Brokers expect growth despite tough conditions

Seventy-nine percent of UK brokers expect their revenue to grow in the next 12 months, according to a report by Macquarie Relationship Banking.

The bank’s 2011 Broking Benchmark Report also found that despite difficult conditions across the UK, more than 50% of the brokers surveyed said their income had grown in the past year.

“Rates are showing signs of hardening across some policy classes and there is a general feeling of cautious optimism in the market,” said Aden Nguyen, head of Macquarie Relationship Banking’s London office, in a statement. “However, while optimism has a role to play in business success, the past has shown us that those who take active control of their business are those who really succeed.”

Brokers who achieved revenue growth during the past financial year said sales, marketing and enhanced insurer remuneration deals were the top contributing factors to their growth, all of which are largely within their control.

Conversely, brokers who experienced a revenue decrease blamed it on external factors such as market conditions and loss of clients to competitors and insolvency.

More than 75% of brokers surveyed expect new client acquisition to drive their future profit growth. Sixteen percent of brokers’ revenue came from new business, which was slightly higher than expected given retention rates for commercial brokers are generally between 90% and 95%.

This is coupled with the fact that organic growth is challenging: the brokers surveyed said that they are vigorously defending their client base. However, as only 7% of brokers say they have spent more time with their existing clients during the global financial crisis, clients may be more inclined to move to another broker for a better deal.

“With more than 50% of brokers intending to grow their teams in the next 12 months the focus is firmly on revenue-generating roles and in particular business development,” Nguyen said.

The survey also revealed a healthy appetite for mergers and acquisitions among brokers, with more than 70% of respondents saying they have either merged or made an acquisition in the past year, have made an approach to merge or acquire, or are considering making an approach.

Macquarie said independent brokers appear just as active as the consolidators in targeting acquisitions. Brokers also mentioned that while they would still be more likely to sell to the highest bidder, they would prefer to sell to another broker rather than to a consolidator.