Mid-sized businesses in the UK are being outpaced by their EU rivals in terms of revenue and profit growth.
Against a backdrop of Brexit concerns, warnings of an economic slowdown, and a steep decline in business confidence, research published today by accountancy and business advisory firm BDO LLP shows that turnover growth of the UK’s mid-sized businesses increased by a healthy 11% in the last year, bringing overall turnover to £1.3trillion.
This pales in comparison, however, to the accelerated growth witnessed in equivalent EU markets, with Germany seeing an upturn of 20% during the same period, while both Italy and Spain welcomed increases of 15%. Of the top five EU economies analysed, only French mid-sized businesses experienced slower growth than those in the UK, with a 9% increase bringing overall turnover to £1.8tn in the last year.
Profit growth tells a similar story to revenue growth with UK mid-sized businesses recording a 4% increase in the last year compared with a 19% increase in the previous year. European counterparts Spain, Germany and Italy experienced significantly higher profit growth of 37%, 30% and 24% respectively. Again, only France lags behind the UK having experienced a profit drop of 3%.
UK mid-sized businesses still remain the most profitable across the top five EU economies, generating profits of £114bn. Equivalent EU markets in Germany, France and Italy have experienced profits of £93bn, £78bn and £54bn respectively, with Spain lagging slightly behind at £50bn.
The news comes less than a week after the Chancellor announced in his Spring Statement that the forecast for UK economic growth has dropped by 0.4% for 2019, to just 1.2%, despite the Office for National Statistics (ONS) reporting record levels of employment in January and February.
The uncertain economic outlook is mirrored in other EU markets, with Germany narrowly avoiding recession in the last few months of 2018 and the French economy growing by just 1.5% compared with the government’s 1.7% forecast.
Since 2016, BDO has been calling on the Government to place ‘overlooked and undervalued’ mid-sized businesses at the heart of its thinking to support growth post-Brexit.
These mid-sized businesses – which BDO calls the UK economic engine – are made up of mid-market businesses with a turnover of between £10m and £300m, AIM-listed companies and private equity owned businesses. Despite making up only 0.5% of total companies they generate around a third of total UK revenue.
Paul Eagland, Managing Partner at BDO, says: “High-performing and entrepreneurially-spirited mid-sized businesses are the economic engine of UK growth. We know that this market grew faster than any other business segment, and created more jobs than larger and smaller businesses combined in the last five years. With this in mind, we are concerned that the government may not be putting the interests of these businesses at the heart of their policy-making.”
In response to its concerns, BDO has set out a five-point policy plan which it thinks will support the UK’s mid-sized businesses post-Brexit. The ‘New Economy’ plan focuses on a number of domestic policies including simplification of the UK tax structure and a focus on tackling the UK skills gap.
Eagland adds: “The nervous economic climate we are facing is inevitable given so much uncertainty around Brexit. We know that none of our policies alone is the silver bullet, but together along with existing government initiatives they could have an incremental gains effect that will help UK business flourish.”
Summary of key research
|Turnover th GBP Last available yr.||1 year turnover increase||Profit (Loss) before taxation th GBP Last available yr.||1 year profit (loss) increase||Total Number of companies|