Unleashing the potential of mid-sized businesses

26 November 2012

Tera Allas

Deputy Head – Government Economic Service

Director General – Strategy, Analysis and Better Regulation, BIS

2

Unleashing the potential of mid-sized businesses: today’s discussion

• Mid-sized businesses are an important part of the UK economy, with many attractive characteristics

• However, mid-sized businesses face specific challenges that limit their current potential

• Addressing these challenges is fundamental to achieving strong, sustainable and balanced growth

• The government has put in place a number of programmes to help unleash this potential

GE Capital

BIS

CBI

3

The definitions of “mid-sized” vary but refer broadly to turnover of £25-£500m

Definitions of mid-sized businesses

Number of employees

An

nu

al t

urn

ove

r, £

m

European Commission

Note: positioning of the shapes is illustrative, not precise

4

Mid-sized firms contribute around a fifth of employment and turnover in the UK

0.5

21.2 19.7

0%

10%

20%

30%

40%50%

60%

70%

80%

90%

100%

# ofbusinesses

Employmentof all

businesses

Turnover ofall

businesses

Small and largebusinesses

Mid-sizedbusinesses

Contribution of mid-sized businesses to all businesses in the UK

Source: Growth review: Mid-sized businesses evidence base, Department for Business, Innovation and Skills, November 2011

5

The number of mid-sized businesses has grown rapidly since 2005

No. of private-sector registered firms, by size category

80

85

90

95

100

105

110

115

120

125

130

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

No

. o

f fi

rms

(in

de

xe

d t

o 1

99

7=

10

0)

Small Mid sizedLarge

Source: Growth review: Mid-sized businesses evidence base, Department for Business, Innovation and Skills, November 2011

MSBs

6

Innovation is a key driver of growth for mid-sized businesses in the UK

% of revenue derived from innovation by company size 2009

Source: Future champions: Unlocking growth in the UK’s medium-sized businesses, CBI, October 2011

MSBs

MSBs

7

Within a mixed picture, some mid-sized businesses achieve very high growth

Source: Growth review: Mid-sized businesses evidence base, Department for Business, Innovation and Skills, November 2011

High-growthMSBs

8

Unleashing the potential of mid-sized businesses: today’s discussion

• Mid-sized businesses are an important part of the UK economy, with many attractive characteristics

• However, mid-sized businesses face specific challenges that limit their current potential

• Addressing these challenges is fundamental to achieving strong, sustainable and balanced growth

• The government has put in place a number of programmes to help unleash this potential

9

Relative to comparator countries, the UK mid-sized business sector is under-weight

Source: Mid-sized Businesses in Finland, France, Germany, Sweden and the UK – General Statistics, NIESR, December 2011

Mid-sized businesses as % of turnover of all businesses

32.8

32.0

31.5

30.5

19.7

Sweden

Finland

Germany

France

UK

10

A number reasons may be responsible for the relative “under-performance”

Drivers of mid-sized business (MSB) sector contribution

MSBs as % ofall business

turnover*

MSBs as % ofall businessemployment*

MSB turnoverper employee(productivity)*

Average turnoverper employee inspecific sectors*

MSB sector mix(relative to allbusinesses)*

Number of MSBsas % of number

of all businesses*

Average numberof employees

per MSB*

MSB specificproductivitydifferences*

* Compared to other countries

“Population”

“Size”

“Sector mix”

“Productivity”

11

UK mid-sized firms’ productivity is considerably lower than other countries

Source: Mid-sized Businesses in Finland, France, Germany, Sweden and the UK – General Statistics, NIESR, December 2011

Turnover (in €) per employee of mid-sized businesses 2009/10

221

268290 290 301

UK Germany France Finland Sweden

12

UK mid-sized businesses’ productivity is relatively poor in all sectors

Source: Mid-sized Businesses in Finland, France, Germany, Sweden and the UK – General Statistics, NIESR, December 2011

Turnover (in €) per employee of mid-sized businesses 2009/10

256

228

206

279

363

293

Manufacturing

Otherproduction

Services

Average of EUcomparators*

UK

* Finland, France, Germany, Sweden

13

Only 26% of UK mid-sized businesses export more than 50% of their turnover

Source: The Financial Times, 23 October 2012; BIS analysis

46

17

11

9

17

Export more than 75% of theirturnover

Export 50-75% of their turnover

Export 25-50% of their turnover

Export less than 25% of theirturnover

Do not export

Mid-sized businesses’ export intensity in the UK % of total mid-sized business population

26%

14

UK mid-sized companies employ fewer graduates than those in other countries

% of managers in mid-sized firms with a degree 2011

Source: Future champions: Unlocking growth in the UK’s medium-sized businesses, CBI, October 2011

15

Unleashing the potential of mid-sized businesses: today’s discussion

• Mid-sized businesses are an important part of the UK economy, with many attractive characteristics

• However, mid-sized businesses face specific challenges that limit their current potential

• Addressing these challenges is fundamental to achieving strong, sustainable and balanced growth

• The government has put in place a number of programmes to help unleash this potential

16

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011 2012 2013 2014

Pe

rce

nta

ge

po

ints

Private consumption Business investment Other private investment

Government Net trade

GDP Growth Forecasts

0.9% 0.7% 2.1% 2.7%

Business investment and trade are instrumental to UK’s economic recovery

OBR* forecast of contributions to GDP growth 2011-2014

* The independent Office for Budget Responsibility

Businessinvestment

17

Mid-sized businesses are particularly important in our key export sectors

Source: Growth review: Mid-sized businesses evidence base, Department for Business, Innovation and Skills, November 2011; Industrial Strategy: UK Sector Analysis, Department for Business, Innovation and Skills, September 2012; * UK Exports by Category of Goods and Services, ITC Trade Database

In top 5 export categories* in 2010

18

Growth of existing mid-sized businesses would contribute to regional rebalancing

Sou

rce:

Fut

ure

cham

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s: U

nloc

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gro

wth

in th

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K’s

med

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-siz

ed b

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esse

s,

CB

I, O

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19

5.2%

1.4%

8.3%

3.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Innovation activefirms

Not innovationactive firms

Other graduates

Science graduates

Employing graduates is correlated with innovation and firm growth

Graduates as a proportion of all employees in innovation active and not innovation active firms 2008

Source: UK Innovation Survey 2009

13.5%

4.6%

20

Unleashing the potential of mid-sized businesses: today’s discussion

• Mid-sized businesses are an important part of the UK economy, with many attractive characteristics

• However, mid-sized businesses face specific challenges that limit their current potential

• Addressing these challenges is fundamental to achieving strong, sustainable and balanced growth

• The government has put in place a number of programmes to help unleash this potential

Support investment and exports

Competitive tax system

The Plan for Growth sets out the government’s strategy under 4 ambitions

£££

Educated and flexible workforce

Best place to start and grow a business

21

22

A number of initiatives are driving our support to mid-sized businesses

Spring 2011 Autumn 2011 Spring 2012 Autumn 2012

Plan for Growth

Mid-sizedbusinesses

growth reviewIndustrial strategy

Lord Heseltinereview andresponse

Implementation

Examples:• New equity for

MSBs: Business Growth Fund

• Red Tape Challenge

• Presumption in favour - planning

• Reducing main corporation tax rate from 28% in 2011 to 22% by 2014.

Examples:• Export support for

MSBs across English regions, eg IP advice and ‘mini-MBA’

• 8 LEPs agree pathfinders to raise MSB profile

• Business School Task Force – report 22 Nov

Examples:• Advanced

Manufacturing Supply Chain Initiative: £125m

• Breedon review, development of £1bn Business Bank

Examples:• Strengthened

role for Chambers, esp. in exports

• Stronger LEP capability and influence

23

Good progress is being made on growth measures and commitments

Status of Plan for Growth Phase 1 and 2 deliverables100% = 250+ measures

39%

61%

CompleteProgress Made

Examples of impact

Apprenticeships• Over 500,000 took up apprenticeships in

2011/12, in over 200,000 workplaces• Extending ‘Higher Apprenticeships’ • 2/3 better paid on completion

Investment and exports• 23,000 companies supported by UKTI in

2011/12; on target for 32,000 in 2012/13• Over £1.5bn High Value Opportunity

wins since launch in 2010• Securing over 1,400 investments from 58

countries in 2011/12

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These and other actions can boost mid-sized businesses’ contribution further

95%

31%20%

10%

15%

15%

9%

13%

14%

18%

41%51%

63%

0%

20%

40%

60%

80%

100%

Enterprises Employment Turnover Exports

Micro (0-9 employees) Small (10-49) Medium (50-249) Large (250+)

Source: BIS Business Population Estimates 2011; *DTI Economics Paper 18 2006 & OECD Statistics Brief Feb 2011

4.5m 23.4m £3,100bn £391bn*100%=

UK economic statistics by size of firm 2011*

Key source of

growthpotential

Unleashing the potential of mid-sized businesses

26 November 2012

Tera Allas

Deputy Head – Government Economic Service

Director General – Strategy, Analysis and Better Regulation, BIS