Private equity arm of Lloyds pledges £1.2bn to UK’s medium-sized businesses

It hopes the injection will help accelerate growth among Britain’s mid-market, and provide a welcome uplift to the economy. The UK’s MSBs currently contribute £165bn a year to GDP – an increase of 33 per cent in five years.

Medium-sized companies have previously been referred to as Britain’s “overlooked success story”, due to little official support but recording impressing numbers nonetheless. Research by business advisory group Grant Thornton said the number of businesses in the space have increased by over five per cent from before the 2007 financial crisis – outpacing 1.6 per cent rise in larger companies and a 0.9 per cent decrease in small businesses.

Grant Thornton said this could be further boosted with help to increase exports and close the skills gap.

Mid-sized firms contribute one fifth of employment and turnover in the UK, with Grant Thornton calculating that the mid-market has 34,000 companies of 50-499 employees.

LDC – formerly known as Lloyds Development Capital – said this pledge would also be useful as its expertise would be a great tool for these businesses to utilise when planning to scale domestically and internationally.

Some 17 per cent of mid-sized firms export beyond Europe – and the percentage of UK MSBs that have international operations compares unfavourably with Germany and the Eurozone. Nearly half of German “Mittelstand” firms have international operations, compared to 29 per cent of UK MSBs.

Read more on the UK’s mid-market:

“Mid-sized businesses are vital to the UK economy, and our core aim is we want to help them grow more quickly,” said Chris Hurley, joint chief executive of LDC. “Private equity is a powerful catalyst,” he added. “Not only does it provide the capital to fund investment, it brings the market-leading strategic and operational expertise of our teams and operational expertise of our teams to help management teams overcome the barriers to growth.”

These companies had proved resilient during the downturn, but often showcased a conservative approach to risk along with a low appetite for international expansion. John Cridland, director general of the CBI employers’ group said: “The biggest barriers for UK MSBs is actually appetite and strategy; they have got to want to grow.”

Over the past three years, LDC has injected £930m into mid-sized firms and is the most active mid-market investor in terms of deal volume. For the year so far, it has completed six deals totally £200m in growth capital.

In March, it was announced LDC was backing a £207m management buyout of SSP, a global insurance technology business. Laurence Walker, chief executive of SSP, said at the time that the partnership “provides us with the investment to continue to rapidly develop the business, and enables us to fully leverage the expansion of our international office network”.

Image: Shutterstock

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