Comment: Britain’s squeezed business middle could be key

Medium-sized businesses (MSBs) form the engine room of Scotland’s economic recovery. Between 2010 and 2014, the number of companies with between 50 and 499 employees grew by over seven per cent and outperformed the market to 2,600.

Kevin Engel

They contributed £18 billion to Scotland’s economy in 2014, which is expected to rise to £24bn by 2020. Over the next five years these “agents of growth” could inject a further £4.3bn if they achieve their ambitions and create an additional 19,000 jobs.

However, last year saw a dip in MSBs’ productivity. So we have to act now to help them realise their ambitions and create an environment where people and businesses can thrive. We have to actively address the challenges facing MSBs – the skills gaps, access to export markets and regulatory burdens. It is essential that we work to remove these barriers to growth.

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The first priority for unlocking productivity is to look at talent development. The solutions are not rocket science but could make a big difference. Medium-sized companies will benefit from enhancing their links not only with universities but with schools and colleges. It is really important to ensure potential workers understand the industry and opportunity, so better career information will help. Work experience is key to achieving this.

Then there is the issue of visa restrictions. Raising the immigration cap would renew access to the fantastic resource of overseas graduates so useful to certain sectors.

The next priority has to be to ensure that Scotland continues its strong traditions as an international trading nation. Twenty nine per cent of MSBs have international operations. But compare that to 45 per cent in Germany and 55 per cent in China. There is more work to do. Why can’t MSBs get the same support as large companies when chasing big deals? There should be three to five-year finance offerings targeted specifically at exporters.

A game‑changer would be if exporting was a focus for the Government. Every government department should have a target and action plan for supporting Scottish exports. Encouraging and enabling sustainable growth of dynamic businesses and expansion into new markets will contribute to a more vibrant economy.

The last priority should be to create a robust regulatory framework for growth. Over the past few years there has been an increasing burden on MSBs. Regulatory requirements have increased from 38 per cent in 2009 to 51 per cent in 2015.

In 1997 there were 3,700 pages of tax code relating to MSBs compared to more than 17,000 pages now. Unsurprisingly, many of the “squeezed middle” are finding it more and more difficult to run their businesses.

An easy win would be to implement the outstanding recommendations from the Office of Tax Simplification reports. It would be good if the Scottish Government’s Better Regulation Team systematically assessed the impact of all new regulations on MSBs.

The introduction of the Scottish Rate of Income Tax is on the horizon. Surely this and any further devolution of powers is an opportunity to simplify the system.

Kevin Engel is managing partner of Grant Thornton in Scotland