Comment: Don’t overlook the importance of the middle

Terry Murden
Terry Murden
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THE recognised mantra is that small firms create the bulk of jobs and are the engine of the economy.

Too often, however, we neglect the “M” in SME – the medium-sized firms that are said to account for a third of private sector jobs and gross domestic product.

To recognise their importance, the CBI today holds the first of its M-Club meetings to discuss common issues and concerns that are peculiar to this segment of the economy.

It is something I have addressed in previous columns. Back in May 2003, following a chat with John Anderson, chief executive of the then nascent Entrepreneural Exchange, it was evident that creating lots of small firms was all well and good, but more important was that they are encouraged to become bigger firms. Too many of those applying to join the Exchange at the time were happy to remain “lifestyle” firms, perhaps with fewer than five employees, and could not be termed entrepreneurial at all.

A year later, Andrew McLaughlin, who at the time was Royal Bank of Scotland’s deputy chief economist, produced a report entitled Wealth Creation in Scotland and he noted that “the importance of the mid- corporate sector is often lost in the competitiveness debate which has tended to focus on start-ups and new entrepreneurial activity”.

The Ms are a big and powerful force if leveraged effectively. According to GE Capital, mid-market firms across the UK posted 5.8 per cent growth last year. But often their potential is held back because, as McLaughlin said, so much official support is aimed at the smaller and larger firms. That was nine years ago, and the same problems have been identified today.

Electric Cable finally gets what he wants

THE coalition’s U-turn on creating an “electrified” ringfence to split the banks suggests more than a submission to the hardliners; it is also hints at some interesting exchanges in Cabinet and begs questions in particular about where Business Secretary Vince Cable stands on the issue.

He was the original hardliner, the bank basher in chief who wanted the complete separation of banks’ retail and investment banking divisions to prevent the collapse of one forcing the other into difficulty and requiring more taxpayer support.

But he appeared to go soft when banking standards commission chairman Andrew Tyrie declared before Christmas that the ringfencing proposals did not go far enough, and that the threat of complete separation – or an electrified ringfence – had to be included in the UK government’s Reform Bill. Cable came down on the side of Sir John Vickers, whose inquiry had initially recommended a more flexible ringfence, though he later offered support to a harder approach.

The Business Secretary argued that to have the threat of full separation hanging over the banks would create too much uncertainty.

The banks also claim the threat of full separation will put Britain at a disadvantage when elsewhere it has been rejected.

But the UK government is now backing Tyrie after being persuaded that the banks would simply find ways around the rules.

The change of policy means Cable has either changed his mind again, or been out-voted. Either way, he seems to have finally got what he wants.