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UK mid-caps expect growth, push for more EU devolution

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Four out of ten UK mid-caps feel the equities markets is open for business, according to an Edison Investment Research survey of executive board directors. More than 200 mid-cap UK listed companies questioned revealed that, despite fragility remaining in the domestic outlook, there is growing confidence about the outlook for their own businesses compared to six months ago. Most are looking to making an acquisition over the coming year.

Nearly 40 per cent of mid-market companies expect to carry out an equity fund-raising round, double those expressing such confidence six months ago. Five per cent are considering a retail bond to raise funds.

Scepticism for euro zone remains

The prospects in mainland Europe have picked up over the past six months, despite most SMEs still pencilling in no growth or a fall in revenue from euro zone countries. However, more are expecting growth.

Assuming the UK continues to remain outside the Euro, 42 per cent of companies want the country to become more devolved from the EU, compared with 39 per cent who want the status quo to remain and 19 per cent who want more integration

A majority agrees with the government’s economic approach to debt control while a reduced number – but still a firm majority of 64 per cent – think it is taking overall the right economic approach to growth.

As for the Scotland debate, 72 per cent see no impact on their business by Scotland leaving the UK but 17 per cent of businesses foresee a significant decrease in their sales or profits.

Asia is the growth engine

Expectations for growth in Asia have increased sharply over the past six months, amid global stagnation. It continues to be the leading region for optimism ahead of the US, where confidence has also grown with growth expected by 40 per cent of UK mid-caps.

Some 52 per cent still see the US fiscal cliff as a serious or very serious concern to their business.

Among those UK mid-caps who have an export market, 60 per cent expect exports beyond the UK (by revenue or relevant market share) to improve over the coming year. Respondents are not so happy with the UK government’s efforts to promote UK businesses in India, China and other emerging markets, though. Some 44 per cent believe the efforts are worse than those of the governments of France and Germany.

Neil Shah, global head of research at Edison Investment Research commented: “The UK government will be relieved that it seems to have the overall backing of UK midcaps for its recent moves to stimulate domestic economic growth. With UK plc however more keenly aware than ever of their growth prospects being linked to Asia, it is noteworthy how deep the satisfaction remains among companies who believe the UK government lags behind its counterparts in France and Germany for promoting British interests in key Chinese and Indian economies.

“It should come as little surprise then that with UK listed midcaps’ business focus increasingly pulled eastwards and with a strong pull to the US still in place, that four out of ten companies want greater UK devolution from the Eurozone, more than twice the number who want closer Eurozone integration. Concerns about Britain’s relationship with the EU will likely dominate serious business planning over any more domestic concerns about Scottish devolution.”

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