A report released by the UK’s business bank NatWest, in partnership with Oliver Wyman and supported by the Business Secretary, Jonathan Reynolds MP, has identified that the United Kingdom’s mid-market businesses are like the “unsung engine” of the nation’s economy.
More than 13,000 of these businesses reportedly exist across the United Kindom, employing around 7.3 million citizens.
They represent just “0.5% of the total number of UK companies, yet each MMC contributes the equivalent of 200 SMEs to the economy.”
As mentioned in the update shared by Natwest, they reportedly contribute £1.3 trillion of turnover and £420 billion of Gross Value Added (GVA) to the economy.
With the correct support, MMCs could contribute an additional “£115bn to turnover and £35bn of GVA” by 2030, and for areas outside of London and the South East, the growth potential could be up to “£70bn and £24bn for turnover and GVA respectively.”
Through consultation with these businesses, the report has identified key challenges which businesses need support to “overcome, from government, financial institutions and partners.”
Should this be effectively addressed, it’s estimated that the mid-market segment could benefit from an uplift in turnover of “£115bn, adding an additional £35bn of gross value add (GVA) to the economy by 2030.”
For areas outside of London and the South East, the growth potential “could be up to £70bn in turnover and £24bn in gross value add.”
According to the report, the key challenges are:
- Lack of collective identity – MMCs do not identify as a distinct segment (unlike the German Mittelstand), and therefore cannot collectively advocate for additional support and policies which would enable growth.
- Lack of data and transparency – this segment loses in terms of policy support and other targeted measures as the lack of data means it is difficult for public and private sector stakeholders to understand the importance of the MMC segment to the economy and define policy and other targeted measures to support growth and productivity.
- Insufficient access to skills – MMCs struggle to fill vacancies at every level (specialist and entry level) and the problem is getting worse;
- Complexity growing faster than their capacity – the level of complexity can exponentially increase as they establish new business lines, enter new markets or breach thresholds for regulation or red tape.
- Infrastructure and planning restrictions – because MMCs are typically more regionally based, limitations in regional infrastructure (e.g housing, rail/bus links, grid connectivity, broadband) disproportionally affects this segment. This is compounded by problems with the planning system.
MMCs are vital to regional economies, often employing a “large proportion of their local community.”
As noted in the update, they contribute to employment in the West Midlands (24%), North East England (23%), Yorkshire (22%), the Humber and Scotland (27%). In aggregate they “employ over 1.2 million more individuals than large non-financial corporates.”
In response to these issues and to provide a voice to this segment, NatWest, with the support of the Department of Business and Trade, announced it will create a UK Mid-Market Council, with members representing the primary sectors from “across the business sphere, commencing in 2025.”
NatWest is launching a new Mid-Market Growth Tracker, in collaboration with S&P Global.
The tracker will use the industry standard Purchasing Managers Index (PMI) to provide an ongoing view of “mid-market sentiment and productivity across the UK, providing regular data on progress.”
The bank is also announcing a partnership with the UK Export Academy, with the aim to help “educate and encourage businesses to begin exporting to EU and International markets.”
NatWest’s report found knowledge, networks and compliance are major barriers for mid-market businesses who “want to commence trading internationally; this partnership will aim to break down these barriers and provide mid-market businesses with the confidence and expertise to expand their business into foreign markets.”
Paul Thwaite, CEO, NatWest Group said:
“Through today’s report we want to encourage a step change in support for the critical middle. The first step on that journey is to convene a MMC Council – creating a cohesive identity to collectively advocate and influence for growth enabling policies and support.”
The report found that MMCs have recovered well from COVID-19 and are producing more than “1.2 times their pre-COVID turnover and are growing faster than the rest of the market.”
Increasing all MCCs growth to the average would “contribute an additional £20bn GVA to the economy.”
Increasing the number of MMCs can help with the UK’s productivity challenge as they produce nearly “double the turnover per employee compared to SMEs.”
They have been growing productivity at “twice the rate of SMEs and Large Corporates.”
Only 13% of SMEs with 9 or fewer employees “exported goods or services, compared with 33% of companies with more than 250 employees.”
The figures for importing were “11% and 43%.”
The majority or around 72% of firms with more than 250 employees “export to both EU and non-EU markets.”