Mid-sized companies revealed as the engine of the economy as they outperform UK plc

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Richard Rose, Partner and head of BDO in Birmingham & The Midlands. Picture by www.edwardmoss.co.uk

The UK’s mid-sized businesses grew faster, generated larger profit growth and created more jobs in the last 12 months than the nation’s large and small companies, according to new figures published today.

Yet despite leading the economy, mid-sized businesses risk being overlooked as the UK prepares to leave the European Union, according to the ‘New Economy’ report published by accountancy and business advisory firm, BDO.

New research shows that mid-sized businesses created 780,000 new jobs last year, more than smaller businesses (135,000 new jobs) and FTSE 350 companies (320,000 new jobs) put together.

Financial results tell a similar story with mid-sized businesses increasing revenues and profits by 3.8% and 19% respectively compared to smaller businesses (turnover contracting by 7.6% and profits contracting by 26%) and FTSE 350 companies (turnover contracting by 12.6% and profits contracting by 24.5%).

Richard Rose, Lead Partner Midlands, said:

“High-growth mid-sized businesses played a leading role in the economic recovery of the Midlands region and wider UK after the global financial crisis. With Brexit and more uncertainty looming, this is the time for the Government to engage with this part of our economy and draw on their natural energy, ambition and entrepreneurial spirit to create a ‘new economy’ and help the UK succeed post-Brexit.

“Despite being the economic engine of our economy, mid-sized businesses are often undervalued and overlooked. Part of the problem is that they include a wide spectrum of family-owned, private-equity-owned businesses and AIM-listed firms that do not have a single voice. They are also based in all areas of the UK not just here in the Midlands.  By supporting mid-sized businesses growth, policymakers would also be helping to achieve the Government’s ambition of a regionally balanced economy that ‘works for all’.”

These high-growth, entrepreneurial and ambitious businesses (which BDO calls the UK economic engine) punch well above their weight, accounting for only 30,000 companies (1.5% of all UK companies) but one third (£1.2tn) of all UK turnover.

Yet despite driving growth, profits and jobs, the UK economic engine falls into a policy and profile gap: too big to benefit from government initiatives aimed at small firms but too small to win the attention that FTSE firms command from the media and policy makers.

With so much uncertainty facing the UK, BDO is calling on the Government to prioritise the needs of mid-sized companies as one of three areas that policymakers must get right in order to create a ‘new economy’ that can thrive in the post-Brexit environment.  The three areas in the ‘New Economy’ report that BDO is calling upon the Government to focus on are:

(i)   Encourage the UK’s fast-growth mid-sized businesses (the UK economic engine)

(ii)  Create sector and geographic powerhouses

(iii) Ensure open and simple access to global markets and talent

The report’s proposals – which suggest twenty two policy recommendations – include a call for the Government to choose ‘simplicity over subsidy’ for the UK tax code, helping to simplify the tax system to support mid-sized companies; to cut through red-tape and commission ‘shovel-ready’ infrastructure projects that bring immediate economic impact; and battling hard to retain the financial services passport which is a core pillar of the UK’s economic success.