Gresham Monitor No. 1

Three-quarters of the UK's middle market companies are optimistic about their business prospects for the next 12 months - despite feeling misunderstood by the Government, over- burdened by regulation, squeezed by exchange rates and threatened by competition.

This is just one of the findings contained in the Gresham Monitor, the first in a regular survey of middle market companies published today by Gresham Trust, the UK private equity house which is part of the Zurich Financial Services Group. The Monitor also highlights regional differences (see notes to editors - appendix) and variations between companies in the manufacturing and services sectors.

The survey aims to identify the challenges and opportunities affecting the current and future performance of this key element of the UK economy. It also seeks board directors' views on major economic and political issues, explores their involvement in international markets and tests their reactions to topical subjects such as e-commerce.

Highlights:

Three-quarters are optimistic about business prospects in the next 12 months.
Over half plan further internal investment in the year ahead.
Nearly two-thirds feel that Government does not understand their needs and would trade off Government grants and incentives for less regulation.
Around half the companies rated government incentives including capital gains tax incentives and share options schemes as having a beneficial impact on their businesses.
62 percent see the inability to adapt to the internet as a threat but only just over 10 percent feel threatened by the new generation of internet companies or believe their competitors are adapting better.
Skill shortages pose one of the biggest obstacles to growth for both manufacturing and service companies.
International trade is significant with 70 percent importing and / or exporting butc ompanies are ambivalent about the euro - half favour the UK adopting the single currency while a third are opposed.

Paul Marson-Smith, managing director of Gresham Trust, said today: "These findings illustrate the vitality, inventiveness and entrepreneurial spirit of this well-established force in the UK's economy. Now that we have a benchmark of responses, it will be interesting to see how performance and attitudes change in future Monitors."

The Monitor's findings highlight variations in the responses of companies in different regions. For example, a quarter of companies in the South cite the strong pound as a negative factor for their business compared to more than 60 per cent of their counterparts in the Midlands and North. And, while around half the companies in the North and the South had increased staffing levels in the past 12 months, only a quarter of Midlands firms had added to their roster.

Similarly, manufacturing and service sector companies differ in their responses to some issues. For example, two-thirds of service companies reported higher sales and over half better profits in the last 12 months. Manufacturing companies were less buoyant with 44 per cent reporting higher turnover and 41 per cent improved profits. Seventy per cent of manufacturers say the strong pound is hurting their business against just 25 per cent of service firms. However, three- quarters of the service firms are exporters, only 10 per cent or so fewer than manufacturers.