FD Index 2024: Volumes versus prices – how businesses expect to grow
UK businesses plan to follow the tried-and-tested strategy of selling more, while putting up prices, to drive their growth over the next 12 months. Nevertheless, a survey of finance directors by Price Bailey highlights that some industries are relying far more heavily on sales volumes rather than price increases to grow their revenues. The same principle applies to certain regions.
The industry perspective
Overall, 78% of UK finance directors expect their company’s revenues to grow over the next 12 months. The survey also offered some insights into how this growth will be achieved. Around two-thirds (67%) of finance directors expect their business to increase its volume of products and services sold. A similar amount (63%) anticipate that their business will raise its prices.
In other words, most finance directors expect to have to work their businesses harder to get revenue growth rather than capture margin through pricing.
In certain industries, however, there are some obvious disparities between finance directors’ growth expectations and how they expect their business to hit its revenue targets. This suggests that price elasticity continues to be significantly uneven by industry.
For example, in the case of architecture, engineering and building, 34% more finance directors expect to see an increase in revenue compared with those forecasting increased prices for goods and services. Furthermore, 17% more finance directors anticipate higher revenues compared with those expecting their business to sell a higher volume of goods or services.
A similar trend can be seen in education, arts and culture, and travel and transport. Finance directors in all these industries are significantly more likely to forecast greater revenue than to predict that their business will raise prices or sell higher volumes of goods and services. This raises the question of how these industries will achieve their revenue forecasts. The research also reveals that these industries are relying more heavily on selling increased volumes of products and services than on price rises to achieve revenue growth. This may reflect the challenges they face with passing their own rising costs onto their customers. Within arts and culture, for example, 67% of finance directors say that they expect to sell more products and services to drive revenue growth, but only 45% plan to increase prices to achieve the same objective.
In the year ahead, will your prices or volumes sold increase or decrease when thinking about driving your revenue changes? (By industry)
The regional perspective
In some regions of the UK, the research highlights a gap between those businesses that are anticipating a revenue uplift and those that are expecting to increase their volume and prices of goods and services over the next 12 months.
In the West Midlands, for example, 39% more finance directors expect to see an increase in revenue compared with those forecasting increased prices for goods and services. Similarly, 36% more finance directors in the region expect higher revenues compared with those who believe that their business will sell more output.
This gap is also evident in the East Midlands, Greater London, the North West, the West Midlands, and Wales.
In Scotland and the South East, the data highlights that businesses will focus significantly more on selling products and services over the next 12 months to hit their revenue goals, rather than on raising prices. Overall, 80% of Scottish finance directors and 55% of finance directors based in the South East expect their business to produce greater output. In contrast, 57% (Scotland) and 39% (South East) anticipate hiking up prices.
In the year ahead, will your prices or volumes sold increase or decrease when thinking about driving your revenue changes? (By region)
Strategic uncertainty
Commenting on the research findings, Chand Chudasama, Partner in the Strategic Corporate Finance Team at Price Bailey, said:
“It is encouraging to see that UK businesses are generally optimistic about their prospects of revenue growth over the next year.”
“Nevertheless, the research suggests that the plan for achieving growth is ‘work harder’. There is limited evidence that creating value through the product or service mix to capture higher pricing is part of the plan. Certain industries have a clearer strategy than others for hitting their revenue targets. In some industries, businesses do not appear to be sufficiently targeting output and price rises as strategies for growing their top line. This begs the question of how they do plan to grow. Given the well-publicised challenges to UK productivity – which at a company level is essentially about revenue or worked hours per head – ‘working harder’ to grow seems like a challenging route to revenue growth unless it is accompanied by a wider strategy.”
“The research also highlighted some individual regions where finance directors are more likely to anticipate revenue growth than to predict that their business will sell more goods or services, or increase its prices. These findings mirror other findings in the research – specifically that finance directors in the North are less optimistic than their southern peers about their business’s ability to increase the volumes and prices of its products and services.”
Chudasama added: “While the Government cannot necessarily accommodate the needs of different industries and regions in the Budget, it should be sensitive to the fact that not all businesses are equally well positioned to take advantage of the UK’s economic recovery. Businesses’ ability to sell more products and services and increase their prices can vary significantly according to their industry and location.”
About the research
The research was based on a survey of 750 finance directors working for UK businesses with turnover in the range of £10 million to £100 million. It was conducted by Censuswide, on behalf of Price Bailey, in August and September 2024. The North is defined as the North East, the North West, Yorkshire and the Humber, the East and West Midlands. The South is defined as the East of England, Greater London, the South East, and the South West.
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