UK mid-market firms set to power economy with investment and hiring

The UK economy is set for a significant boost, with mid-sized businesses – deemed the “backbone” of the economy – set to invest and recruit, according to a new report.

Accountancy and advisory firm BDO expects such firms – defined as turning over £10 million to £300m – to ultimately accelerate the country’s economic recovery.

In March it sought the opinions of leaders from 500 medium-sized businesses across the UK to uncover their plans for the year as the country progresses with its vaccine rollout programme.

The survey found three quarters say 2021 is the time to invest, and more than a quarter are already planning to invest in new locations or deal activity.

Three quarters of mid-tier firms said 2021 is the time to invest, according to BDO. Picture: Hugh Hastings/Getty Images.

Additionally, 75 per cent expect revenues to return to pre-pandemic levels within a year of the strictest restrictions being lifted, and – hinting at early signs of recovery – 86 per cent are looking to boost their ranks over the next six months, with 54 per cent planning permanent appointments.

BDO added the UK Government’s £3,000 apprenticeship grant also provided a boost, with more than a third of businesses saying they would now hire apprentices as a direct result of this incentive.

Businesses believe they are well supported by the UK Government for the year ahead, BDO added – with 59 per cent believing their region will be given enough financial support over the next 12 months as a direct result of the pandemic.

Additionally, nearly half of businesses are planning new investments following the “super deduction” initiative announced in the recent Budget, allowing companies to cut their tax bill by up to 25p for every £1 they invest.

That said, few businesses have come away from the crisis unscathed, BDO also said.

More than a third expect their business model or product line to change in light of the pandemic, and another third expect pricing of products and services to increase, “likely reflecting a need to pay back debt or recover higher costs”.

Regarding mid-sized, private-equity-owned and Aim-quoted businesses, BDO deems them the “economic engine”, accounting for fewer than 1 per cent of businesses overall, but contributing £1.4 trillion in revenues and providing one in four jobs – and having grown income by nearly half in the five years leading up to the pandemic.

BDO partner Ed Dwan said: “Mid-sized businesses are the engine of the economy – they have often proven robust even during the most uncertain economic conditions.

"The resilience they have demonstrated over the past year will mean they are well-placed to benefit from the vaccine roll-out and gradual lifting of restrictions. Ultimately these businesses will drive the UK’s economic recovery forward.”

However, he also warned the sector’s strength can’t be taken for granted. “The results show that government support has been vital for this segment of the economy so far, but areas such as access to finance and support on supply chain disruption will be crucial in creating an environment that allows these businesses to thrive,” he said.

A separate recently published report found the Scottish economy could completely regain ground lost during the Covid-19 pandemic within the next two years.

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