With the final shape of Brexit still impossible to predict, uncertainty about the political direction the country will take, and many high street retailers limping along in a precarious state, there are clear macroeconomic challenges for UK companies, writes Richard Hallett, manager of the Marlborough UK Multi-Cap Growth fund.
On a more positive note though, plenty of UK businesses are continuing to achieve strong growth.
In many cases, these are companies benefiting from powerful trends changing the way we do business, spend our money or lead our lives.
Where these long-term structural trends are channelling money into particular business areas, the leading companies in that field should benefit from a strong tailwind, providing the potential for robust growth irrespective of wider macroeconomic conditions.
Such businesses can be termed 'secular growth' companies and they can be found across the full breadth of the market cap spectrum.
The structural growth trends they are benefiting from can range from cutting-edge technology through to less exciting, but nonetheless powerful changes.
Increasing global regulation
One example of the latter is increasing regulation. This is a global trend affecting virtually every area of life, with new rules, restrictions and safeguards being introduced at local, national and international levels. New regulations relate to everything from food hygiene and pest control to building safety.
One beneficiary is FTSE 100-listed Halma, a group specialising in health and safety products. It has almost 50 subsidiary companies that make products ranging from fire detection systems and emergency phones for lifts, to corrosion detectors to monitor the structural integrity of bridges.
The company believes increasing global regulation should drive continuing growth in demand for its products, protect margins and provide a degree of income security in difficult economic conditions.
Halma is acquisitive, using strong cashflows to buy up smaller businesses. In June, the group reported adjusted pre-tax profits for the year had increased by 10% to £214m.
Intertek, another FTSE 100 company, is also benefiting from the trend for greater regulation. It provides testing, inspection and certification for products in a broad range of industries globally.
It is a multi-faceted business - testing goods and auditing services, checking everything from the quality of oil coming out of the ground to the effectiveness of cyber security measures.
Intertek is a consolidator, making earnings-enhancing acquisitions by buying up smaller businesses, reaping the benefits of cost synergies and selling new services to its global customer base.
In August, the company announced half-year profits before tax of £214m, up 7.5%, on a constant currency rate basis, compared with the first six months of 2017.
Growing healthcare spending
The growth in healthcare spending is another long-term structural trend. In the US, for example, health spending was estimated to be up by 4.6% to nearly $3.5trn in 2017 and is projected to rise another 5.3% this year.
This is being driven by an ageing population, greater disposable income and higher prices being charged for medical products.
AIM-listed Craneware is a business well-positioned to reap the benefits of this growing market. The company provides software for the US healthcare industry and is the largest player in its field. With a potential market of more than 500 US healthcare companies, Craneware already counts around a third of them as customers.
Its software helps hospitals and other providers monitor their stocks of medicines, manage payments from health insurers and patients and ensure they comply with the pricing transparency required by regulators.
Craneware's customers sign multi-year contracts giving good visibility of earnings and the company is using its strong and sticky cashflow to invest in developing new products, particularly cloud-based offerings.
Pre-tax profits for the first half of this year were £6.6m, up 16% on the same period last year.
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