In 2014, a report by Grant Thornton, entitled “Agents of Growth: The power of mid-sized businesses”, highlighted just how much these companies’ success and ability to scale is linked with the wider economy.
If medium-sized companies could increase productivity to match that of European counterparts, the consultancy estimated that living standards would increase through boosted household incomes – something that can only benefit the wider economy, for which consumer confidence and spend is a key pillar.
The chancellor is no doubt aware of the potential of medium-sized businesses (MSBs), but to date, his annual Budget statements have held little of joy for MSBs. This business class has much potential, but the fact that firms are neither large nor small brings with it unique challenges that I’d like to see this week’s Budget statement address in order to incentivise growth and bolster confidence.
Speaking with customers, the main conundrum that comes up time and time again is: “How can we grow without losing the flexibility and speed that are our prime competitive advantages?”
It’s not an easy question to answer, and there is no one-size-fits-all response. But this week, the chancellor needs to show medium sized businesses that they are a valued contributor to the UK economy.
Building bridges with MSBs
Government policy does not favour MSBs and I suspect that is because the government does not truly understand the challenges faced by these kind of companies. I’d like to see a remit created for the Department for Business, Innovation & Skills (BIS), whereby it seeks to build better relationships with the UK’s MSBs – with a short-term view to cutting red tape and providing flexible tax incentives that give MSBs the confidence to invest. With many MSBs eyeing growth opportunities outside of the UK, it would also be good to see extended UKTI support for this sector. Growing into markets such as China, the BRICS or Asia brings with it language barriers and cultural differences that can be hard to master.
Read more about the mid-market:
- Does the mid-market have middle-child syndrome?
- Brittelstand vs Mittelstand: Who would win in a clash of the mid-market titans?
- British mid-market firms are punching above weight, says study
Compliance
Compliance is tricky and an onerous subject for MSBs. Big enterprises have dedicated compliance teams to help understand the small print, what is required and how business processes need to be adapted. Small companies tend to fly beneath the threshold of compliance. MSBs – yet again – fall somewhere in the middle. Held to the same rules as large companies, but without the resources to devote to the task. It would be great to see regulatory bodies think about how they can support and engage MSBs in order to ease this burden.
Funding
The same Grant Thornton report found that MSBs outpaced small and large firms when it came to investing in research and development and capital spending growth. So not only are MSBs contributing billions to the UK economy and employing hundreds of thousands of people, each are also a hotbed for innovation and new thinking.
Whilst more resilient during the last downturn, MSBs are still struggling to get access to the funding needed to grow the business. This in turn potentially makes each more conservative and risk adverse, because cash flow management becomes even more important to long-term survival. Whilst many banks boast about support of small businesses, all of them need to extend this to include MSBs and I would like the Budget to incentivise to do just that.
This Budget comes at a tricky time. I certainly don’t envy George Osborne with the task of balancing prudence with growth, but I’d encourage him to reclaim the forgotten middle and help MSB leaders realise their ambitions. The UK economy will only be better for it.
Dafydd Llewellyn is MD for UK SMB at Concur.
We have our finger to the pulse when it comes to the Budget and Autumn Statements, so catch up on what happened last year in our convenient 500-word summary.
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