According to new research published by BDO, mid-sized British firms are growing faster and generating more profit than their counterparts in Germany, France, Italy and Spain, despite uncertainty surrounding Brexit. Based on the analysis, the report advises the government to support mid-sized companies, dubbed “the UK’s economic engine”, through shaping future policy.
Over the past year, British companies grew turnover by 3.83%, in comparison with a 0.99% increase for German companies, the second highest rate of growth. However, Mittelstand companies still generate the most revenue, at £1.48tn compared with £1.25tn turnover for Brittelstand companies.
This rate of growth is in keeping with the long term trend, as over the past five years the UK has had the highest turnover increase at 34.78%, just beating Germany’s 34.61%. French and Italian companies’ turnover growth depreciated by -0.01% and -1.35%, respectively.
British companies are also generating the most profit out of the top five EU economies at £97.68bn, an increase of 19.09% in the past year.
Despite being a high-growth sector of the UK economy, mid-sized companies are often “overlooked and undervalued” by policymakers. Sajid Javid MP, former business secretary, has previously commented: “For too long, governments have focused on the massive multinationals and the plucky little start-ups, leaving the mid-sized companies to fend for themselves”, calling them the “unsung heroes of the British economy”. Indeed, mid-sized companies outperform large and small enterprises in revenue and profit and have been responsible for creating 780,000 jobs, compared with 320,000 by FTSE 350 companies and 135,000 by small businesses.
The report stresses the importance of cultivating these dynamic enterprises and outlines 22 policy suggestions to foster growth and help build a stronger post-Brexit economy. The policy suggestions include merging national insurance and income tax into one payroll and placing a moratorium on UK corporate tax changes until 2020, or when Brexit negotiations are finalised. These recommendations aim to encourage mid-sized businesses, create sector and geographic powerhouses and ensure open and simple access to world markets and global talent.
Paul Eagland, managing partner at BDO, commented: “High-performing and entrepreneurially-spirited mid-sized businesses are the economic engine of UK growth. Despite all the uncertainty of the past twelve months these companies have taken calculated investment risks and prospered. The success of these businesses should not be taken for granted and with much uncertainty ahead with Brexit negotiations, advancements in technology and regulatory changes, it is crucial that the government factors the needs of these mid-sized businesses into their policy thinking.”