UK Language Services Industry Survey and Report 2021

The Association of Translation Companies (ATC), in conjunction with Nimdzi Insights, recently conducted and published the findings from its annual survey of the UK language services industry. Here, we’ve included an abbreviated introduction to the report — to read the report in its entirety, go to nimdzi.com.

The report covers a wide range of topics, from the effects of the COVID-19 pandemic on the language industry as a whole to UK companies’ leeriness toward Brexit’s impact on the industry. The report includes data based on 51 companies’ responses to the ATC survey; 43 of the companies were based in the UK, while the remainder were scattered throughout Europe (6 companies), Asia (1), and Africa (1).

“It is our pleasure to present to you this report, and we hope you will glean valuable insights from it and that it inspires you to prepare your business for what is yet to come. The resourceful and the bold are the ones who will lead the pack in our new reality.” 

-Raisa McNab, CEO of the ATC

Executive Summary

  1. More than half of companies recorded positive growth: The negative effects of the pandemic notwithstanding, 56% of companies reported various degrees of growth in 2020. Two years ago, 67% of companies reported growth figures; considering the circumstances though, this is a very encouraging figure.
  2. The market for language services in the UK is growing: We estimate the current size of the language services market in the UK at between GBP 1.5 and 1.7 billion. This is up from the GBP 1.35 billion we estimated two years ago. The UK is the largest single-country market for language services in Europe.
  3. Almost half of language service companies expressed concerns over Brexit: In this year’s survey, 47% of respondents reported worries over future effects of Brexit while 20% stated that they are already experiencing negative effects from it. 
  4. Work-from-home is here to stay: Almost 80% of businesses have a positive view on remote work. In fact, more than one-quarter of respondents are considering offering a work-from-home option to their employees beyond the pandemic, while only 7% plan to resume full onsite operations.
  5. Is the UK a language technology hotbed?: Almost two-thirds of businesses in the mid-market segment of the UK develop their own proprietary technology. This is higher than the figure for the largest language service companies in the world (56%). On the other hand, only 46% of respondents offer machine translation (MT) related services, whereas the global figure is much higher (72%).

Growth between 2018 and 2020

If we tally up the revenues of all companies that participated in our survey and compare the consolidated figures across the years, then there was a notable decrease over the latest  financial period.

The average growth rate of UK companies on an individual level (versus the growth of the revenue of all companies combined as displayed in figure 1) was 14% for the latest financial year. This is higher than both the global 2020 average (7.9%), and the UK 2019 average (9.9%). 

Interest in mergers and acquisitions is on the rise

Mergers and acquisitions (M&A) have been on the rise over the last year and a half. It is likely the pandemic has spurred business owners to be more receptive to opportunities to invest or sell. What’s more, our industry is attracting outside interest from private equity firms and venture capital firms who are looking for deals.

Looking at the companies in this year’s ATC UK survey, more than half (57.7%) are interested in either buying other companies or receiving offers from potential buyers. Only one-third report that they are not thinking about M&A at all.

Figure 1: The average growth rate of UK companies on an individual level versus the growth of the revenue of all companies combined.

Figure 2: Respondents by size category.

Figure 3: Mergers and acquisitions (M&A) have been on the rise over the last year and a half.

Business challenges and opportunities

2020 was a year like no other before. The global COVID-19 pandemic impacted language service companies of all sizes in one way or another, whether it was a decrease or increase of business, a shift to remote work, or a stronger focus on technology. We also wanted to know what lies ahead and asked survey respondents what the biggest challenge they are facing in 2021 and beyond is. 

Interestingly, 28% of companies reported that their biggest challenge in the next year will be to keep up with the growth they achieved over the last financial period. In addition, an equal number of language service companies (16% each) listed recruitment, consistent sales and marketing, and keeping up with technology trends as the next biggest challenges they are facing. 

Where the clients are

We asked survey respondents to indicate the percentage of their revenue derived from customers based in different parts of the world. The results show that, on average, almost half of a UK language service company’s revenue comes from domestic clients (44.3%). The rest of their revenue originates in continental Europe (26.1%) and North America (21.9%), followed by Asia (6.3%), and Australia and New Zealand (0.9%). 

It is worth noting that not much has changed in this regard over the last two years. Compared to 2019 figures, there is only a slight decrease in revenue coming from the domestic market (-3.4%), the rest of Europe (-4.4%), and the rest of the world (-1.6%). The loss of revenue from these three regions seems to have shifted to revenue being generated from clients based in North America (+6.3%) and Asia (+3.4%).

Figure 4: Where the clients are.

Figure 5: Almost half of a UK language service company’s revenue comes from domestic clients.

Brexit

Brexit came into effect on January 31, 2021. Yet, there is still a lot of uncertainty around it. In this year’s survey, 47% of respondents reported worries over future effects of Brexit while 20% stated that they are already experiencing negative effects from it. The two main challenges, which close to one-third of respondents listed in direct relation to Brexit, are acquiring new talent and a decrease in work as a result of clients moving away from the UK. The third challenge companies reported was a lack of visibility into how the shifting regulations will affect them in the future. 

The EU is the strongest revenue generator for language service companies in the UK. It stands to reason that language service companies that depend on clients in the EU for a large portion of their revenue stream are also the ones that are either already experiencing challenges due to Brexit or fear that Brexit will negatively impact them in the future. For companies in this group, the UK still remains the second strongest revenue generator, followed by North America.

Impact of COVID-19 

The data show that UK businesses were not unaffected by the COVID-19 pandemic. Almost 60% of respondents highlighted a decrease or loss of existing business and 41.3% reported that they saw a suspension or termination of work from clients or government contracts (37% and 4.3% respectively).

A shift to remote work

Digging deeper into this topic, the results show that the vast majority (79%) of language service companies have a positive view on remote work, while almost 14% of respondents reported security concerns (9.9%) or technical challenges (3.7%) related to the work-from-home (WFH) model.

Figure 6: A shift to remote work.

Figure 7: Revenue is vanity, profit is sanity. 40% of survey respondents reported that their profitability increased in 2020.

Increased profitability

Revenue is vanity, profit is sanity. 40% of survey respondents reported that their profitability increased in 2020, while an additional 31% said that their profitability stayed level with the previous year. These findings are similar to the global trend reported in the Nimdzi 100, where 45.5% of the largest language service companies in the world recorded an increase in profitability over the latest financial period and 35.6% retained their profitability levels.

This increase in profitability comes as no surprise when the side effects of the lockdowns are considered, i.e. no or very little travel, reduced need for office space, and no in-person events. All of these byproducts of the pandemic translated into a decrease in expenses which in turn increased profitability. This theory is further confirmed when we take a closer look at the decrease in expenses companies reported.

Technology  

Technology creates an opportunity for all language service companies regardless of their size, and these days the use of technology has become commonplace. This is confirmed by the data from this year’s survey — here are the types of technologies used by the companies surveyed.

Figure 8: UK language service companies tend to use well-established MT providers.

Figure 9: The types of technologies used by the companies surveyed.

Preferences in MT brands

MT remains a subject of high interest among localization providers and buyers from all over the world, and the UK localization market is no exception. When asked about the types of technology trends that have the greatest impact on their business, the majority of respondents named MT. Judging by the responses, language service companies tend to use well-established MT providers such as Google and Microsoft. Similar results can be observed in the US where the adoption of MT seems to have taken off more rapidly.