- NatWest’s report, ‘The Critical Middle’ reveals mid-market companies (MMCs) represent just 0.5% of UK companies yet account for 26% of employment and 30% of UK economic GVA
- Since 2014 MMCs have grown 20% faster than rest of the economy, growing productivity at twice the rate of SMEs and Large Corporates.
- 1% growth in this segment could add £35bn gross value add to the UK economy and £115bn in business turnover by 2030
- New private sector Mid-market Council announced to act as voice for this critical sector
A new report issued today by the UK’s biggest business bank NatWest, in partnership with Oliver Wyman and supported by the Business Secretary, Jonathan Reynolds MP, has identified that UK mid-market businesses are the unsung engine of the UK economy:
- Over 13,000 of these businesses exist across the UK, employing 7.3 million Britons;
- They represent just 0.5% of the total number of UK companies, yet each MMC contributes the equivalent of 200 SMEs to the economy;
- They 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 over 1,000 of these businesses, the report has identified five challenges which businesses need support to overcome, from government, financial institutions and partners. If 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.
The top 5 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.
Supporting the UK’s regions
MMCs are crucial to regional economies, often employing a large proportion of their local community. They contribute most significantly to employment in the West Midlands (24%), North East England (23%), Yorkshire (22%), the Humber and Scotland (27%). In aggregate they employ more than 1.2million more individuals than large non-financial corporates.
Supporting MMCs to drive economic growth
In response to these issues and to provide a unified voice to this critical segment, NatWest, with the support of the Department of Business and Trade, has today announced it will create a new UK Mid-Market Council, with members representing the primary sectors from across the business sphere, commencing in 2025.
NatWest is also launching a new Mid-Market Growth Tracker, in collaboration with S&P Global. Thought to be the first of its kind, 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.
Finally, 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:
“Mid-market businesses are a significant growth driver for our economy, playing a crucial role in supporting the UK’s regions as a substantial employer, whilst driving productivity improvements. However, they have the potential to do even more. 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.”
Business Secretary Jonathan Reynolds said:
“This Government’s number one mission is growing our economy - this report provides clear evidence for the vital role that mid-market corporates can play in achieving that. It sets out the contribution these businesses make to regional economies, delivering jobs and increasing productivity across all sectors. The sky is the limit for what these businesses can contribute to the UK. I look forward to working closely with business, and with NatWest, to ensure these firms have the recognition and support they need to overcome challenges and realise their ambitions.”
Shevaun Haviland, Director General of the British Chambers of Commerce, said:
“The potential for mid-market corporates to generate economic growth is staggering, if we can get the frameworks to support them right. These firms have often been overlooked but with their regional influence, high productivity levels, and capacity to boost exports, they deserve greater support and a stronger voice.”
Louise Hellem, Chief Economist at the CBI, said:
“Mid-market businesses have a vital role in driving economic success across the UK. Productive, innovative and ambitious to grow they are lynch pins of regional economies around the UK as well as key players in our national prosperity and international trade. We are proud to speak on behalf of many of them within our membership, representing their voices and perspectives as we engage with government about our shared mission of kickstarting growth. We welcome NatWest’s commitment to this issue and look forward to working with them further.”
Irene Graham OBE, CEO of the ScaleUp Institute, said:
“The focus on UK mid-market companies in this report is welcomed. We estimate that there are nearly 8000 scaleups within the midmarket who are highly innovative and international. Tailoring solutions to the needs of our mid-market scaleups to foster their further growth makes sound economic sense. This reports recommendations mirror the needs our scaling businesses have as regards market access; talent and infrastructure. As the Government progresses its Industrial, business and trade strategies there is opportunity to lean further into this segment through even closer public and private sector collaborations, which we look forward to working on further as part of the MMC Council.”
MMCs driving the UK’s productivity and export performance
The report also 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.
Just 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%. 72% of firms with more than 250 employees export to both EU and non-EU markets.
