Medium-sized businesses (MSB’s) are the unseen engine of the British economy, even though there’s far more that they can do. If the UK’s 8,900 MSB’s managed to unlock their potential, according to a recent report, then they would be worth between £20bn and £50 billion to the UK economy. It’s no wonder, then, that they are considered such an integral part in the Government’s plans to strengthen the UK’s economic position, and why both UKTI and the Government have devoted a special focus to achieving their potential.

A vital role
The number of MSB’s in the UK is on the rise. Since the 2007 downturn, UK MSB’s have increased by 5%, outperforming both small and large businesses in this respect. Despite this, MSB’s make up a mere 0.5% of overall businesses. Even though they comprise a small number of companies, they punch well above their weight, accounting for a fifth of employment and turnover in the UK.

Facts like these have led Grant Thornton, an organisation of independent assurance, tax and advisory firms, to dub MSB’s the UK’s “secret success story”. In their Agents of Growth report, they say that overall MSB’s have contributed £270bn to the UK economy so far, which is slightly more than the real estate sector (£158bn) and the financial services sector (£108bn) combined. This shows the important role that MSB’s play within the existing economy – a role that has often gone unrecognised.

Untapped opportunity
While this area is performing strongly, it has yet to realise its full potential. Most MSB’s trade solely within the parameters of the EU, with only 17% of UK MSB’s trading outside of this region. This is in contrast with rates of 25% in Germany and 30% in Italy. Confining their activities to this area in an age of globalisation means that many UK businesses are missing out on tangible opportunities for growth. Speaking in Staffordshire during February, Minister of State for Trade and Investment Lord Livingston addressed this, stating that MSB’s “have the potential to be economic powerhouses for the UK economy, creating jobs and growth for all regions of the UK”. He went on to explain to businesspeople that UKTI supports and helps businesses to excel. The Government and UKTI don’t just want British companies to trade abroad – they want them to thrive.

Major potential
In their recent report Future Champions: Unlocking Growth in the UK’s Medium-Sized Businesses, the Confederation of British Industry (CBI) state that realising the unlocked potential of MSB’s would release between £20 billion and £50 billion into the economy, which would undoubtedly have a beneficial effect. There is scope for expansion in vision; less than one in ten UK MSB’s access the equity markets. German MSB’s produce twice the number of jobs than the UK MSB’s do, so there is also room for improvements in this area.

Once UK MSB’s reach a certain level of expansion, growth can stall. This is attributed to many things: risk aversion, or a challenging economic climate have often been cited as reasons. The CBI has stated that the biggest barriers for UK MSB’s is actually appetite and strategy. “They have got to want to grow and they have got to get the partners to help them grow,” said CBI Director General John Cridland. The Government wants to ensure that MSB’s are not held back from succeeding by a lack of Government support, filling in the ‘limbo zone’ between significant supports for the smallest start-ups and the economies of scale given to a large company.

Changing the picture
The Government, through UKTI, has introduced a package of supports aimed at enabling UK MSB’s to succeed at home and, especially, abroad. Lord Livingston announced the package in January of this year. UKTI will now be offering trade advice that is tailored not only to MSB’s in general, but to the needs of individual businesses. In addition to this, there will also be a range of supports on offer to enable them to begin exporting to Europe and beyond.

The influence for this approach comes from the German Mittelstand model. The name ‘Mittelstand’ refers to the large group of small and mid-sized companies that form the backbone of the German economy. These companies employ around 70% of the German workforce and, crucially, are highly focused on the export market. Most focus on high value products, such as chemicals, machinery, auto parts and electrical equipment. These businesses tend to have a laser-like focus on their industry, learning how to do one thing to a high standard, and then diversifying for maximum market penetration.

The scope of this UKTI initiative is not localised. Its aim is to bring prosperity throughout the country. Indeed, with the Department’s help, companies in the East Midlands alone brought in new business worth £4.7bn in the last year.

Eligibility
In order to qualify for the supports, a company needs to have a turnover of between £25m and £250m. Companies based in Northern Ireland, Scotland or Wales should check with their devolved administrations trade and investment organisations to check if they are eligible for UKTI trade advice and supports.

UKTI support package for MSB’s
UKTI is committed to helping MSB’s throughout the UK. It has regional International Trade Teams who are responsible for implementing the programme in each area. The exact package of services required by a business would vary, but would include some of the following: on application, each company will be assigned a local UKTI trade expert who will work directly with them to help each MSB identify the best market for them. International Trade Advisers will help develop a business strategy that suits the individual needs of each business, and help devise a marketing plan to complement this. MSB’s that participate will also be directed to information sources that pertain to them and their industry, and will also have access to UKTI’s global network.

One of the most challenging aspects for MSB’s looking to expand into the overseas market is finding the funds to do so, and difficulties in this regard has been cited in a recent CBI publication as a reason why businesses choose not to export. UKTI want to level the playing field for MSB’s, who often find it difficult to secure financing through traditional channels. Companies that participate in the programme will have the opportunity to apply for support from UK Export Finance, which will make the plan a lot more realistic. There’s also the opportunity to have a Intellectual Property Health Check, which will assess your company’s intellectual property, and what you can do to secure it.

At the beginning of April, Chancellor of the Exchequer George Osborne announced that a further £4m would be invested through UKTI in order to triple their international trade advisors, making UKTI able to support a wider number of MSB’s than previously imagined.

The additional funds will also allow for an expansion of the services available. These include access to High Value Opportunities in major overseas projects. Opportunities also exist to participate in MSB trade missions, which are an excellent way to build and develop new business relationships. UKTI will be supporting membership of regional mid-sized business clubs to assist with networking among these firms. In addition to this, there will also be educational supports through access to appropriate postgraduate placement opportunities that would suit your business.

UKTI has over 2,180 staff members and operates in 107 Markets throughout the world, so wherever you’re hoping to expand to, there will be someone qualified to give you up to date advice. If you are running a medium-sized business, and want to kick-start your next phase of growth, contact your local UKTI team or visit gov.uk/ukti to find out more.