Increased demand for private equity in UK

New research suggests UK companies are getting more bullish – and private equity is a likely beneficiary.

57 percent of fast-growing UK companies would look to private equity in order to fund growth, according to new research from UK mid-market buyout firm ECI Partners. That’s up from 40 percent last year, and represents the highest level recorded since the survey began four years ago.

ECI’s Growth Survey 2013 – which polled 650 high-growth UK companies – found that businesses in the TMT (telecoms, media and technology) and business services sectors were particularly likely to choose private equity, at 76 percent and 51 percent of companies polled respectively.    

There also appears to be a marked rise in confidence among growth businesses when it comes to finding funding. Fifty-four percent of companies polled said they expected it to be ‘easy’ or ‘very easy’ to obtain growth finance over the next 12 months, up from 36 percent in 2012. Fifty-eight percent said they were likely to use bank debt to fund their growth, which is largely consistent with last year’s 57 percent. 41 percent said they were likely to look to public markets – a dramatic rise from a mere 9 percent that said they would consider this in 2012. 

This increased confidence was mirrored in respondents’ attitude towards the economy: 73 percent of companies said they would look to fund growth initiatives over the next 12 months. New product markets are expected to be the biggest driver of growth, according to 38 percent of respondents, while 36 percent were planning international expansion. Thirty-one percent said growth would be driven by investment in staff. 

The TMT sector proved to be by far the most bullish in terms of growth potential, with 38 percent of companies expecting to increase turnover by over 20 percent this year and 60 percent expecting funding to be easy to come by. Sixty-two percent of companies said they were likely to access the public markets, 73 percent likely to use bank debt, and 94 percent likely to fund growth through internal cash flow, with 65 percent turning to other private investors.