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CENTRAL SOUTH MID MARKET CONFIDENTINNOVATIVE
The Central South mid market – is it mighty?
Too often overlooked or lumped in with smaller enterprises, the UK’s mid market could in fact be the heartbeat driving much of the recovery, says Malcolm Thixton (pictured), lead partner, BDO LLP. For the past five years BDO has produced the ’Central South Report’ which has focused on the top 150 companies in the region. This year we are looking a little deeper to gain a different perspective and concentrating on the mid-market sector of our local economy
Quite simply, we see mid-market companies as our region’s best chance for sustainable and dynamic growth – which is why we want to shout about them. Too often pushed out of the limelight, these are the companies that form the sturdy core of corporate Britain, proving dynamic and resilient throughout all the drama that may happen elsewhere.
According to the CBI, medium-sized businesses represent just 1% of companies in the UK, but employ 16% of the workforce and generate 22% of the UK’s revenue – so they clearly have the potential to contribute even more to job creation and growth. If we focus on the Central South region, where we have taken the mid market to be privately-owned companies with turnover between £10 million and £300m, they represent 9% of companies, employing 45% of the workforce and generating 48% of the region’s revenue. Such figures speak for themselves.
At BDO in Southampton we work with these mid-market businesses every day. As such we had a fairly good idea of what this Central South Report would reveal: that the mid market is a true asset to this region. Yet even we were a little surprised by how much the Central South mid market punches above its weight. It has proved resilient during some of the toughest times the global economy has known, while being home to some of the UK’s most innovative companies, which are now exporting for growth and staying a step ahead of their markets.
Something else we know from working with the mid market is that it is unique. These businesses face very different challenges from those encountered by smaller companies, or larger corporates. This means that they also have very distinctive needs, and require advice and legislation that is specifically focused on them.
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Over the coming months we will be exploring the region’s best mid-market performers in certain key areas. We’ll also be inviting their decision makers to discuss their strategies for sustained growth.
One size doesn’t fit all
It is starting to look as if the term SME (meaning small and medium-sized enterprises) is doing more harm than good. Recent research by the Bank of London and the Middle East (BLME) found that half of all such businesses in the UK believe they should be treated separately from smaller companies (it defined medium-sized companies as those with a debt requirement of £1m to £25m).
... medium-sized businesses represent just 1% of companies in the UK, but employ 16% of the workforce and generate 22% of the UK’s revenue
These companies took the view that the term ’SME’ does not work, because the needs of small and medium-sized businesses are so different. They have found that both the Government and banks tend to focus too much on the lower end of the bracket, at the expense of the other. Now these mid-sized companies are campaigning for a separate voice, with 39% of them requesting that an industry organisation be established to represent their views in the UK, while 24% are calling for a minister to be appointed to promote their needs.
Strong evidence that they have a point comes in the form of GE Capital’s 2013 report
The Mighty Middle. This showed that, despite the recent dismal economic climate, the UK mid market has continued to grow, and that medium-sized companies have remained largely confident about their future business prospects. It did however show marked regional variations, with a distinct north- south divide – mid-market companies in the south have been growing more than twice as fast their northern counterparts; indeed, faster than the overall average for the much lauded German mid market. The report also found that this trend is expected to continue, with the next twelve months bringing faster growth in the south.
None of this good news, however, can hide the fact that mid-market businesses are facing ever more complex, and distinctive, challenges. And although there is a lot more optimism in the air these days, the UK economy still has a mountain to climb, while the debate continues to rage as to where sustained growth will come from.
... they represent 9% of companies, employing 45% of the workforce and generating 48% of the region’s revenue
Now we are seeing clear signs that the Central South region is one of the strongest candidates as an engine of this sustained growth. Keen to build on previous strong growth in entrepreneurial and small businesses, supported by grants such as the British Growth Fund, the Government is now encouraging more innovation and seeking to make the UK more attractive through corporate tax changes. The Central South mid market is exceptionally well placed to reap the benefits of this.
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – FEBRUARY 2014
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