BDO: Mid-sized businesses essential part of UK economy

As the UK mid-sized businesses account for 75% of the UK exports and are responsible for 25% of all private sector employment, these businesses are essential to the UK economy, concludes BDO. Even though, the mid-sized businesses are an ‘exporting powerhouse’, their importance is often overlooked by the Government and more can be done to help these businesses grow their export abroad, which would further profit the UK economy.

Accounting and consulting firm BDO recently released a new research into the mid-market businesses and their role for the UK Government. BDO’s overall conclusion: mid-sized businesses are an ‘exporting powerhouse’, often overlooked by the Government, but essential for the UK economy.

The research shows that although mid-sized businesses make up less than 1% of the UK firms, they account for almost 75% of all UK exports. On an annual basis they are responsible for an export of £70 billion of the UK total of £300 billion. These businesses make a huge contribution to the UK economy, as the 31,000 firms account for over 6.2 million jobs, which is more than 25% of all private sector employment, £1 trillion each year in turnover, which is 31.3% of total in private sector turnover, and 28% of the UK private sector GVA, which is £320 billion annually.

Of the mid-market exports, 75% come from outside London and the South East, making the mid-sized businesses also a vital part of the regional economy. And as policy-makers strive to rebalance the economy, to make UK’s growth less dependent on London and the South East, The firm states that the UK Government should make it easier for the UK's mid-sized businesses to sell abroad.

BDO published its research accompanied with a set of policies that could unlock the potential of the UK's mid-market in its own Mid-Market Manifesto. According to the researchers, if these policies were to be adopted by the UK Government, over £1.3 billion would be added to mid-sized companies’ GDP contribution and thousands of jobs would be created. The consulting firm lists three recommendations that could help mid-sized businesses export abroad.

An overview of the policy recommendations:

• VAT zero rating of supplies to companies that export: the UK currently allows manufacturers to zero rate their exports, but is less generous with reliefs for domestic companies that supply to UK exporters.
• Reducing the regulatory burden for exporters: new exporters often find that regulatory and legal barriers make it harder for them to grow into a new market.
• Reduce the overseas tax barriers for UK exporters opening a new branch overseas: the UK Government exempt UK businesses when opening a new branch or subsidiary from local taxes up to a de-minimis level of economic activity of £1 million of total cumulative sales.*

“The UK Government has done a good job at promoting the general needs of business but more can be done to help Britain’s mid-market specifically – especially around the challenge of exporting abroad.  The Government is focusing on rebalancing the UK economy and driving regional growth.  The mid-market, with its strong presence across the entire UK, must be a vital part of their plans,” comments Simon Michaels, Managing Partner at BDO. “As we begin the run-in to a general election, this is a good opportunity to reflect on the needs of this section of our economy, as all political parties consider what they can do to drive economic growth.”

* Just recently, counterpart EY also released a research into the exports of the UK, in which it stated that the vast majority of UK entrepreneurs believe that they will have to look outside the EU to grow their exports and that the Government should encourage companies to grow internationally.