Key trends and priorities of middle market business leaders
Australia’s middle market remains unphased by the pandemic and its repercussion: many are moving forward with more confidence than they had back in 2019. Pitcher Partners commissioned Forethought to examine the crucial economic segment.
Middle market businesses – both family-owned and otherwise – make up 25% of Australia’s total revenue, and contribute a fifth of the country’s net income from tax, with more to come. The researchers surveyed several businesses in this sector – termed “the engine room of the economy” – in February this year, and compared the findings with a similar study in October 2019.
Before the pandemic, few in the middle market were worried about global trends and cross-border undercurrents – which have little impact on these relatively compact businesses. Instead, they were concerned about shifts in consumer preferences, tech disruption, regulatory shifts, currency and interest rate fluctuations, and other ‘here and now’ factors.
Things have changed: the pandemic has been a global trend that no one can ignore. Nearly half of Australia’s middle market now place Covid-19 as the biggest impact factor, with regulation occupying more headspace while tech and currency take a back seat.
Interestingly, changes in consumer behaviour don’t make the top five concerns – despite seismic shifts over the last year. Trade tensions with China have now become more of a concern, given the interconnectedness of both economies.
Clear shifts are underway, although not necessarily for the worse. Around 20% of businesses did report a negative impact from Covid-19, with another 40% emerging as more or less neutral. That said, well over 40% actually saw their business performance improve during the pandemic.
Gavin Debono, Melbourne executive director at Pitcher Partners – a member of the global Baker Tilly network – explained this resilience: “While the pandemic presented many challenges, valuable opportunities also arose for people and businesses to pivot, address latent weaknesses and problems, and reach new markets.”
“Some of these businesses looked at pivoting markets all together, rather than focussing on how they could augment operations to serve existing customers within the limitations of Covid-19. For others, the restrictions and lockdowns prompted adaptation and the motivation to try new ways of doing things. These included fast-tracking initiatives and planned changes, and capitalising on opportunities emerging from the pandemic.”
Growing confidence
The size of a middle market business is an advantage here: many have the flexibility to change course with speed if necessary. And many have unwavering belief to go with it.
Back in 2019, middle market players rated their confidence in the current and future strength of their business higher than 7 on a scale of 10. Similar confidence prevailed about their own industry, although perceptions of wider economic conditions in Australia and around the world were a little worse off.
This year, confidence levels have actually grown – across current business strength, future business strength, industry performance, and the Australian economy as a whole. The only metric to get worse is the assessment of the global business economy, which can be pegged on Australia’s rapid containment of the infection and strong economic recovery so far.
“When research for this second edition of the report was gathered, Australia was moving on from the height of the Covid-19 pandemic,” explained Ashley Davison, Pitcher Partners’ Melbourne-based head of the private business and family advisory division.
“The economy was recovering quickly, and business and consumer confidence had reached all-time highs, despite the nation’s continued vulnerability through exposure to global events and intermittent domestic lockdowns in most states.”
The road ahead is about making the most of the status quo through strategic decision-making, scenario planning and adaptability. “The strength of Australia’s economy in 2021 has buoyed business confidence but business owners and leaders can still be better prepared for the uncertain future,” concluded Debono.
