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December 9, 2014

MID-SIZED FIRMS ADD £50BN TO UK

The latest research from Grant Thornton’s Agents of Growth series, written in conjunction with Cebr, released this week ahead of the Autumn Statement, show that the medium-sized business (MSB) segment has continued to drive the UK economic recovery, contributing £262 billion GVA to UK GDP in 2014. Through the year, MSBs have again delivered a stronger performance than smaller and larger firms in 2014, reporting higher annual growth in capital investment, gross profits, and salary.

 

MSBs reported average salary growth of 2.3%, compared to 2.1% for small firms, and 2% for larger businesses, and it’s estimated that MSBs injected £152 billion into household finances in 2014 through total employee remuneration.

 

Capital investment spending by MSBs was up 3.4% in 2014, compared to 2.4% and 2.8% for small and large companies, respectively. And their average annual increase in gross profits was up 4.9% (small: 4.4%; large: 3.8%).

 

Looking forward, MSBs expectations for 2015 are also better than those of their smaller and larger counterparts. They are anticipating faster growth in turnover (6.7%), exports (4.5%), capital investment (2.8%), and employment (2.7%) than the UK business population as a whole. If 2015 expectations are met, MSB GDP growth will stand at 5.8%, considerably higher than overall UK GDP growth expectations of 3.5%*. To put this into context if the trends continue, MSBs could be contributing £413 billion GDP annually to the UK economy by 2020 (up from £294 billion in 2014).

 

However, whilst MSBs have performed extremely well, our research has shown a flattening in turnover, down 0.6% to £708bn, and dip in productivity of 2.7%, indicating there is more support to be offered and they are still experiencing barriers to growth.

 

In the research, one quarter of MSBs highlighted lack of skilled talent as a major constraint to their continued success, as well as regulation and red tape (20%), and economic uncertainty (18%). If MSB growth continues to be weighed down by factors such these, it could impact their contribution to the UK economy by £50 billion between 2015 – 2020.

 

Scott Barnes, CEO of Grant Thornton UK LLP, commented: “MSBs have done fantastically well through the crisis, and continue to outperform the market across many important metrics and supporting our view that dynamic MSBs are critical to driving the UK’s economic growth.

 

“Of continued concern however, especially given the widening trade deficit, is that whilst they have high expectations about their growth propsects, this year the reality is that they have fallen behind despite the launch of targeted efforts from UKTI. Added to the flattening in turnover and dip in productivity performance, it suggests more needs to be done to promote productivity and growth, particularly looking at : skills, exports and incentivising businesses to invest and innovate.

 

“These results should raise a flag to the Government that more needs to be done to support these businesses. Our forecasts show there is a wealth of potential yet to be unlocked from MSBs, but they need to be fully acknowledged and enabled by the Government, to realise this. From our on-going discussions with government and policy makers we know that this work is beginning to gather pace, and would call for even more focus and support for this engine room of the economy.”

 

*Cebr forecast

 

To access the report in full via the Grant Thornton website, click here

 

For further enquires please contact:

 

Wendy Watherston

Head of PR

T 020 7728 2309

EWendy.Watherston@uk.gt.com

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