The Interpreneur survey: Understanding mid-market business trends in the UK
A backdrop of recession, supply chain issues and austerity has made for a difficult 18 months for the UK. However, in the first quarter of 2024, the UK showed signs of recovery, with 0.6% growth, even with interest rates steady at a 10-year high. Perhaps these very early green shoots are due to a more optimistic economic outlook for key trading partners, the US, with modest growth and slowing inflation, making international expansion a consideration for UK interpreneurs.
To understand how this landscape is affecting mid-market businesses, we recently surveyed 1,400 C-suite business leaders in 14 countries, in private sector companies earning up to £300m a year that have expanded internationally. We call these CEOs ‘interpreneurs’.
We have analysed the UK data against the global outlook to get a better understanding of what drives UK interpreneurs.
Global business trends: Do British business leaders believe more business will expand overseas in the next 12 months?
| Significantly increase | 25% |
| Moderately increase | 53% |
| No change | 16% |
| Moderately decrease | 6% |
UK in the top 3 least optimistic countries surveyed regarding overseas business expansion
78% of respondents said they expect there will be an increase in businesses expanding overseas in the next 12 months.
- 25% think there will be a significant increase
- 53% think it will be a moderate increase
Only 6% think there will be a decrease.
Which markets do UK businesses prefer to expand into?
| Which, if any, of the following regions or countries would you / your business considering expanding to? (Select all that apply) | |
|---|---|
| Western Europe (e.g. Germany, France, UK, etc) | 52% |
| Eastern Europe (e.g. Poland, Hungary, Romania, etc) | 41% |
| North America (e.g. USA, Canada, Mexico, etc) | 40% |
| North Asia (e.g. China, Japan, Korea, etc) | 23% |
| Middle East | 19% |
| South Asia (e.g. Thailand, Vietnam, Singapore, etc) | 18% |
| South America (e.g. Brazil, Chile, Colombia, etc) | 14% |
| Africa | 12% |
| Australia/New Zealand | 10% |
| Other | 1% |
Western Europe takes number one spot for British interpreneurs
Over half (52%) of respondents said their business would consider expanding to Western Europe.
- 41% said their business would consider expanding to Eastern Europe. This was the second highest of all responding countries, just behind Germany.
- 48% said their business would consider expanding to North America.
Only 10% would consider expanding to Australia/ New Zealand.
What makes a country more attractive to UK businesses looking to expand globally?
| Which, if any, of the following would make a country most attractive for international expansion? [Select up to five] | |
|---|---|
| Skills and talent (e.g. availability of local talent and openness to skilled talent immigration) | 43% |
| Government support (e.g. grants, incubators, and mentorship programs) | 41% |
| Favorable trade agreements (e.g. free trade zones, diplomatic partnerships, or preferential tariff treatment) | 36% |
| Tech infrastructure and digitalisation | 33% |
| Favorable tax policies | 31% |
| Future economic growth prospects | 30% |
| Transparent regulatory environment | 28% |
| Geographic proximity to existing operations | 27% |
| Alignment with long-term growth strategy (e.g. regional investment into specific industries) | 23% |
| Cultural and language similarity to existing operations | 22% |
| Not sure | 2% |
Skills and talent primary attractors for UK business leaders
43% of respondents said that one of the most attractive traits for international expansion is skills and talent (e.g. availability of local talent and openness to skilled talent immigration)
This was followed by:
- Government support (e.g. grants, incubators, and mentorship programs) at 41%. This was only scored as number one by the UAE.
- Favourable trade agreements (e.g. free trade zones, diplomatic partnerships, or preferential tariff treatment) at 36%
- Tech infrastructure and digitalisation at 33%
What motivates UK interpreneurs to expand internationally?
| What were the primary motivators for your business expanding internationally? [Select up to three] | |
|---|---|
| Market growth opportunities: Accessing new customer segments | 46% |
| Competitive advantage: Gaining a foothold in new markets before rivals | 32% |
| Diversification: Reducing dependence on any single market | 31% |
| Access to digital technologies and innovation | 26% |
| Talent acquisition: Recruiting skilled employees from a broader pool | 26% |
| Resourcing: Manufacturing, supply chain or other resourcing opportunities | 24% |
| Cost optimization: Leveraging lower production/resource costs | 20% |
| Existing personal network abroad | 19% |
| Government incentives in host country (including regulatory framework and tax incentives) | 15% |
| Not sure | 1% |
Almost half (46%) of respondents said their business was primarily motivated to expand internationally by market growth opportunities. 32% were motivated by the possibility of a competitive advantage and the ability to gain a foothold in new markets before rivals. 31% said that diversification, and reducing dependence on any single market was a primary motivator.
What are the biggest international expansion challenges in 2024 according to UK interpreneurs?
| Top 3 biggest challenges during international expansion process | |
|---|---|
| Understanding complex compliance requirements (e.g. ESG and legal compliance) | 42% |
| Adapting logistics and supply chain issues (e.g. managing international shipping, distribution, and communication) | 39% |
| Managing economic volatility (e.g. currency fluctuations, inflation and or low growth) | 39% |
Compliance biggest challenge to doing business internationally say UK CEOs
42% said that one of the biggest challenges faced by businesses during international expansion was understanding complex compliance requirements (e.g. ESG and legal compliance)
- Other significant challenges were:
- Adapting logistics and supply chain issues (e.g. managing international shipping, distribution, and communication) – 39%
- Managing economic volatility (e.g. currency fluctuations, inflation and or low growth) – 39%
- Finding the right local partners (e.g. building reliable and trustworthy relationships) -34%
Risk: What do UK CEOs think are the biggest risks to global business expansion in 2024?
How much of a risk do the following pose to your business’s international expansion or planned international expansion?
| Escalating geopolitical tensions and instability | Disruptive risk | 9% |
| Significant risk | 19% | |
| Moderate risk | 36% | |
| Minimal risk | 21% | |
| No risk | 13% | |
| Not Sure / Not applicable | 2% | |
| Economic slowdown or recession | Disruptive risk | 10% |
| Significant risk | 24% | |
| Moderate risk | 33% | |
| Minimal risk | 26% | |
| No risk | 6% | |
| Not Sure / Not applicable | 1% | |
| Financial market and foreign exchange volatility | Disruptive risk | 6% |
| Significant risk | 17% | |
| Moderate risk | 41% | |
| Minimal risk | 25% | |
| No risk | 7% | |
| Not Sure / Not applicable | 4% | |
| Cybersecurity threats and data breaches | Disruptive risk | 10% |
| Significant risk | 23% | |
| Moderate risk | 28% | |
| Minimal risk | 23% | |
| No risk | 10% | |
| Not Sure / Not applicable | 6% | |
| Talent shortages and skilled labour gaps | Disruptive risk | 10% |
| Significant risk | 20% | |
| Moderate risk | 30% | |
| Minimal risk | 25% | |
| No risk | 14% | |
| Not Sure / Not applicable | 1% | |
| Technological disruption from AI and new technologies | Disruptive risk | 9% |
| Significant risk | 22% | |
| Moderate risk | 28% | |
| Minimal risk | 31% | |
| No risk | 7% | |
| Not Sure / Not applicable | 3% | |
| Environmental disruption and extreme weather | Disruptive risk | 10% |
| Significant risk | 19% | |
| Moderate risk | 34% | |
| Minimal risk | 25% | |
| No risk | 11% | |
| Not Sure / Not applicable | 1% |
Economic slowdown biggest risk to UK businesses expanding internationally
34% of respondents felt economic slowdown or recession poses a disruptive or significant risk to their business’s international expansion or planned expansion.
- 10% said this was a disruptive risk, and 24% said it was a significant risk.
- 32% felt this was a minimal risk or no risk at all.
33% felt that cybersecurity threats and data breaches pose a disruptive or significant risk and an additional 31% felt this risk from technological disruption from AI and new technologies.
Private Equity vs Venture Capital: Which is the preferred international expansion funding source for UK businesses?
| Employee equity schemes | 35% |
| Private investors (including HNWIs) | 35% |
| Government funding | 34% |
| Capital markets (i.e. IPO) | 33% |
| Venture capital or private equity | 27% |
| Management buyout | 26% |
| Crowdfunding | 23% |
| Debt | 12% |
| None of the above | 7% |
Employer equity schemes number one choice for financing UK business expansion internationally
UK interpreneurs were one of the least likely countries to consider private investors and venture capital. This was due to the fairly even spread across all options, outlining the choice of funding UK interpreneurs can access to help their businesses to grow internationally.
35% of respondents said that their business is likely to consider or have used private investors to grow internationally.
35% reported using/ considering using employee equity schemes for international expansion.
Other common sources of growth capital were:
- Government funding (34%)
- Capital markets (i.e. IPO) (33%)
- Venture capital or private equity ( 27%)
Understanding global tax: Is the C-suite ready for a global tax threshold?
| How confident are you in your understanding of the global international tax rules (for example transfer pricing, VAT) that govern multinational businesses? | |
|---|---|
| Extremely confident: I have a deep understanding of global tax rules and their implications for multinational businesses | 34% |
| Confident: I have a good grasp of key principles and can navigate common scenarios, but may seek external guidance for complex situations | 61% |
| Not very confident: My understanding of global tax rules is limited, and I rely heavily on external advisors for guidance and analysis | 4% |
| Not confident at all: I lack knowledge of international tax regulations and rely entirely on external advisors for their advice, guidance, and/or decision-making | 1% |
Confidence high for UK businesses in understanding global taxation
- 34% of respondent are extremely confident that they understand the global international tax rules that govern multinational businesses –they have a deep understanding of global tax rules and their implications for multinational businesses.
- 61% are confident – they have a good grasp of key principles and can navigate common scenarios but may seek external guidance for complex situations.
- Only 4% are not very confident, with limited understanding and rely heavily on external advisors for guidance and analysis
- 1% are not confident at all, relying entirely on external advisors for their advice, guidance, and/or decision-making
The growing importance of ESG for UK investors and interpreneurs
| We do / would prioritise ESG | 26% |
| We do / would value ESG but it wouldn’t be our top priority | 40% |
| We do / would consider ESG practices but if only if they don’t interfere with our other priorities | 27% |
| We don’t / wouldn’t strongly consider ESG practices | 2% |
| We don’t / wouldn’t consider ESG practices at all | 2% |
| Not sure | 3% |
UK considers ESG, but trails behind China when placing it as a priority
The majority (93%) do/would consider ESG practices when considering countries or regions to expand into:
- 26% of respondents said that their business does or would prioritise ESG. The highest score was China at 64%, more than 3x a more positive response than the UK.
- 40% do/would value it, but it wouldn’t be a priority.
- 27% do/would if it didn’t interfere with their other priorities.
- Only 4% don’t / wouldn’t consider ESG practices.
The benefits of AI in international business operations
| To what extent do you agree or disagree with the following statement: ‘I feel prepared to harness the benefits of AI in global business operations within the next two years? | |
|---|---|
| Strongly agree | 37% |
| Somewhat agree | 54% |
| Neither agree nor disagree | 7% |
| Somewhat disagree | 2% |
UK businesses confident about the use of AI in global operations
Most respondents (91%) agree that they feel prepared to harness the benefits of AI in global business operations in the next 2 years.
- 27% strongly agree.
- 54% somewhat agree
- Only 2% of respondents disagreed with this statement
