Mid-Market Execs Anticipate Growth, Government Biggest Obstacle

April 30, 2013, 07:08 AM

Filed Under: Economic Commentary

Related: Deloitte, Middle Market

After sustained economic turmoil, mid-market executives have a stronger footing and are taking the necessary steps to make the sector an engine for growth in the next year. However, while optimistic about their own growth, according to findings in Deloitte's "Mid-market perspectives: 2013 report on America's economic engine," they have lower expectations for U.S. economic growth. The majority (57 percent) of respondents anticipate that over the next year the economy will grow less than two percent or not at all.

Mid-market executives that responded to the survey believe government budget challenges (69 percent), rising health care costs (60 percent) and high tax rates (53 percent) are the greatest obstacles to U.S. economic growth. These three issues were perceived to be greater obstacles to respondents this year than they were last year.

Interestingly, the housing market and European debt crisis were much less of a concern this year. Only 24 percent of respondents cited the housing market as an obstacle to growth, compared to 59 percent in 2012. Just 31 percent of respondents said the European debt crisis was an economic challenge, compared to 50 percent last year.

"This year's results highlight a potential economic inflection point, with most mid-market executives confident about their business prospects and taking the necessary steps to prepare for growth," said Tom McGee, national managing partner, Deloitte Growth Enterprise Services, Deloitte LLP. "In order for the economy to regain its momentum and allow businesses to fully prosper, the survey respondents want government to make meaningful progress on the issues that are creating uncertainty and hindering economic growth."

Companies are poised to grow...

Companies have taken significant actions to grow their revenue, boost productivity and increase their competitiveness. As such, mid-market executives are somewhat optimistic about their own businesses. In fact, 46 percent expect to increase revenue this year.

Forty-three percent of respondents ranked sales as the area where they will be devoting the most time in 2013, far higher than any other priorities.

When asked to name their top growth strategy for 2013, mid-market executives singled out organic growth in domestic markets (32 percent), the development of new products and services (16 percent) and increased productivity (14 percent).

Government roadblocks...

Respondents are most challenged by the gridlock happening in Congress. The survey showed that mid-market executives are concerned with a myriad of issues such as health care costs and budget challenges. Respondents had specific views on the current tax rates.

Survey respondents are concerned over the potential effects of tax law changes to their bottom line, with 60 percent believing that the costs of tax compliance will rise in the coming year compared to 48 percent who believed it would rise in 2012.

When it comes to tax reform, mid-market executives are most supportive of lower corporate tax rates (35 percent), simplified tax code (35 percent) and lower individual tax rates (26 percent).