South of England now highest-performing region across Europe's four largest economies, GE Capital report finds
British mid-market firms are close to matching the revenue growth of the famed German Mittelstand, according to a report by GE Capital on European mid-market.
However, the strong sales growth of £55.4bn is yet to translate into German-style job creation. Medium-sized UK firms created 67,000 roles in the last year, but it could have been 80,000 had it matched the pace in Germany's heartland of medium-sized firms.
The chief executive of GE Capital UK, Ilaria del Beato, said: "Our research shows that mid-market firms really are the drivers of UK GDP and are absolutely essential to future economic prosperity."
Across major western European markets Britain has the highest proportion of what the report calls "growth champions" – firms that have reached exceptional revenue growth of more than 10% over the past year.
However, regional differences are clear in the UK mid-market's overall performance. Firms in the north of England grew by only 1.2% last year, compared with 3% in the south. This means the south of England is the highest-performing region across Europe's four-largest economies. Professor Stephen Roper, of Warwick Business School, warned "this needs to be addressed to enable the rebalancing potential of the mid-market to be achieved".
John Cridland, CBI director-general, said that despite these firms being "small in numbers [they] are big on impact", just 1.67% of British mid-market companies provide more than one-third of private sector GDP, revenues and employment.
He added: "To maximise their growth potential the government must ensure they can access the skills they need by giving employers more control over the design and funding of apprenticeships, and improving access to export support schemes so they can tap into fast-growing overseas markets. This report is a timely reminder of the importance of medium-sized businesses to the British economy."
The growth of UK firms has led them to predict average growth of 2.1% next year; the most bullish of Europe's largest economies. That compares with 1.7% in Germany, 1.4% in France and 0.5% in Italy.
Of the mid-market firms from Europe's largest economies, only 44% of British mid-market firms believe that remaining in the EU is vital for growth. This contrasts with the 67% in Italy and 63% in France.
Compared with 0.2% growth in Italy, the average UK mid-market firm has grown by 2.3% in the last year. A mid-market firm is defined as having annual turnover of £15m-£800m. Despite these figures representing a reduction on growth on the previous year, they highlight the resilience of UK mid-market firms, in contrast to the other large European economies which are more exposed to the eurozone recession.