James Hurley, Enterprise editor of The Times - in an exclusive piece written for Steps to Growth: Strategy - weighs in on the economic importance of the UK’s mid-sized businesses.

 

Large companies get the column inches and political access. Small companies benefit from patronage from policymakers and well-earned praise for their hard work and risk-taking. So where does that leave those stuck in the middle?

 

Sadly, the needs and indeed successes of Britain’s mid-sized companies are all too often simply overlooked. It’s a curious state of affairs given their contribution to the economy.

 

A modest army

 

Big business is generally a net destroyer of jobs in the long run, as it seeks cost savings from established business models to improve shareholder returns.

 

It is well known that the vast majority of new jobs are created by smaller companies. But what is said less often is that it’s not the combined strength of hundreds of thousands of these smaller companies that makes the biggest difference.

 

In the 12 months to February 2017, mid-sized businesses created 780,000 new jobs, more than smaller businesses (135,000) and FTSE 350 companies (320,000) combined, according to research conducted by BDO, the accountants.

 

Only 30,000 medium-sized companies, or 1.5 per cent of all UK businesses, contributed a third of all UK turnover. Separate research by GE Capital has shown these businesses employ more than a third of the country’s workforce.

 

In short, a modest army of middle-sized companies, like the 500 C-suites surveyed for AIB (GB)’s Steps to Growth 2017 survey, quietly helps provide Britain’s economic engine.

 

Despite their huge contribution to the UK’s economy, the BDO report concluded that these companies tend to fall into a “policy and profile” gap, “too big to benefit from government initiatives aimed at small firms but too small to win the attention that FTSE firms command from the media and policymakers”.

 

“A modest army of middle-sized companies, like the 500 C-suites surveyed for AIB (GB)’s Steps to Growth 2017 survey, quietly helps provide Britain’s economic engine”

 

The recent Conservative manifesto, for example, had measures concerning large organisations, and plenty of promises of targeted interventions to help the smallest companies too, with issues including business rates, winning government contracts and selling their wares overseas.

 

There was nothing specifically aimed at mid-sized businesses, however.

 

Despite the lack of assistance, those running medium-sized businesses appear to be performing remarkably well on the whole.

 

In the year to April 2017, they grew more quickly than their German, French, Spanish and Italian counterparts. They expanded their turnover by almost 4 per cent, compared to only 1 per cent in Germany, the country where mid-sized, or “Mittelstand”, organisations are famous for providing the nation’s economic engine room.

 

Room for improvement

 

Yet, despite the winning performance of many mid-sized companies who have just been left to get on with the job, the lack of support for, and acknowledgement of, their efforts is at best a missed opportunity. At worst, it risks damaging our economic prospects.

 

It must also be asked how much more employment and wealth medium-sized companies could create if they were given better conditions. The UK has the second-largest mid-market in Europe, with a bias towards manufacturing and a tendency towards being located outside London.

 

However, there are obvious areas where there is room for improvement. Productivity tends to be weak. Among some there is a reluctance to export and invest, while others complain about difficulty in accessing the skilled workers they need to grow.

 

There is likely to be plenty of untapped potential in family-owned and managed companies that could be turned into growth champions if their management could be professionalised.

 

Policies such as making it easier to list on growth equity markets and more generous tax breaks for manufacturers who invest in machinery would also help.

 

The door for providing more official support of this sort may already be ajar. Back in 2011, the then Coalition government acknowledged that supporting 10,000 companies with sales of between £25 million and £500 million could prove transformational.

 

George Osborne, chancellor at the time, acknowledged that support for companies is too polarised between the small and the very large. Yet little came from those good intentions.

 

If the next government wishes to make a success of a rebooted industrial strategy, and reduce the nation’s reliance on the capital and its financiers, it needs to start getting behind those in the middle.

 

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