‘Brittelstand’ firms spearhead stronger growth across UK regions.
OREANDA-NEWS. August 24, 2015. Mid-market companies in all regions of the UK grew more strongly in the past year and outperformed the national economy as a whole, according to GE Capital’s latest annual report on the European mid-market. The average UK mid-market company grew its revenues by 3.9% last year, outstripping overall UK GDP growth of 2.8% and almost closing the gap with Germany’s Mittelstand companies who grew on average by 4.0%. The performance of individual UK regions ranged between 4.3% in the East of England and 3.1% in Wales, with mid-market companies in Scotland most likely to have grown in the past twelve months.
Reflecting their higher levels of growth, UK mid-market companies reported having a more positive outlook for the year ahead than their counterparts in Germany, France and Italy. In the next 12 months, UK mid-market companies expect to grow their revenues by 4.9%, equating to projected UK mid-market revenue growth of ?97.6 billion. They also plan to create an estimated 303,400 new jobs in the next 12 months, representing a 2.7% increase in their workforce compared to only 150,000 in Germany (up 1.8%). Almost half (48%) of all UK mid-market companies are aiming to increase headcount in the next twelve months, more than any other country surveyed.
Perhaps buoyed by domestic growth, GE Capital’s latest report also indicates that some UK mid-market companies are too narrowly focused on their home market and failing to grasp overseas opportunities. Although they are the most confident about prospects for their national and regional economy (62% and 61% respectively), export sentiment has almost halved year-on-year. Only 4 in 10 UK mid-market companies reported having a presence in China, lagging behind Italy, France and Germany. The main barriers cited in the survey for entering new markets were lack of local knowledge and language skills, as well as fear of existing competition in overseas markets.
Ian Wilkins, Leader, UK Commercial & Corporate Lending at GE Capital, commented: “Our research over the past four years has demonstrated the resilience and determination of mid-market companies. This year’s report further highlights their huge potential to drive a more even distribution of growth across the UK. The news is particularly good considering that mid-market companies are responsible for over a third of private sector GDP, revenues and employment. Although small in number – less than 2% of all companies – they are crucial to the success of the national and global economy.
“That said, it’s clear that there are still major challenges to overcome and with companies still crying out for more staff with the right skills to boost productivity and for access to a wider range of financing solutions to take advantage of more opportunities.”
Other key findings in this year’s report include:
· For the second year running skills challenges are foremost in the mind of most mid-market companies, with ‘finding talent with the right skill set in the local area’ and ‘retaining key/talented employees’ cited as the top two hurdles to growth
· The number of mid-market companies reporting access to finance as a problem has fallen from 35% in 2014 to just over one in four (27%) of mid-market companies. However this resulted in an estimated potential ?42 billion total lost in revenue to mid-market companies across the UK
· ‘Growth champion’ mid-market companies who achieved revenue growth of 10% or more in the past twelve months are much more likely than others to have solved any issues around skills and access to finance and be more concerned about complex regulation and market competition.
Lead author of the report, Prof. Nicos Nicolaou of Warwick Business School, said: “UK mid-market companies may be enjoying a period of ‘domestic bliss’ but they need to look further afield to secure long-term growth and keep pace with competitors from other markets.
“The benefits of being active in China are particularly clear from our analysis: the fastest-growing mid-market companies are more likely to have a presence in China. On average the UK mid-market companies who operate in China expect to generate around 13% of all their revenues in that market alone by 2020”.
About the report
This report was authored by Nicos Nicolaou, James Waters and Stephen Roper, Warwick Business School and marks the fourth year of GE Capital and Warwick Business School’s research partnership dedicated to understanding and analysing the “mid-market.” The mid-market is a fast growing segment that represents just 1.67% of UK companies but which contribute over a third of private sector GDP, revenues & employment.
This year’s report is based on a survey of over 4,000 mid-market companies which was designed, managed and executed by Millward Brown’s Corporate Practice between 30th January 2015 and 12th March 2015 in France, Germany, Italy and the UK. All interviews were conducted online with a minimum sample size of 1,000 companies per market. Data was weighted to ensure representativeness by region and industry. Mid-market company definitions are based on the annual revenues of companies, with some variations across markets: UK & Germany = €20m - €1bn / ?15m - ?800m; France = €10m - €500m; Italy = €5m - €250m.
To download a copy of the report, visit the GE Capital UK insights page at www.gecapital.co.uk
About Warwick Business School
Warwick Business School (WBS), located in central England, is the largest department of the University of Warwick and the UK's fastest rising business school according the Financial Times. WBS is triple- accredited by the leading global business education associations and was the first in the UK to attain this accreditation. Offering the full portfolio of business education courses, from undergraduate through to MBAs, and with a strong Doctoral Programme, WBS is the complete business school. Students at WBS currently number around 6,500, and come from 125 countries. Just under half of the faculty are non-UK, or have worked abroad.
About GE Capital in the UK
GE Capital, one of the leading commercial finance providers in the UK, has major offices in Bristol, Manchester and the London area and focuses on providing leasing and lending solutions, from working capital and investment finance through to fleet management and equipment leasing to mid-market customers. For more information, please visit www.gecapital.co.uk
GE Capital Bank Limited, registered in England and Wales No. 02549477, registered address The Ark, 201 Talgarth Road, Hammersmith, London, W6 8BJ. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority to accept deposits. For more information, please visit www.gecapital.co.uk
About GE Capital
GE Capital offers consumers and businesses around the globe an array of financial products and services. For more information, visit www.gecapital.com or follow company news via Twitter (@GECapital).
GE (NYSE: GE) imagines things others don’t, builds things others can’t and delivers outcomes that make the world work better. GE brings together the physical and digital worlds in ways no other company can. In its labs and factories and on the ground with customers, GE is inventing the next industrial era to move, power, build and cure the world. www.ge.com
Exchange rates calculated as at 1st June 2015.