Oft-forgotten mid-market companies outshine rest of economy

The Investec Mid-Market Index is a new indicator of the size, health and performance of the UK’s mid-market. The results of the first index, announced today, shows that the mid-market is growing faster than the rest of the UK economy.

“While there is a great deal of information and analysis of Britains major companies, there is relatively little known about the mid-market,” says Philip Shaw, chief economist at Investec.

“Given its importance to the economy, this is a major omission. We aim to put this right with the Investec Mid-Market Index and show the outstanding contribution of the British Mittelstand.

Looking at historical data from January 2006 to today, the index shows a rise from 100 to 135.4 this is comparable to the performance of the FTSE 250 index, which currently grows at 4 per cent per year.

Annual growth in operating profits for the 24,000 analysed in the index, runs at just over 8 per cent, higher than the rise in “money” GDP of 5.4 per cent. Return on capital is also a very healthy 7.4 per cent for mid-market companies.

The data for the index, provided by free private-company information provider DueDil, involves data from 24,000 companies with an annual turnover of between 10m and 200m. Four indicators are considered for the index: annual turnover, operating profit, return on capital employed and employment levels.

Together, these companies employ more than six million people and account for nearly 1tn of turnover each year.

The UKs mid-market companies account for nearly 1tn of revenue and a quarter of all private sector jobs, yet their contribution to our economy is either overlooked or misunderstood,” adds Ed Cottrell, head of growth and acquisition finance at Investec.

“The data used to create the index shows that the owners of these businesses invest for the long term, are not distracted by quarterly results and share price fluctuations, and are reliable employers and therefore provide the foundation of our economy.