overwhelmingly gloomy, it is encouraging to see that so many of the respondents to this survey believe in their future growth.
Case studies
Travel Chapter
Travel Chapter is one of the leading online vacation rental platforms in the UK. While the initial lockdown created huge uncertainty, it also brought opportunity as holidaymakers turned to staycations. Domestic travel has always been a resilient sector - as proven again in 2020 - but we also expect to see high levels of future growth now the UK has reacquainted itself with the joy of holidaying at home.
Content+Cloud
Content+Cloud is a leading technology services business and Managed Services Provider. The business was able to shift to remote working rapidly and continue to support its clients to transform through tech. They have also been helping clients navigate the business challenges presented by Covid-19, such as remote working, cyber threats, communication and collaboration, governance, migrating legacy systems to the cloud and app modernisation.
Investis Digital
Investis Digital is a global powerhouse in digital communications and marketing, providing clients with the technology and “always on” service that means clients know their digital footprint and brand reputation is secure and protected 24/7. As well as existing clients therefore seeing it as an essential service, they have also seen a significant number of new client wins during the pandemic. We speak to Global CEO, Don Scales, about why that is in our latest podcast episode:
Case studies
Travel Chapter
Travel Chapter is one of the leading online vacation rental platforms in the UK. While the initial lockdown created huge uncertainty, it also brought opportunity as holidaymakers turned to staycations. Domestic travel has always been a resilient sector - as proven again in 2020 - but we also expect to see high levels of future growth now the UK has reacquainted itself with the joy of holidaying at home.
Content+Cloud
Content+Cloud is a leading technology services business and Managed Services Provider. The business was able to shift to remote working rapidly and continue to support its clients to transform through tech. They have also been helping clients navigate the business challenges presented by Covid-19, such as remote working, cyber threats, communication and collaboration, governance, migrating legacy systems to the cloud and app modernisation.
Investis Digital
Investis Digital is a global powerhouse in digital communications and marketing, providing clients with the technology and “always on” service that means clients know their digital footprint and brand reputation is secure and protected 24/7. As well as existing clients therefore seeing it as an essential service, they have also seen a significant number of new client wins during the pandemic. We speak to Global CEO, Don Scales, about why that is in our latest podcast episode:
International presence
International markets are key for the growth businesses surveyed, with 84% currently operating internationally.
Perhaps unsurprisingly, respondents that weren’t internationally diversified did struggle more during the pandemic, with those projecting a decline in revenue post-March three times as likely to only operate domestically.
This might be one reason international growth is clearly a key focus for the next year, with 84% of companies looking to grow overseas revenues in the next twelve months.
Moneypenny
Joanna Swash, CEO of Moneypenny, the world-leading provider of outsourced business solutions, shares her perspective on how they managed to acquire and integrate a US-based business in 2020, and the benefits of expanding into different markets.
Obstacles to growth
In the short term the most significant obstacles for businesses are clearly pandemic related, with changing guidance the greatest concern. This is certainly front of mind for businesses in the North West, which has been under fairly stringent restrictions since the summer, with 44% naming pandemic guidance as one of their top short-term business concerns.
Longer term concerns can also be linked to the impact of the pandemic; a global economic downturn is the most significant long-term concern (39%) with parts of the economy effectively put into hibernation for much of 2020. International political uncertainty is also a primary concern (29%) although full disclosure – the respondents were surveyed ahead of the US election!
Skills shortages are anticipated to be another obstacle to growth, particularly as the digital economy expands. This is something we see regionally with Northern businesses 50% more likely to see skills shortages as a top concern over the next 12 months than their compatriots in the south.
Another key concern is cybersecurity, and given that cyberattacks cost businesses £27 billion every year, investing in cybersecurity is a vital part of building a resilient business.
It is encouraging, if not slightly surprising, that fewer than a quarter of respondents saw Brexit as a top threat to their growth. On a positive note this might mean businesses are prepared for the changes ahead. However, given how little information has been provided to businesses including even basic rules around declaring trade and duty, it is more likely that it has been superseded by prevailing ‘known’ threats, such as the pandemic and cyberattacks.
Investment in technology
98% of respondents surveyed have invested in tech over the past 12 months, with cybersecurity, automation and cloud migration topping the list of investment areas.
Businesses will have found that this investment in tech paid dividends in 2020, with employees suddenly needing to access their work easily and securely from home.
Not all sectors have invested equally across tech, however, with over half of TMT firms focused on cybersecurity to protect the platforms on which they operate, while financial services firms are the biggest adopters of AI/machine learning (45%) as many adopt tech as a key differentiator to become more efficient.
Across sectors the fact that 36% of respondents have invested in AI or machine learning is a good indication of the growing importance of once ‘cutting-edge’ technologies and their role in creating fast-growth scalable businesses.
We chat to Mark Eastham, CEO of Avantia, the technology-enabled insurance provider behind HomeProtect.
Q: How has Avantia invested in tech over the last few years?
The business has undergone a large tech transformation over the last few years. From investment in the underlying machine learning platform to our in-house data science team, we are now fundamentally a technology business that focuses on non-standard home insurance rather than a home insurance business. As well as creating a market leading tech stack that can ingest diverse data at scale – over 10 billion data points over the last decade and growing – we can mine our data lake of information at speed to deliver an executable quote for over 98% of the price comparison market.
Q: How has that investment helped your business?
It has enabled significant growth, allowing us to win in the fastest growing part of the home insurance market. There is also stability and security to our proprietary platform. We have removed key person risk and replaced legacy systems and operations. Beyond that, it has helped us become that much more scalable – we can currently return a quote for 98% of the online home insurance market in under a second, and the modular stack means that we can easily plug into new data sources and technologies as new opportunities emerge. For customers, it means that they can do things remotely at speed. People always need insurance, so it’s a fairly resilient market, but businesses that can leverage tech like we do are able to offer a better customer experience, retain and grow market share through winning new customers.
Q: How do you see the use of data transforming Avantia in the future?
While the speed of change in the insurance industry is quite slow, once you have developed such an advanced machine learning platform, it creates a great roadmap for growth. Firstly, the nature of the model will be one that optimises along your entire value chain, improving the value to the customer and to the provider. For example, through better risk modelling, we have halved the frequency of accidental damage claims. Or it might be better decisioning functionality - for example we’ve used our platform to increase the ROI from our google ad spend by 40% and increase price comparison site conversion by 12%. Furthermore, once you have your model, it also opens up opportunities in the wider market, bringing in more potential customers. It really is winning on two fronts, as we can use tech to continue to improve the underlying business and deliver on strong growth opportunities.
Flexible and remote working
There is no doubt that Covid-19 has changed the future of work. Almost half of businesses are expecting to increase working from home in the future, and as changes to working practices accelerated in a matter of months, many people find it hard to imagine a return to normality.
Yet, reports of the death of the office have been greatly exaggerated. Only 28% predict a shift to permanent remote working, and less than a third plan to either move or downsize their premises. It is far more likely that companies will look to a hybrid solution in the future as they look to benefit from both the culture and collaboration of the office and the flexibility of working from home.
Content+Cloud
Thea Fineren, Chief People Officer at Content+Cloud, one of the UK’s leading technology services, solutions and support providers, chats through how the business responded to the need for remote working, what it means for the future, and the democratisation of the employee experience.
A year like no other
We first launched this report during a global recession in 2009, so we have now been tracking growth for more than a decade and through two significant cycles - both the Global Financial Crisis of 2008-2009 and now the Covid-19 crisis of 2020/21. We’ve seen not only how impressively growth businesses navigate headwinds, but how they can bounce back stronger than ever.
Few would have predicted the far-reaching impact of the pandemic, and it isn’t clear exactly what normal will look like once it returns. But one thing is sure: there will be real value in companies that can show that they treated their customers and people fairly, faced adversity head on, and demonstrated both growth and resilience in a year of such enormous pressure.
ECI surveyed 403 leaders from high-growth businesses in Autumn 2020 across technology, media and telecoms (TMT), business services, financial services, healthcare and consumer sectors. Respondents were surveyed about the impact of Covid-19 on their businesses, the future of work and investment and growth plans. Businesses had to have demonstrated business growth for 2019 to take part in the survey.
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