Everywhere you turn, people are talking about the UK’s economic recovery. Amid signs of growth, low interest rates, increasing consumer confidence and boosts in employment, it’s important that we acknowledge the drivers of this revival.
Yet whilst significant attention by policy makers and business leaders is paid to the smaller end of SME or to the titans of industry at the top of the market, the role medium-sized companies play is often overlooked.
Many are surprised to hear that despite forming a fraction of 1 per cent of the UK’s business population, the 1,000 fastest growing medium-sized businesses in Britain now contribute the equivalent of almost a tenth of UK GDP. Put another way, that’s £2.46 for every person in the country.
Our analysis shows these businesses generated £158bn in revenues in 2013 alone, and in just three years, increased headcount by 181,780, through a combination of job creation and acquisition activity. By comparison, total new employment in the UK increased by 400,000.
These medium-sized champions are also helping rebalance the economy in terms of the sector focus, something policy makers have been calling for since the financial crisis. Almost three-quarters come from three crucial sectors: consumer business, business and professional services and manufacturing.
Given these businesses are amongst the elite performers in the UK’s recovery, it’s important to understand the reasons behind their success. The more we can understand about the businesses that have led the UK out of recession, the greater the chance of replicating this across the country, ensuring a more prosperous future for us all.
Our analysis has found that there are three key rules for growth:
Niche markets – These businesses understand and “own” specific parts of a supply chain, enabling them to compete against major businesses
Eye on export – They also understand the importance of exploiting these niches, not only in their domestic markets, but also internationally
Visionary leader – Finally, they have an exceptional leader who has the vision and drive to deliver the growth agenda
We also argue that whilst traditional methods of economic measurement, such as GDP and employment are valuable indicators, they don’t provide a lens on the types of companies underpinning economic performance.
We have sought to do this through our research, grouping these high-performers into four clusters: brand builders, KITs (knowledge, innovation and technology), professionals and webmeisters.
The brand builders, for example, have been astute at developing niche products, and as a result, make up 34.9 per cent of the fastest growing medium-sized businesses, contributing £51.5bn in revenue. KITs, on the other hand, understand the importance of owning the IP that is at the forefront of process improvements and product development, making up 21.7 per cent of the top performing businesses, and a staggering £34.4bn in revenue.
Whilst these mid-sized businesses are clearly doing well on their own, it’s still vital that these businesses have a supportive environment from business leaders, both economic and social. The overnment should be helping maximise the impact of these leading businesses, so that their success can be replicated across the economic landscape.
Ways of doing this could include: policy makers examining whether public data can be used more effectively to understand this section of the business population; the business community and the government working together to ensure that there is advice and support for leaders of medium-sized businesses; and building on the successful work of the current minister of state for trade and investment, the government should be considering appointing a minister to “champion” the interests of medium-sized businesses.
Measures such as these could not only help medium-sized businesses flourish even further, but also help create similar success stories across the economy.
If there’s a lesson for the UK to learn from these businesses – too often they are the forgotten engine of growth.
Chris Gentle is head of insight at Deloitte.
Image: Shutterstock
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