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UK Mittelstand to outpace European rivals

June 23, 2014 12:02 am

UK Mittelstand to outpace European rivals

By Brian Groom, Business and Employment EditorAuthor alerts

Britain’s neglected medium-sized companies expect to grow faster than their mainland European rivals during the coming year, but they are being held back by the UK tax system, business leaders say.

UK mid-market companies are narrowing the performance gap with Germany’s admired Mittelstand, according to research by GE Capital, the finance provider.

For the year ahead British medium-sized businesses – those with annual turnover of £15m-£800m – expect sales to grow by 6.1 per cent, compared with 4.8 per cent in Germany, 3.8 per cent in Italy and 3.4 per cent in France.

They also expect to create 326,000 jobs in the next 12 months, against 150,000 in Germany, and to increase exports more than the other three countries.

More than one in three UK mid-market businesses that had offshore activities were considering “reshoring” some of them, the research found.

The overall picture is of British and German companies expanding as their economies recover, while their French and Italian counterparts still struggle with weak demand and cost control issues.

“The mid-market is very significant in terms of jobs and the potential to generate growth and wealth for the future,” said Stephen Roper, professor of enterprise at Warwick Business School, the report’s author.

However, a separate report by the CBI employers’ group and accountants Grant Thornton warned that the UK tax system was acting as a brake on growth of medium-sized businesses.

These companies do not have the resources of large companies to navigate tax rules, nor do they receive the support the government directs at small businesses, it said.

The CBI/Grant Thornton report called for changes to the tax system, including measures to improve cash flow, wider access to research and development tax relief, and easier access to export.

“We need our growing businesses to invest, innovate and break into new markets to secure the long-term health of our economy,” said John Cridland, CBI director-general. “The UK’s tax system should support these entrepreneurs to do this, but in many cases it is actually working against them.”

The GE Capital study found that, while UK mid-market companies were optimistic about the outlook for sales and workforce growth, skills shortages and attracting and keeping top management talent were growing problems.

Prof Roper said the UK and German mid-markets were both growing, but the Mittelstand still had a big advantage in its skills training and productivity.

Lord Livingstone, UK trade minister, said the report was “very encouraging” for mid-sized businesses. “I’m particularly pleased to see their entrepreneurial attitude to exports, which is critical to growth,” he said.

 

 

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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