Other Key Findings:
Middle market companies continue to grow
Revenue continues to grow with 63% of firms saying that gross revenue grew during the past 12 months. That’s down slightly from the fourth quarter of 2012. The mean revenue growth fell to 5.8%, with most of the decline coming from the largest middle market companies. Companies also expect performance in the coming year to be better with 64% projecting revenue to grow, although at a slightly lower average of 4.9% than the 5.2% average at the end of the fourth quarter.
Confidence is returning
Companies slowly are becoming more confident in the global and U.S. economies, while most remain confident in their local economies. More middle market companies said they were somewhat confident in the global economy (34% up from 29% a year earlier). Those “somewhat confident” in the U.S. economy grew to 43%. Those “somewhat confident” in the local economy remained at 46%. Middle market companies also are increasingly confident that the global and U.S. economies will grow in the next 12 months with 38% expecting growth in the global economy and 58% expecting the U.S. economy to expand.
Investment is predicted to increase
Since the second quarter of 2012, the number of managers who plan to invest extra cash has increased with 63% now looking for opportunities to invest. That’s up from 50% in the second quarter. The number of companies planning to hold onto cash has steadily decreased in the same period to 37% from 49%.
Employment growth is forecasted to continue
More than a third of Middle Market companies plan to add employees in the next year. The mean growth in number of employees is expected to be 2.1%, a slight decline from 2.3% in the fourth quarter, but still evidence that companies will continue to hire workers. Growth is similar across the middle market with all industry sectors anticipating at least marginal employment increases during the year.
Challenges include healthcare, taxes and the skills gap
The middle market continues to cite the cost of healthcare as the main challenge to their businesses; this remains unchanged as the leading issue for these companies over the past 12 months. Companies also say the cost of doing business, the ability to continue to grow revenue, and maintaining margins will remain challenging in 2013. Uncertainty over higher taxes and skills gap issues are also holding down growth rates: Companies say higher taxes would affect their businesses. Of those 71% that felt higher taxes would affect business, many would adopt painful mitigating strategies with 30% likely to institute a hiring freeze. Also, 30% of respondents would decrease investment, while 29% would reduce employee benefits and 20% would lay off employees. Firms also were concerned about their abilities to maintain margins and the rising cost of doing business. This is unchanged from much of the year’s responses.