With less than two weeks until the intended date of Brexit, the news is dominated by headlines and speculation about when so called ‘B-Day’ will take place. In the last few months these headlines have taken even more of a political steer, with journalists focusing heavily on in-party fighting, votes against ‘no deal’ and of no confidence, and just how the Prime Minister is going to manage to get her peers to agree with her proposed deal.

It seems easy to forget about the UK businesses who will inevitably be the most affected, no matter what the deal. Perhaps most likely to be impacted by Brexit are what BDO refers to as the UK’s ‘economic engine’, mid-sized businesses with turnover between £10-£300m, PE-owned or AIM listed businesses.

Despite making up only 0.5% of total companies they generate around a third of total UK revenue and are often overlooked by government and policymakers in favour of larger FTSE350 businesses or smaller start-ups.

Recent research BDO conducted showed that although the UK’s economic engine grew by 11% in the last year, bringing overall turnover to £1.3tn, this pales in comparison to the accelerated growth witnessed in equivalent EU markets.

Germany saw an upturn of 20% during the same period, while both Italy and Spain welcomed growth of 15%. Of the top five EU economies analysed, only French mid-sized businesses experienced slower growth than the UK, with a 9% increase.

Profit growth tells a similar story, with UK mid-sized businesses recording a 4% profit increase in the last year compared with Spain (37%), Germany (30%) and Italy (24%). Again, only France lags behind the UK having experienced a profit drop of 3%.

The good news is that UK mid-sized businesses still remain the most profitable across the top five EU economies, generating profits of £114bn. Equivalent EU markets in Germany, France and Italy have seen profits of £93bn, £78bn and £54bn respectively, with Spain lagging slightly behind at £50bn.

The news comes just two months after the Bank of England warned that this year the UK economy is likely to grow at its slowest rate since the 2009 recession, despite the Office of National Statistics (ONS) reporting record levels of employment in February.

The uncertain economic outlook is mirrored in other EU markets, with Italy officially entering recession and Germany only narrowly avoiding it in the last few months of 2018.

Since 2016, BDO has been calling on the Government to place ‘overlooked and undervalued’ mid-sized businesses at the heart of its thinking to support growth post-Brexit.

High-performing and entrepreneurially-spirited mid-sized businesses are the economic engine of UK growth. We know that this market grew faster than any other business segment, and created more jobs than larger and smaller businesses combined in the last five years. With this in mind, we are concerned that the government may not be putting the interests of these businesses at the heart of their policy-making.

The nervous economic climate we are facing is inevitable given so much uncertainty around Brexit. We know that none of our policies alone is the silver bullet, but together along with existing government initiatives they could have an incremental gains effect that will help UK business flourish.

What are the five policy areas we believe will help create the new economy? Download BDO’s New Economy report to find out.

Paul Eagland is Managing Partner at BDO.

 

“Since 2016, BDO has been calling on the Government to place ‘overlooked and undervalued’ mid-sized businesses at the heart of its thinking to support growth post-Brexit.”

Paul Eagland, Managing Partner at BDO.

More insights

BDO New Economy

The UK’s economic engine is the driving force behind the economy


Paul Eagland, Managing Partner at BDO, looks at how mid-sized businesses with turnover between £10m-£300m (which we call the economic engine) have...

Read More

AI in manufacturing: change brings opportunity


Tom Lawton, BDO Partner, looks at how manufacturers have a unique opportunity to utilise new technologies and ideas to add real value to their...

Read More

Productivity puzzle banner

Solving the UK’s productivity puzzle: Annual Investment Allowance increase could provide the economy with a £27 billion boost


Tom Lawton, BDO Partner, discusses the latest Manufacturing Outlook results and the need for a 'new economy' to fuel the growth of the sector.

Read More