Rebooting the UK’s mid-sized business sector

Gym-goers and women?s magazine readers will know that strong muscles around your abdomen and spine are vital for your body?s balance and wellbeing.

A strong midriff is essential for the economy, too.

All kinds of businesses keep the economy moving, but it?s the mid-sized ones that have been the UK?s core strength recently, helping it through tough economic times. Often overlooked, this ?squeezed middle? of medium-sized businesses (employing 25-199 staff) are the big businesses of the future. They were the only firms to continue to recruit during the recession.

New research, however, shows that this growth is being challenged by severe skills shortages. So what can be done to help our mid-sized firms?

Germany?s famed “mittelstand” has been instrumental in getting their economy in shape. These companies account for a substantial proportion of employment in the private sector and in rural areas of Germany. Export-based and delivering high-end products, the Mittelstand has a defined role and is at the forefront of policy-making in Germany. Conversely, in the UK, much focus is on the small start-up companies and larger organisations. I think it?s time to recognise what medium-sized firms have to offer.

Medium-sized businesses occupy a unique position in the labour market. Unlike small firms that have fewer staff and are less likely to train, medium-sized ones have enough people to share the load, and learn from the main players at the top of their value chains. But this unique position also brings skills challenges.

Compared with other firms, medium-sized businesses are more likely to have staff that have skills gaps ? in other words, who are not fully proficient in their role. Similarly, medium-sized businesses are more likely to have unfilled vacancies because they can?t find people with the skills needed to do the job. These missing skills are specialist and technical ones that restrict businesses from moving up the value chain and meeting more sophisticated consumer demands. In the advanced manufacturing sector, research shows that manufacturing firms operating below full capacity and reporting skills gaps are half as productive as other firms.

So what can be done to remedy this situation?

It may sound obvious, but nobody sets up a medium-sized company. They set up a small company that grows. Pyronix started from the humblest of origins ? I set it up during my evenings and weekends while I continued my day job as a lawyer. I quickly realised that if the company was to grow, I needed staff I could trust. I invested in potential ? in people who had the right attitude and aptitude, even if they were initially lacking the technical skills I needed. 

I paid for their training, on the understanding that the member of staff would stay with the company for the duration and for an agreed length of time afterwards. This strategy has stood me in good stead ever since, and I have staff who joined me straight from school who have gone on to do degrees and MBAs, repaying my investment in them tenfold.

In 2008, as the recession bit, Pyronix urgently needed to cut costs, so, with the agreement of the staff, we implemented a temporary four-day week. At exactly the same time, our Investors in People accreditation was up for renewal. It was tempting to let it slide but, thankfully, we didn?t. The assessor not only gave us some helpful insights, but the wonderful feedback from staff made a very difficult time a bit easier. Celebrating its 21st year, Investors in People (IIP) offers support to all kinds of businesses on a range of areas to help make the most of the skills of their staff, and improve their profitability.

Medium-sized firms have a lot to offer. By taking ownership of their skills challenges and asking for help where needed, they can thrive. Now that?s a workout that will certainly help the economy…

Julie Kenny is founder of the leading alarm manufacturer Pyronix, and a Commissioner at the UK Commission for Employment and Skills

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