October 24, 2011

Medium sized companies key to growth says CBI

by Jan Harris

The CBI has called for the government to support the ‘forgotten army’ of mid-sized businesses, as they have the potential to expand quickly and help Britain prosper.

The government should improve access to finance, especially in the bond markets, for mid-sized firms, the CBI said.

John Cridland, the organisation’s director general, applauded Germany’s “Mittelstand” – around 3.5 million companies with fewer than 500 employees and annual sales of less than 50 million euros, which together employ 78.5 per cent of the German workforce and generate 53 per cent of the country’s GDP.

Mr Cridland suggested that the UK should emulate this model by fostering a core of medium-sized firms with access to new kinds of finance.

Research commissioned by the CBI from consultants McKinsey found that many mid-sized firms lacked management ability and that family-owned companies run by sons on average underperformed.

The CBI suggest that these companies should be more ambitious and should consider recruiting professional executives with university educations to their leadership teams, rather than passing roles down to family members who may lack the business skills needed to take the company to the next level.

Although mid-sized companies account for fewer than 1pc of all UK businesses, together they employ around 16 per cent of the workforce and contribute almost a quarter of GDP.

Yesterday, the CBI warned that a planned business tax increase in Scotland could deter large retailers from investing in the country.

A new, public health levy is being introduced on large retailers of alcohol and tobacco.

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