Pick your analogy. Whether it’s the starting gun being fired or divorce proceedings being issued, Theresa May’s Article 50 letter will be sent tomorrow kicking off the most complex set of negotiations in living memory.

 

As the process for leaving the EU begins, advice will come from all quarters as the Prime Minister tries to maintain the awkward balancing act of withdrawing from the single market while signalling that Britain remains open for business.

Theresa May won’t thank me for adding to her list but there is one area that she must focus on that is currently being overlooked – the entrepreneurially-spirited, mid-sized businesses that are driving UK growth.

To prove my point it’s worth looking at where growth is coming from in the UK economy.

Let’s begin by looking at businesses that generate overseas revenue for the UK. In the last five years mid-sized entrepreneurial businesses have grown international turnover by 50% from £84bn to £127bn.  This growth significantly outstrips that of UK FTSE 350 and small businesses which in fact have fallen 14% (£425bn to £366bn) and 25% (£13.9bn to £10.4bn) respectively.

Now examine UK revenue and profit growth figures. Mid-sized businesses again outperform their large and small counterparts increasing revenues and profits by 3.8% and 19% respectively compared to smaller businesses (turnover contracting by 7.6% and profits contracting by 26%) and FTSE 350 companies (turnover contracting by 12.6% and profits contracting by 24.5%).

And finally look at job creation. Mid-sized businesses have increased their workforce by 11% compared to large businesses (4.5%) and small businesses (9.2%).

At BDO, we call these mid-sized high-growth businesses – for obvious reasons – the UK economic engine.  On any measurement, these entrepreneurial businesses are making a massive contribution to growth in the UK economy yet their needs are rarely discussed.

In some ways this is easy to understand. Mid-sized businesses aren’t as simple to characterise as smaller start-ups or the big FTSE giants. Mid-sized businesses are more disparate and consist of privately-owned businesses, AIM-listed companies and private equity-backed firms.

But putting this to one side, it is also clear that mid-sized businesses are fundamental to the Government’s vision of the UK economy and can meet many of its policy objectives.

The Government has an ambition to create powerhouses in the regions by investing in the north and midlands. Unlike large businesses which have a big footprint in the South East, mid-sized businesses exist evenly throughout the UK and by boosting mid-sized companies you therefore lay the ground for rebalancing the economy.

The Government also has an ambition to build growth in key sectors across the UK principally through its industrial strategy. Mid-sized businesses sit at the heart of all the key business sectors and by boosting mid-sized companies you are supporting sectors like manufacturing and tech.

And, most crucially, as the Government is poised to lick the stamp on the Article 50 letter, mid-sized businesses are the driver or international growth and are therefore the businesses that can help forge new relationships globally.

 

So what should be done?

BDO’s ‘new economy’ report suggests 22 policies that will help the UK thrive post-Brexit and support the UK’s high growth entrepreneurial businesses. As a starter we would like to see a VAT zero rating on supplies to companies that export once Brexit negotiations are finalised and a call for the UK Government to battle hard for a variant of financial passporting as part of the Article 50 negotiations.

High-performing and entrepreneurially-spirited mid-sized businesses are the economic engine of UK international growth.  The success of these businesses should not be taken for granted and, while they have taken calculated risks and prospered, the Government must factor their needs ahead of the start of EU negotiations.

 

Paul Eagland is Managing Partner at BDO.  

“Theresa May won’t thank me for adding to her list but there is one area that she must focus on that is currently being overlooked – the entrepreneurially-spirited, mid-sized businesses that are driving UK growth.”

Paul Eagland, Managing Partner, BDO

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