UK’s mittelstand central to ‘new economy’

CROP- British Manufacturers engineering jobs
Mid-sized manufacturers have seen profits increase at a greater pace than large and small businesses.

Mid-sized manufacturers have outpaced large and small manufacturers’ revenue growth and taken the lead in annual turnover for the sector, according to new research published today by accountancy and business advisory firm, BDO.

In the past five years, mid-sized manufacturing – mittelstand – businesses increased turnover by 29.2% from £158.4bn to £204.6bn. In comparison, large manufacturers grew revenue by 20.8% from £167.8bn to £202.8bn, and small businesses saw an increase of 19.7% from £15.8bn to £19bn.

Mid-sized manufacturers have also seen profits increase at a greater pace than large and small businesses over the same period. Profits have grown by 57.2% from £12.3bn to £19.3bn. Large and small firms experiencing profit growth of 17.6% and -111.8% respectively.

Yet despite having such an impact on the UK economy, mid-sized businesses in the manufacturing sector risk being overlooked as the UK prepares to leave the European Union, according to BDO’s New Economy report.

UK’s mittelstand central to ‘new economy’ - infographic courtesy of BDO.

With so much uncertainty facing the UK, BDO is calling on the government to prioritise the needs of mid-sized companies as one of three areas that policymakers must get right in order to create a ‘new economy’ that can thrive in the post-Brexit environment.

The three areas that BDO is calling upon the government to focus on are:

(i) Encourage the UK’s fast-growth mid-sized businesses (the UK economic engine)

(ii) Create sector and geographic powerhouses

(iii) Ensure open and simple access to global markets and talent

The report’s proposals – which suggest 22 policy recommendations – include a call for the government to:

  • encourage innovation and digitisation for high-growth manufacturers and provide funding to implement Industry 4.0 processes
  • create a long-term Industrial Strategy looking 15 to 20 years ahead
  • remove overseas tax barriers for UK manufacturing exporters to access new markets
  • harness the potential of high-quality apprenticeships to bridge the skills gap and increase productivity – which is a core pillar of the UK’s economic success.

Tom Lawton, partner and head, BDO manufacturing, commented: “Thriving mid-sized businesses are the driving force of growth in manufacturing. They contribute jobs, revenue and profits to the manufacturing sector and the UK economy yet, because they are so hard to define, they are overlooked and undervalued.

“With Brexit and more uncertainty looming, this is the time for the government to engage with sector powerhouses and draw on their natural energy, ambition and entrepreneurial spirit to create a ‘new economy’ and help the UK succeed post-Brexit”.