Generating future economic prosperity

By | Business
The BDO, a leading accountancy and business advisory firm, spoke at the MSB Monday summit focussing on the main funding options open to MSBs and discussed the various opportunities and challenges arising from different routes. Experts at the CBI believe there are more real opportunities and ones that are available to be used. Image credit - @The CBI via flickr.co.uk

The Confederation of British Industry (CBI), in partnership with Lloyds Bank, hosted its first summit for mid-sized businesses (MSBs) this week. John Cridland, the Director-General of the CBI, highlighted their role in the economy and listed what more needs to be done to ensure that they are able to fulfill their potential contribution to British economic recovery.

Speaking at the summit, John Cridland said: “Unlocking their potential to grow is vital to our future prosperity. With the right support from the government and other businesses, they might be the engine of our economy into the next five years and beyond. Once companies in the UK grew beyond a certain size they ceased to attract the backing that small businesses typically received from the government and which ‘Mittelstand’ companies might still expect in Germany.”

Since the CBI published its report ‘Future Champions’ in 2011, progress has been made, however the CBI believes that there is more potential that may be achieved. Their recent survey of 200 mid-market companies found that over half of MSBs are experiencing 10 percent growth or more in the last three years. However, only one in four classify themselves as MSBs; they believe that too many companies see themselves as small companies. The return to sustained economic growth and building on export potential, as more and more countries look to buy British-made goods and services, may be celebrated. Nevertheless, experts at the CBI believe that there are more real opportunities available for use.

Recent research reveals that UK mid-market firms increased sales by an average of 3.5 percent over the last year, creating over 202,000 new jobs. Even more rapid growth is anticipated over the next year, with sales volume up 6.1 percent, accompanied by the recruitment of nearly 326,000 new members of staff. The UK’s newfound optimism is exceeding even that of Germany’s mid-market, which is projecting the creation of 150,000 new jobs in the coming year.

This growth-driven creation of jobs may be reinforced by re-shoring, with 26 percent of UK mid-market firms intending to re-shore some activity over the next three years; a further expression of confidence in the UK. The regional picture is more comprehensive than ever before and tells a strongly polarised UK mid-market growth story. Mid-market firms in the South East, London, the East of England and East Midlands are out-performing other regions. Those regions growing most rapidly are also those in which mid-market firms are most strongly linked to export markets.

The globalisation of the mid-market and their ambition to develop export markets is also a key feature within the recent research. UK mid-market firms are global operators, with seven out of ten firms generating a proportion of their sales abroad. Moreover these firms are ambitious, envisaging almost 8 percent growth in export sales over the next year, significantly more than Germany (4.6 percent), France (4.9 percent) and Italy (4.1 percent). Nearly half of all mid-market firms are hoping to enter new markets in the coming year and of these a third have their sights set on Asia-Pacific and the potential offered by emerging markets.

The Head of Lloyds Banking Group, Antonio Horta-Osorio, said at the Summit: “The untapped potential of the UK’s mid-market is part of a wider narrative on the UK’s economic performance. It is about ensuring the UK economy continues to rebalance and moves away from its reliance on consumer spending, towards an export-led growth model that mirrors the global interconnectedness that is a feature of our major markets and trading partners. Firms have to look beyond the US and Europe as traditional export partners and towards emerging markets in China and India, as well as other rapidly developing economies across Asia.”

Which areas might medium-sized businesses invest in to help them grow further?

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