The UK’s mid-market companies are now growing faster than those in Germany, France and Italy, according to Professor Stephen Roper's latest in-depth report on the European mid-market produced for GE Capital.

The average UK mid-market company – defined as posting annual turnover of £15m-£800m – is set to grow sales by 6.1 per cent in the next 12 months, compared to 4.8 per cent in Germany, 3.4 per cent in France and 3.8 per cent in Italy. This equates to projected UK mid-market revenue growth of £133bn in the next 12 months.

In addition, over the next year an estimated 326,000 jobs are set to be created by mid-market companies in the UK compared to 150,000 in Germany, as the UK mid-market seeks to accelerate recruitment in response to increasing sales and resultant new capacity. Further, over one in three UK mid-market firms that currently have offshore activities are considering re-shoring some of them over the next three years, helping further boost UK economic growth.

While the outlook for sales and workforce growth is bullish, the findings highlight an emerging skills shortage facing the mid-market. Attracting employees with the right set of skills has emerged as the principal challenge facing the UK mid-market in 2014, followed by attracting top managerial talent and retaining talented employees. This is a shift from the 2013 research, when keeping down business costs and overheads was the top challenge.

Ilaria del Beato, Chief Executive of GE Capital UK, said: “The success of the mid-market is crucial for the UK economy. Just 1.7 per cent of all businesses provide over one third of private sector GDP, revenues and employment. Yet whilst the mid-market is thinking bigger, it still has critical challenges to overcome, particularly as the competition for talent becomes much tougher, more so than regulation, keeping costs down, and access to finance.”

The research highlights that Greater London is the UK’s best performing region, with 86 per cent of mid-market companies reporting revenue growth in the past year.  The region also has the most percentage of international sales (50 per cent) as a link emerges between sales growth and international focus.

Lord Livingston, Minister of State for Trade and Investment, said: “This report is very encouraging for the UK and its mid-sized businesses. I’m particularly pleased to see their entrepreneurial attitude to exports, which is critical to growth. UK Trade & Investment is continuing to support the UK’s mid-sized businesses to help them maximise their potential and tap into fast-growing overseas markets.”

Key export-based findings from the report include:

  • Seven out of 10 mid-market companies in the UK generate some sales from international markets – however these account for one third of total sales value.
  • Almost half (48 per cent) of UK mid-market companies intend to expand into new markets in the next three years, compared with 40 per cent in Germany.
  • UK mid-market exporters are more bullish about international sales growth than those in Italy, France or Germany, predicting an increase of 7.6 per cent in the next 12 months.
  • UK mid-market firms perceive the most significant barriers to exporting to new markets as navigating local regulations, lack of local knowledge and associated costs.

John Cridland, Director-General, CBI, said: ”As the economic recovery continues to build momentum, UK mid-market firms are playing a key role in creating new jobs and markets, as well as competing on the international stage. We must build on this strong performance; addressing skills gaps and overcoming concerns around cost pressures that impact on business confidence."

Author of the report, Professor Roper of Warwick Business School and director of the Enterprise Research Centre, said: “Overall UK mid-markets are happy with the current business environment, but notable regional differences persist with businesses in the south generally growing faster than those in the north.

"This may, in part, be explained by a stronger focus on export markets in the south. Mid-market companies in the north also have more negative perceptions of transport and broadband infrastructure. Greater export support and infrastructure investments in these areas could help to redress the growth imbalance.”

The mid-market is a fast growing segment that represents just 1.67 per cent of UK companies but which contribute more than a third of private sector GDP, revenues & employment.

This year’s report is based on more than 4,000 C-suite and senior executive interviews across France, Italy, Germany and the UK. The UK survey is based on insights from more than 1,000 boardroom interviews equating to more than 430 hours of in-depth interviews.

To download a copy of the report, visit the GE Capital UK insights page at www.gecapital.co.uk.

Watch Professor Stephen Roper interviewed on CNBC about this report.

See this article featured in the Financial Times.