Earlier this year it was revealed that Europe’s mid-sized businesses (MSBs) – those with between 50 and 500 employees and revenues between £2.5 million and £100 million per annum – could be missing out on up to £4.8 million annual revenues due to a number of different barriers that are hindering their growth.
The research, commissioned with Ricoh was revealing – 16 per cent of mid-sized businesses in UK and Ireland believe that their revenues could have been improved by 16 to 20 per cent over the last year if these barriers were not in place. With 75,000 MSBs across Europe, this figure could amount to £364 billion per year, almost the same as the annual GDP of Poland.
They are said to be suffering from ‘middle-child syndrome’, and for good reason. A lot of government support is aimed at supporting entrepreneurs, start-ups and there are other programmes intended for larger organisations. This means that MSBs are stuck in the middle with a lack of full funding and support. This has led to 70 per cent of mid-sized businesses suffering from middle-child syndrome. This figure is unlikely to go down unless they digitise their organisations, naturally improving productivity. However, this will only happen with backing from government.
To complicate issues further, there are a number of barriers which affect the growth of these MSBs. These include the need to comply with complex and costly regulation and the struggle to attract the best employees. However, according to 30 per cent of those surveyed based in UK and Ireland, the biggest barrier to growth is that they have yet to apply the digital solutions which will enable them to scale up and become bigger, more successful brands. With digital transformation high on the agenda and organisations under pressure to modernise their infrastructure, and improve productivity through greater innovation, it’s important that smaller companies have access to the same possibilities as larger organisations. If this does not happen, smaller companies face the danger of being held back.
This argument is given further importance when looking at the number of MSBs looking to expand, despite the alarming figures which seem to be holding them back. 51 per cent in UK and Ireland intend to make initial public offerings, whilst a further 17 per cent plan to merge or acquire other companies in order to increase their competitive advantage in their respective sectors.
Despite all this, there are strategies that can be put in place to aid mid-sized businesses. Firstly, and most importantly, money and technology needs to be given to struggling MSBs so that they can flourish, especially in the growing digital economy. The recent Autumn Statement from Philip Hammond should also help MSBs that aspire to growth. In the announcement, he set aside £23 billion over five years into a new National Productivity Investment Fund in order to tackle’s the UK’s productivity gap and spend on innovation and infrastructure. With this investment, assistance of digital transformation and innovation, there is a real opportunity for MSBs to get involved, enabling them to grow into larger, more successful companies.
With mid-sized businesses missing out on so much revenue, it’s essential that more support is given so that they can break through the barriers hindering their growth. However, we must remember that it is not a one-way process; the businesses themselves need to ensure they are properly investing in both innovation and digital transformation as well as strategies to streamline processes so that they are in a prime position to take full advantage of new opportunities in 2017 and beyond.
Phil Keoghan is the CEO at Ricoh UK and Ireland.
