NEW YORK, Jan. 11, 2016 /PRNewswire/ -- While the U.S. economy is growing at a more rapid rate, mid-market momentum has slowed to a more modest pace than seen in recent years, according to Deloitte's latest report, "America's Economic Engine: Tapping the brakes." This trend may be due to the belief that the economy will not grow in excess of 2 percent over the next 12 months; a view held by 29 percent of mid-market executives – the highest mark since spring 2014.
"On our five-year anniversary surveying 500-plus executives in this important market segment, our data shows mid-market executives reining in certain expenditures," said Roger Nanney, vice chairman, Deloitte LLP, and national managing partner of Deloitte Growth Enterprise Services. "The reason may be due to a focus on short-term economic fluctuations. We are encouraging mid-market executives to take a long-term view to business growth and success."
Mid-market executives point to several growth barriers and threats to their business
Cost of health care takes center stage
In this latest survey, more than half of executives (53 percent) cite rising health care costs as the No. 1 obstacle to U.S. growth, and more than one-third (34 percent) refer to it as the No. 2 issue for company growth, behind the uncertain economic outlook. Following passage of the Affordable Care Act in 2010, mid-market concerns regarding health care costs had been steadily waning. Now, nearly one-third of respondents (32 percent, up from 26 percent one year ago) favor rolling back health care reform as a way the government could aid growth.
Regulatory compliance – an increasing area of focus
In addition to health care costs, 31 percent of mid-market executives expressed concern about increased regulatory compliance. For example, new energy regulations were introduced, including new curbs on power plant emissions and the implementation of the nation's first major federal regulations on hydraulic fracturing by the U.S. Department of the Interior in March 2015.
Interest rate concerns loom large
In the current survey, which closed before the Federal Reserve's short-term rate-hike announcement in December, rising interest rates are a top concern. More than one-third (33 percent) believe the rising rates will be an obstacle to U.S. growth. Roughly 40 percent of executives consider keeping rates low as the second most important step the government can take to support business growth this year.
Remember the power of people
"Despite these concerns, one area where we are seeing mid-market executives adopting a long-term view is in training and development of talent," said Nanney. "Prioritization of investments in talent and building a diverse workforce will alter the landscape of the middle market in the coming year and could set these executives up for growth with a robust talent pipeline."
Hiring and training take the top spots when identifying a company's biggest investment for the first time since the inaugural survey in 2011. In fact, 56 percent of companies report their workforces grew over the past 12 months. While the results are in line with a U.S. labor market that is expanding steadily, nearly two-thirds agree that it is more difficult to find skilled talent to meet their business needs. More than half of respondents (51 percent) say training will dominate their talent investments in the coming year. Diversity also will be a key talent investment, as 63 percent of executives cited that their company has, or is developing, programs to foster diversity and inclusion. These investments in talent and the building of a diverse and inclusive workforce signify companies' focus on developing a solid foundation toward long-term business growth.
About the Survey
From Oct. 22 to Nov. 4, 2015, a Deloitte survey conducted by OnResearch, a market research firm, polled 522 executives at U.S. mid-sized companies about their expectations, experiences and plans for becoming more competitive in the current economic environment. Respondents were limited to executives at mid-market companies with annual revenues between $50 million and $1 billion.
About Deloitte Growth Enterprise Services
The Deloitte Growth Enterprise Services team delivers a distinctive client experience through service offerings tailored to address the unique needs of the middle market and privately held companies. View the entire report here.
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