The long-term strategies are in place for growth – now it’s about delivery

Stuart Burt and Richard Kelly unpack the government’s growth framework and reveal how business leaders are gearing up to deliver on its promise.

Reaching the first year of its term in office, the government provided greater clarity on its long-term strategy for growth. The Modern Industrial Strategy, a 10 Year Infrastructure Plan and the Comprehensive Spending Review all arrived within weeks of each other, along with other plans relating to areas such as trade and national security.

These establish the framework for the economy over the coming years. The Industrial Strategy identifies eight priority sectors including financial services, professional services, clean energy and advanced manufacturing, as well as cross-cutting priorities such as technology and AI adoption, the skills agenda and regional growth. The Spending Review holds out the prospect of increased investment in healthcare and defence in particular.

Business leaders are undoubtedly more focused on the day-to-day issues involved in running their own organisations than they are on ‘big picture’ national strategy – but nevertheless, having a clear framework and field of reference helps create stability and clarity over future direction, which are also important components of setting organisational strategy.

Private enterprise ambition

Stuart Burt

Deputy Head of External Affairs

KPMG in the UK

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To that extent, solid foundations for growth have been laid and a direction of travel for the next four years has been set. Now, it’s about delivery.

The latest Pulse research that KPMG has conducted amongst 1,500 business leaders and owners of private enterprises and family-owned businesses – the backbone of the UK economy – is therefore highly instructive at this crucial juncture.

The research finds that private business executives are upbeat about the future – 93% of them being confident about future prospects, with 61% ‘very’ confident. Most of them are planning to diversify into new products and services, expand into new markets, and invest for growth.

AI and Tech as a golden thread

One of the most striking findings is that, when asked about their investment priorities to facilitate this, the overwhelming priority is technology (AI, digital transformation, cyber security). Two-thirds (67%) of leaders cite technology, well ahead of workforce & skills in second place (36%).

This is a very clear signal to government about business intention, that is also backed up by our respondent base when asked about the forthcoming Autumn Budget: the key area they would like to see prioritised in the Budget is technology adoption (44% of respondents), ahead even of business profitability (35%). Government might therefore think about how policy can unlock adoption at the Budget.

In fiscally constrained times such as these, government has to prioritise, weighing politics against strategic economic objectives. Health (the NHS) and defence were winners at the Spending Review in this respect. Our research indicates that AI and other technology must be a golden thread in national investment policy too. This is recognised by government, which published a Digital and Technologies Sector Plan aiming to make the UK a leading destination for creating, scaling and investing in fast growing tech businesses, and to unlock the growth-driving potential of the industry. Significant investment will be needed to realise these ambitions, including co-investment with the private sector to maximise reach, impact and ROI; so these are key questions for policy development, and possibly an opportunity to introduce tech and AI focused, growth-driving interventions at the Budget.

Business concerns

The business leaders in our survey also signalled some clear concerns. With employment taxes and costs having risen in last year’s Autumn Budget, further tax rises were one of their most prominent worries. For private and family-owned businesses, taxes such as capital gains and inheritance tax are especially significant – and further increases in those would be particularly unwelcome. Employment costs are a significant area too, and leaders are likely to be waiting with some concern to see how the pending Employment Rights Bill shakes out, and what obligations and costs it may create.

Other key factors for long-term growth cited by our respondent base included the availability and cost of capital, and the performance of the capital markets and equity valuations. With nearly a third (29%) of private enterprise leaders saying that growth through M&A could be on the cards in the next five years, this indicates potential for value creation and enterprise.

Time to deliver

Standing back from our research, it is clear that business leaders have the appetite and determination to drive growth in the coming years. The government has laid out the framework and strategy to support this. Now, the time has come to turn these ambitions into reality – and public and private investment in technology is the most likely game changer of all.

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