Defying Gravity

Published on
3 min read

The mid-market is the unsung powerhouse of the UK economy: pre-referendum studies forecast that medium sized businesses (MSBs) would be the fastest growing segment of the UK economy over the following three years.

The mid-market is the unsung powerhouse of the UK economy: pre-referendum studies forecast that medium sized businesses (MSBs) would be the fastest growing segment of the UK economy over the following three years.

But how will they achieve this, and what are the challenges and opportunities for this sector?

In 2015 our Full Scale Ahead report explored the paths to growth for MSBs and the factors affecting the decision of whether to scale up or sell. Since then, the Brexit referendum has led to economic uncertainty so, despite some positive signs and growth, it seems harder than ever to decide which path to take.

To help us better understand the mid-market sector’s experience in the current climate, we recently commissioned a further report, Defying Gravity, which explores the issues faced by business leaders and suggests possible steps to success. We interviewed 500 leaders of UK MSBs, including CEOs, CFOs and company directors, across a range of sectors. We’ve collated their responses into a number of reports, the first of which focuses on funding and growth.

Defiant ambition

Our research supports the pre-referendum growth predictions, finding 66 per cent of MSBs increased turnover last year at an impressive average rate of almost 20 per cent. And, although nearly three quarters (74 per cent) of business leaders believe the mid-market lacks targeted policy support from the Government, they are still ambitious and ready to take on the challenges of an unstable economy and the impact of Brexit.

That said, two thirds (66 per cent) of MSB leaders believe that, while the mid-market have the resources to navigate turbulent times, economic uncertainty will disproportionately affect the sector. Nonetheless, MSBs are confident in their ability to succeed against the odds: 83 per cent of mid-market business leaders are aiming to grow their turnover this financial year (2017/18) by an average of 22 per cent.

Keep your powder dry

This isn’t blind optimism, however. 65 per cent of MSBs are holding onto increased cash reserves in response to heightened economic uncertainty. They may have bold plans but, without government support, there remains an underlying nervousness.

Holding back their financial firepower is also holding back their businesses, as more than half admitted their business would have grown faster if they had invested more of their cash.

As well as a lack of investment from within their business, respondents also highlighted the lack of external funding as a factor that restricts growth. Over half (63 per cent) of mid-market leaders believe the UK funding environment, while great for start-ups, is not doing enough for the mid-market. Raising long-term finance is a particular challenge, as is finding the flexible capital they need to finance their business.

Time for a finance revolution

Our Defying Gravity report clearly demonstrates that the mid-market sector has not only the skill to increase productivity and grow but also the hunger. Unfortunately, while support for start-ups is easy to access, the same isn’t true for MSBs.

Whether it’s a lack of funding itself, or a lack of awareness of the funding options available, the mid-market is missing out. This is why we’re calling for a finance revolution. MSBs make a significant contribution to the UK economy and they need funding solutions tailor-made to their complex requirements.

Our own finance team is well placed to help, having experience in a wide range of innovative funding approaches and would be happy to discuss any funding challenges with you. We are also working with organisations such as the CBI and local enterprise partnerships to champion MSBs and look for viable funding alternatives for these businesses.

As part of our Defying Gravity campaign, we will be releasing a number of detailed reports and holding roundtable events to help businesses realise their potential. To sign up for updates, register for one of our events or simply find out more, go to www.wearedefyinggravity.co.uk.
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