Now the dust has settled from the general election, it’s time to take stock and assess how the government can continue to boost the economy.
There is no doubt that it will look to support small and startup businesses, especially from a funding perspective, and I wholly support this, but it must avoid alienating one of the fastest growing sectors of the economy – the mid-market.
A recent study found that the turnover of UK mid-market companies is now £1.4tn, exceeding that of the German Mittelstand and making the UK mid-market sector the largest in Europe. On the continent, the Mittelstand is seen as the engine room of the German economy, driving growth throughout the country. So why is the UK mid-market, Europe’s leader, not regarded as the backbone and lifeblood of the British economy?
The answer is simple – not enough support is given to the sector. The only way this can be achieved is if it receives support from finance providers and the government. During the last parliament, the government introduced the Funding for Lending scheme to help mid-market businesses access capital. Growing competition for the traditional banking landscape from challenger banks has helped heal the funding wounds of many medium-sized firms to a degree. However, more needs to be done and I have outlined some ideas that could be implemented to support the sector:
1. The government needs to look at employment in the sector. Many small and medium-sized firms believe a lack of access to skilled workers is an obstacle to their growth. Mid-market businesses are falling victim to larger corporates offering lucrative apprenticeships and internships to graduates, leaving many medium-sized firms without the necessary resources to perform and grow. Introducing an initiative to combat this, by giving small and medium-sized businesses access to graduates and jobseekers through skills-based learning schemes, would support the economy from the bottom up.
2. When looking at taxes, any gradual reduction of mid-market business rates is likely to help. Furthermore, any tax incentives for budding entrepreneurs will again fuel the economy from the bottom up and release the burden that small and medium-sized firms are feeling from the tax dealings of large corporates.
3. It is important to remember that we are not looking solely at a London issue. Many mid-market firms operate out of the north of England so the government needs to continue to introduce ways to serve an ever-growing “northern powerhouse”. Cities such as Leeds, Manchester and Newcastle will all require similar funding and tax breaks, as well as access to the best employees across the country.
Funding small business was always going to be a feature of any elected government, but what is to be done outside of funding has not yet been defined. Support for the mid-market would be a sensible place to start.
Jervis Rhodes is head of corporate banking at Bank of London and the Middle East (BLME)
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