2013-07-04 London
Mid-sized companies in the UK are outperforming their competitors both in domestic and international markets
Mid-sized companies in the UK are outperforming their small and large counterparts, creating more jobs and adding more value in the last 12 months than any other businesses in the British economy. While only accounting for roughly 1.7 percent of companies, the British Mittelstand contributes almost 40 percent of economic activity, recent data compiled by GE Capital suggests.
While most countries continue to struggle with economic recession, the European mid-market “punches well above its weight, surpassing average national growth to make a substantive economic contribution”, GE Capital’s Richard Laxer said. Taken together, the mid-markets in the UK, Germany, France and Italy create economic output worth $1.64 (£1.07) trillion, which is roughly equivalent to the GDP of Canada.
Britain is home to the most “Growth Champions”, with more high-performing mid-market firms than in the other EU-4 countries, including Germany, the main centre of well-established Mittelstand enterprises. British entrepreneurs, according to GE Capital, have outplayed their European competitors by setting new standards for innovation and expanding into emerging markets. Positive growth projections in the mid-market also coincide with a strong push in confidence by businesses in the UK, where net predicted growth is 2.1 percent compared to 0.5 percent in Italy.
Compared to other EU mid-markets, British entrepreneurs are less focused on manufacturing, instead concentrating on the professional service sector, which employs roughly a fourth of the workforce in the mid-market segment. Companies with an annual turnover of between €20m and €1bn have their greatest market share in the southern region of the UK, which is ranked first in the European mid-market league table.
Yet despite medium enterprises helping to pull the UK’s economy out of recession, further growth is constrained by the ability of these companies to cope with future challenges including declining export levels, the report suggests.
Unlike its British mid-market equivalents or the French ETIs (entreprises de taille intermédiare), German Mittelstand firms benefit from close-knit networks of established supplier structures and access to cheap credit provided by their Hausbanken (house banks), which gives German entrepreneurs a comparative advantage over their competitors in the UK, France and elsewhere. These well-established inter-linkages are what Harvard professor Peter A. Hall calls “institutional complementarities”, which are a major factor in the success or failure of any national production system.
In France, mimicking German management practices has largely failed due to the lack of institutional complementary structures in place. The question remains whether the UK will have a similar experience.
