Midmarket Companies Looking to Boost Overseas Revenue, Survey Finds

Midmarket companies have their eyes fixed abroad as growth opportunities outside the U.S. offer a way out of the sluggish economic recovery, one survey finds.

U.S. midsize companies are increasingly pinning their growth plans on markets overseas even as the U.S. economic recovery slowly takes hold, according to the International Business Survey.

The U.S. component of the survey, conducted for the third year, polled nearly 650 U.S. senior financial executives from companies with annual sales between $20 million and $5 billion, a critical segment of the U.S. economy, accounting for nearly $8.2 trillion in annual sales.
The survey, released by HSBC's commercial banking division, found that the portion of U.S. executives planning to increase their overseas sales targets rose sharply to a survey high of 72 percent, up from 49 percent in 2008 and 56 percent in 2009. Fifty-six percent of the executives polled say their overseas sales are growing faster than domestic sales, a rebound from 52 percent last year though still below the 67 percent level seen in 2008.

Respondents indicated that the most attractive countries for U.S. companies to do business with currently are Canada and the United Kingdom, which surpassed some of America's largest trading partners, including China, Germany and Japan.
This year, less than one-third of respondents indicated that they are reducing the number of employees at their companies, down from the nearly half of respondents that reported staff reductions in the previous year. Perceived risks hindering businesses' interest to engage in international business include legal complexities and local regulations (49 percent), complexity of certain international markets (42 percent) and sovereign (country) risks (29 percent).
"The survey findings validate the untold story of the U.S. economy that we see every day; midsized businesses at the heart of the U.S. economy are increasingly adding cross-border trade to their growth plans," said Christopher P. Davies, senior executive vice president and head of commercial banking for HSBC North America. "But the fact that many businesses currently find the greatest opportunities in established markets like Canada and the United Kingdom suggests that the challenges to tapping high-growth emerging markets remain high."
Although the survey suggests renewed confidence among U.S. businesses, respondents still expressed some caution, which is evident in their reluctance to take on new debt. Davies noted a surprisingly high 60 percent of respondents stated that they have not applied for an increase in their credit line or for a new line of credit in the past 12 months.
"Despite the perceived risks to expanding internationally, we think that business will become increasingly global," Davies added. All 10 markets surveyed not only reported that the pace for international growth was faster than their domestic business activity in the past 12 months, but will continue to trend upward in the next two years.