Accountancy and business advisory firm BDO LLP has turned its attention to the driving force behind much of the recent recovery – the mid-market of our economy.
Previously, BDO produced the Central South Report, which looked at the performance of the top 150 companies in the region. But with the ‘mighty middle’ driving business growth, BDO is putting the mid-market firmly on the map.
Defining the mid-market as companies with £10m – £300m turnover, during the next six months BDO will reveal some of the best performing South Central mid-market companies in each of three categories: international activity, growth and innovation.
The launch was marked last month by a private lunch hosted by BDO for 14 of the most senior members of the region’s leading banks, law firms and other influential bodies.
Malcolm Thixton, partner and head of BDO in Southampton, opened the discussion by outlining the importance of the mid-market to the region: “Quite simply we see mid-market companies as the Central South’s best chance for sustainable and dynamic growth. In our region the mid-market may only represent 9% of companies, but it employs 45% of the workforce and generates 48% of the region’s revenue. These medium-sized businesses (MSBs) are big business. They tend to be amalgamated with smaller companies in the term ‘SME’, yet their needs are very different which is why it is important to look at them separately.”
The group agreed that it was important to develop strong relationships with each mid-market company, as they don’t define themselves as being the same as each other. “The factors that draw them together are their locality, the drive for growth and innovation,” said Terry Koizou, Relationship Director, Mid-Markets at Lloyds Bank Group. “We have seen such changes in technology and globalisation that these companies are nothing like they were 20 years ago.”
Manoj Styche-Patel, Head of Corporate at Blake Lapthorn Solicitors said he observes a growing confidence in the mid-market, but that it is yet to fully translate into activity on the ground. The group agreed that many businesses of this size feel unsupported. Ian Workman, Head of South West Region for Barclays Mid Corporate commented during the launch: “In our experience, some clients feel there is a lot of external support for micro-businesses up to £2-3 million, and for the largest of companies that employ a lot of people, but the mid-market in comparison is overlooked.”
“There are grants and funding available to them,” countered Dan Salanson, Head of Corporate and Institutional Banking at RBS, “but it’s difficult to clarify what’s available to whom and how to access it. I am aware that the Chamber and the LEP are working hard to bring some clarity to this area but personally I think that all the banks have a bigger role to play in helping their customers to understand the different sources of funding that may be available to them.”
Stewart Dunn, newly appointed Chief Executive of Hampshire Chamber of Commerce concurred saying, “With reference to funding and grants, the Chamber and the LEP are working hard to establish the Solent Growth Hub which will help small and medium sized companies find the correct business support for their needs.”
Stuart Lisle, Tax Partner at BDO pointed out that mid-market companies investing in research and development are still missing out on tax credits: “The Government introduced R&D Tax Credits in 2000 as a way of driving innovation in SME’s and I am constantly amazed at how few mid-market companies have heard of them. R&D tax credits provide up to 225% tax relief and in just one example recently, we helped a company gain £18m relief in cash.”
The equity markets are opening according to Helen O’Kane, M&A Director at BDO which is good news for the sector. She says: “It’s harder to achieve growth when you are already a reasonable size; many mid-sized companies have built up cash in the business but haven’t invested as they haven’t known what to do with it. It’s not always about innovation as much as how to grow.”
And the growth from the mid-market is increasingly coming from exports. According to Stewart Dunn, the Export Documentation handled by the Chamber is up by around 20%, which mirrors BDO’s findings in its research into those mid-market companies growing their international business.
Arbinder Chatwal, Head of India Advisory Services at BDO reported: “There are around 300 companies in the region doing significant exports, activity which has grown around 20% in the last three years. Those growing their exports fastest are £10-100m turnover and it’s interesting that there are new names on the list. Many are not yet aware of how to handle new complexity such as international taxation, situations that implicate the bribery act, or access to finance. All of these are examples of how professional advisors are becoming more and more important to the UK’s growth in export”
