Deputy director-general Neil Bentley has been at the forefront of the CBI’s activity focused on the UK’s vital mid-sized business sector. Here, in the run-up to the 2012 Entrepreneurs’ Summit, he outlines the biggest issues facing Britain’s most important companies.
The CBI recently published a major report into the importance of mid-sized firms in the UK. What were its main conclusions?
Our main conclusion was that UK medium-sized businesses (MSBs) have been a neglected part of the business community for too long and now is the time to unlock their potential.
Our report, ‘Future Champions’, showed that while UK medium-sized firms punch above their weight – they represent less than one per cent of businesses but generate 22 per cent of economic revenue – we must champion, nurture and encourage our medium-sized firms so that more of them grow and create jobs. Importantly, the report set out the size of the prize: mid-sized companies have the potential to inject between £20bn and £50bn into the economy by 2020.
What are the most common challenges you hear from CBI members who are entrepreneurial mid-sized businesses?
Working with McKinsey, we interviewed hundreds of owners and managers of MSBs to understand the challenges they face. Based on what we heard, we set out a clear three-point plan to tackle these barriers.
First, we need to undo the years of neglect and better champions of MSBs in the UK. For too long these companies have lacked a clear identity and as a result have fallen under the radar of policy-makers. We are pleased at the speed and enthusiasm by which the government has joined us in championing medium-sized firms. This must continue.
Second, the UK needs to build up the capabilities of its lagging MSBs. Even with the right level of ambition firms will struggle to grow if they lack the right capabilities internally. In practical terms, this means having access to and acquiring the right management and leadership skills. It means not being afraid to bring in new talent and external ideas into the businesses. Critically for long-term growth, it means having the confidence to export their innovative products and services to new markets.
Finally, we need to address the finance gap for MSBs. With banks’ lending constrained, these firms can no longer rely solely on bank lending for long-term growth capital to invest in their companies. The CBI has been an advocate for a broader range of finance to be made available to medium-sized businesses (MSBs) and we call on government to take forward the recommendations of the recent Breedon Taskforce review into alternative finance options for business.
A further challenge that links all of these issues for MSBs is that they often have limited opportunity for peer-to-peer sharing. This is crucial as there is a great deal businesses can learn from the experiences of others. To help address this, we are establishing CBI “M-Clubs” in 11 regions across the UK. The CBI’s M-Clubs will bring together mid-cap businesses to facilitate discussion, networking and on-going support networks on key challenges facing their businesses, helping them to help themselves.
Brazil recently overtook the UK as the world’s sixth largest economy. Does the UK need an entrepreneurial renaissance to kick start growth? Does the UK yet have a credible “growth plan”?
Future growth of our economy relies on business investment and increasing our exports. To do this we need the products, technologies and services of the future to be developed here, in the UK.
Currently, the UK’s small and medium-sized businesses are not strong exporters – only one in five UK SMEs is an exporter, in contrast to EU average of one in four – but they are at the forefront of innovation in the UK. Medium-sized firms in particular obtain a greater percentage of revenues from innovation than smaller and larger firms.
However, compared with 84 per cent of German firms and 67 per cent of French firms, only 62.5 per cent of UK MSBs describe themselves as innovating. Tackling the confidence and ambition of UK MSBs is therefore critical to our ‘entrepreneurial renaissance’.
You’re opening this year’s Entrepreneurs’ Summit on June 13, where the theme is “The Growth Challenge”. In which sectors, and indeed specific companies, do you see the innovative and entrepreneurial dynamism that will re-energise growth in the UK?
There are no quick fixes for the UK economy and no one industry or sector that can alone tackle “The Growth Challenge” we face. But let’s be clear, the changing economic world is forcing us to rethink the laissez-faire approach to markets and sectors in the UK. For too long, this has created economic expansion dependent on household consumption and government spending which is no longer sustainable.
Instead, we must rebalance the UK economy, reinstating business investment and net trade as the primary drivers of growth. This is the key message of our recent report, A Vision for Rebalancing the Economy, which is the CBI’s blueprint for a new approach to growth in the UK. It is also why we will be taking forward work this year to deliver practical recommendations for a new strategic approach to industrial policy in the UK. It’s not about picking winners; it’s about nurturing the UK’s competitive advantage and capabilities for the long term.
A new dynamic and resilient industrial policy should work to champion the innovation and entrepreneurial dynamism which UK industry has in abundance, but that we know we must increasingly fight to keep.
Dr Neil Bentley will be speaking at the Entrepreneurs’ Summit, held in association with Investec and supported by the CBI, Land Rover and Spring Law, on June 13 at the London InterContinental, Park Lane.
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