Mid-market corporates (MCCs) play a significant role across the East Midlands jobs market, employing nearly a quarter of the workforce.
And a new report issued by NatWest, in partnership with Oliver Wyman and supported by the Business Secretary, Jonathan Reynolds MP has identified that UK mid-market businesses have an oversized impact on the UK economy, are particularly important to regional economies and are the unsung engine of the economy:
- c.13,000 of these businesses exist across the UK;
- while being only 0.5% of the total number of UK companies each MMC business contributes the equivalent of 200 SMEs to the economy;
- every year they contribute £1.3 trillion of turnover and £420 billion of Gross Value Added (GVA) to the economy, nearly one third of all companies;
- with the correct support, MMCs could contribute an additional £115bn to turnover and £35bn of GVA by 2030. For areas outside of London and the South East, the growth potential could be up to £70bn and £24bn for turnover and GVA respectively, and
- employ 7.3 million Britons – 26% of the total and are essential employers across the UK’s regions.
Supporting the UK’s regions
MMCs are crucial to regional economies, often employing a large proportion of their local community. As well as employing 24% of the East Midlands’ workforce, they contribute significantly to employment in the West Midlands (26%), North East England (23%), Yorkshire and the Humber (27%) and Scotland (27%). In aggregate they employ more than 1.2 million more individuals than large non-financial corporates.
MMCs are also present across all sectors, with 20-30% share of turnover in most industries. MMCs form a higher proportion of the education sector, including many universities and private schools, and the property sector, while being less present in retail and agriculture.
Unlocking MMCs growth potential
Through consultation with over 2,000 of these businesses, the report has identified five challenges mid-market businesses need support to overcome from government, financial institutions and partners to unlock growth.
If these challenges are addressed, it is 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.
The top 5 challenges are:
- Insufficient access to skills – MMCs struggle to fill vacancies at every level (specialist and entry level) and the problem is getting worse;
- Infrastructure and planning restrictions – MMCs are typically more regionally based, limitations in regional infrastructure (e.g., housing, rail/bus links, grid connectivity, broadband) disproportionally affects this segment. Compounded by problems with the planning system;
- 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;
- Lack of self-identity and collective profile – MMCs do not self 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.
Supporting MMCs to drive economic growth
In response to these issues and to provide a unified voice to this critical segment, the bank with the support of the Department of Business and Trade has announced a plan to create a new UK Mid-Market Council, with members representing the primary sectors from across the business sphere.
The first bodies to be announced as members include the British Chamber of Commerce, Confederation of British Industry, Make UK, and XYZ, with NatWest Group chair/CEO set to chair the council.
NatWest will launch the Mid-Market Growth tracker in January, in collaboration with S&P Global. Thought to be the first of its kind, the tracker will provide a quarterly view of sentiment across the UK mid-market, giving an ongoing view of this sector’s sentiment and growth prospects in every corner of the UK.
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 cited knowledge, networks and compliance as 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.
Lisa Phillips, Regional Managing Director of Commercial Mid-Market Midlands at NatWest, said: “Without question mid-market businesses play a pivotal role in the East Midlands economy, employing nearly a third of the workforce. And with the right support and investment, they have the potential and capabilities to have an even greater impact on the region. We look forward to working with our regional partners on developing ways to better support these vital businesses.”
Jonathan Reynolds, Business Secretary, said: “I welcome this report, which describes the vital role that mid-market corporates can play in driving economic growth. As these businesses scale up, they can become tomorrow’s blue-chip quoted companies with global scale and reach. I look forward to working with NatWest and the new Council to ensure that the potential of mid-market corporates is fully realised.”