Hong Kong And India Will Soon Top League Of 'Super Growth' Firms

by Mike Godfrey, Tax-News.com, Washington

02 May 2006

For the second consecutive year the US tops the Grant Thornton International Super Growth Index as the country with the highest proportion of “super growth” companies, although the booming economies of India and Hong Kong are catching up fast.

According to the Grant Thornton Index, 39% of US companies attained super growth status in 2006. However, the US score fell by nine percentage points compared to 2005 at a time when India and Hong Kong surged up the rankings to take joint second place, with 34% of firms achieving super growth status in both territories.

Other strong performances came from Sweden (31 per cent), which climbed back up the Index to fourth position after dramatically falling to tenth last year from first position in 2004 as a result of a recovery in domestic spending and increased business investment.

Ireland (26 per cent), the United Kingdom (23 per cent) and Canada (23 per cent) took the next three super growth rankings.

At the other end of the scale, Italy, Russia and Turkey jointly shared the bottom position in the Super Growth Index. In the case of Italy, the sustained malaise affecting the economy with weak consumer demand, falling investment and shrinking industrial output appears to underpin its poor rating, says Grant Thornton. Italy’s ranking has fallen in each of the past three years of the Index.

Mainland China was included in the Index for the first time this year – and came in 14th position, with 14 per cent of its companies classified as super growth. However, Grant Thornton believes that it will be hard for Mainland China to achieve greater super growth status until more companies experience rapid expansion both in terms of turnover and employment.

Grant Thorton defines a ‘super growth’ company as one which has grown considerably more than the average measured against key indicators including turnover and employment. Now in its third year, the Grant Thornton International Business Owners Survey (IBOS) surveys more than 7,000 business owners worldwide in 30 countries.

The sharpest fall in the rankings was seen in Greece, down from 9th to 21st position as the proportion of super growth companies fell from 15 to 8 per cent, partly in response to the end of the Olympic Games spending windfall.

This year the survey established that super growth companies are 23 per cent more likely to export than ordinary companies.

Significantly, super growth companies were found to be far less constrained by the ability to finance expansion of their business. Grant Thornton says that the cost of finance was an issue for 50 per cent more ordinary companies than super growth companies; as was shortage of working capital (47 per cent); and shortage of long term finance (58 per cent).

"The US continues to perform relatively well, reflecting the inherent dynamism of its economy which saw buoyant consumer demand, strong capital investment and robust export growth," observed Grant Thornton partern Andrew Godfrey.

"But the real story is the continuing rise of Indian and Hong Kong companies, as their economies boom and productivity continues to surge. On current trends, there is every chance that we could see a change in the top ranking next year," he concluded.

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