Medium-sized firms urged to think German

The CBI believes that far too many UK companies are under-performing while the so-called Mittelstand firms are driving Germany’s export success. These companies tend to be ambitious, family-owned exporters.

Based on analysis from McKinsey, the business lobby group said that improving the performance of UK firms with a turnover between £10m-£100m could boost the regional economy by £3.6bn by 2020.

At present, just six per cent of companies are producing 60 per cent of the jobs in the medium-sized business sector, claimed the CBI.

Tom Thackray, senior policy adviser, said the sector makes a solid contribution, “but perhaps less than those in other parts of the world. The UK flags behind Germany and France. Six per cent of them are showing what can be done, but the long tail are static”.

According to the CBI, 16.7 per cent of jobs in Yorkshire are in medium-sized businesses, a smaller proportion than in the North East (19.9 per cent) and the North West (19.2 per cent).

“If we manage to get those firms growing it will have a disproportionate impact on those parts of the country,” said Mr Thackray, speaking at an event in Yorkshire.

He said lack of ambition and confidence, difficulty in bringing in new capabilities and shortage of long-term capital are preventing growth.

Mr Thackray added: “We need more options on the equity and debt side. Some other countries such as the United States and Germany steal a march on us in developing these options.”

For example, the Stuttgart Stock Exchange issues bonds from medium-sized businesses to retail and institutional investors. “There’s no reason why we can’t set up a similar initiative in the UK,” he added.

The event, at Leeds Metropolitan University, heard from business leaders who have transformed companies.

Alastair Kitching, chief operating officer of IT services firm Esteem, joined the Wetherby-based company when it was a lifestyle business with sales of £4m and a staff of 14. It now has a £40m turnover, 220 employees and private equity backers.

He said that medium-sized businesses often lack skills and expertise in areas such as human resources, legal and training. They also find it difficult to recruit and retain staff.

Mr Kitching said that SMEs should get a fairer deal in public sector procurement and claimed that Government directives in the last 18 months are making it harder for public sector organisations to award contracts to SMEs.

Jonathan Riley, Yorkshire senior partner for event sponsor Grant Thornton, said professional services firms should challenge businesses to be more ambitious.