THE UK’s largest companies are preparing to invest up to £200bn in the next two years, signalling an increase in corporate risk appetite in response to the upturn in economic growth.
A survey by Deloitte found that 80% of companies with revenues in excess of £1bn intend to invest this year, with close to 70% earmarking at least £250m of investments to drive growth.
Deloitte’s report, which follows an upwards revision to expected business investment by the Office of Budget Responsibility, estimates that Britain’s biggest businesses will invest up to £90bn in 2014, with an increase in 2015 to £107bn.
However, the resurgence of business investment will be phased as some companies use cash for other purposes, with over half intending to return cash to shareholders and 11% focusing on strengthening their balance sheets.
“A well-balanced recovery requires a significant rise in corporate investment and a shift away from consumer-led growth,” said David Sproul, chief executive of Deloitte UK.
Of the 132 executives responding to the survey, 56% expressed a preference for pursuing organic over inorganic growth, though the strategy shifts when investing in high growth markets with 66% of companies favouring M&A activity as a means to establishing a presence or scaling the business in a new market.
Despite some uncertainties about emerging markets, UK companies still see strong opportunities. China and the wider Asia-Pacific region are most attractive for large businesses, with 73% and 66% forecasting growth in those markets respectively.
“Britain has some catching up to do when it comes to global exports. We punch below our weight at present in certain key areas, so it is good that businesses acknowledge that growing revenues internationally is a necessity for the continued success of their own company and the UK’s prosperity more broadly,” Sproul said.