Support the mid-market

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Let’s stop overlooking and undervaluing our thriving medium-sized companies, says Simon Michaels

The UK’s commercial heartland of medium-sized companies is thriving. Not only does it generate over £1trn in revenue every year – nearly a third of all private sector turnover – it also accounts for one in four private sector jobs.

Despite their remarkable contribution to the economy, Britain’s mid-sized companies (those with a turnover of between £10m and £300m) have the potential to deliver so much more – if they so weren’t undervalued and overlooked by policymakers. Mid-sized firms don’t grab headlines as much as punchy start-ups, which are celebrated for their smallness and entrepreneurial zeal. Nor are they sizeable PLCs, attracting attention without too much effort. The mid-market is the squeezed middle of the business world; too large to benefit from policies tailored to small business, but too small to win the same recognition from politicians that FTSE firms command.

Compared to other European nations, particularly Germany’s renowned Mittelstand, Britain’s mid-market is rarely a focus for political support. It may therefore come as a surprise to discover that the UK’s mid-market has grown so rapidly over the past five years that it’s now bigger than Germany’s.

BDO’s research reveals that the UK mid-market has weathered the global downturn so well it has overtaken the Mittelstand – growing nearly 33 per cent over the last five years compared to Germany’s 12 per cent.

It’s good news on the jobs front too as the UK mid-market now employs 9.3 million people compared to Germany’s 9.2 million.

But we could still do better. We need to consolidate our position rather than be complacent about it. A key ingredient to keeping this important section of the economy growing is to create a supportive policy environment around it.

There has been some great work done to promote the mid-market, but BDO’s work with a wide range of mid-sized businesses shows that some simple and cost-neutral policy changes could still be made to drive continued UK economic growth and keep us leaders in Europe.

Some of the biggest challenges that face medium-sized companies involve scaling up, growing and exporting abroad. And some straightforward changes could make a material difference to the mid-market, benefiting both those companies and the wider UK economy.

First, we’d like to see a reduction in employers’ national insurance for manufacturing companies – a key mid-market sector – when they take on new workers. Research from BDO and Oxford Economics reveals that this would boost UK GDP from medium-sized companies by over £1bn, creating nearly 20,000 new jobs.

Second, the government can support the mid-market through its own procurement policy. Within the current open framework, the government should consider contracts on the basis of providing the best value to the UK economy rather than looking at the cheapest price. This could result in boosting mid-market contribution to UK GDP by £285m and create over 11,000 jobs.

Finally, it should be easier for ambitious mid-market firms to scale up by enhancing access to the Regional Growth Fund (RGF). By allowing the RGF to lend to smaller businesses it would grow the mid-market by nearly £60m while creating over 2,000 jobs.

We have a unique opportunity to capitalise on the economic recovery by creating a policy environment that enables the UK mid-market to drive growth that delivers to its full potential. Let’s take hold of this moment, as the general election draws near, and make the case for the UK’s forgotten middle-ground.

Simon Michaels is managing partner at BDO UK

 bdo.co.uk

The BDO Mid-Market Manifesto can be found at midmarketmanifesto.com

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Simon Michaels

Simon Michaels

Simon Michaels is managing partner at advisory and accountancy firm BDO UK.

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