The UK economy is set for a significant boost as UK mid-sized businesses emerge from a winter of lockdowns and restrictions with plans to invest and recruit, according to new figures published today.
According to the data from accountancy and advisory firm, BDO, medium-sized businesses are set to spearhead the UK’s economic recovery with three quarters (75%) of mid-tier businesses stating that 2021 is the time to invest, and over a quarter (26%) already planning to invest in new locations or M&A.
BDO surveyed leaders from 500 medium-sized businesses across the UK to uncover their plans for the year as the UK progresses with its rapid vaccine rollout programme.
Hinting at some early signs of recovery, 86% of UK mid-tier businesses are looking to recruit more staff over the next six months, with over half (54%) planning permanent appointments. Almost three quarters of businesses based in Yorkshire and the Humber, as well as Central South (73%), will add permanent staff to their ranks.
The Government’s £3,000 apprenticeship grant also provided a boost, with over a third (36%) of businesses stating they would now hire apprentices as a direct result of this incentive. This came as part of a larger 70% of businesses planning to recruit in this area regardless of the incentive.
News of investment in apprenticeships will be welcomed by many, with recent data from the ONS revealing that those under the age of 25 account for more than two thirds of job losses since the start of the pandemic.
Businesses believe they are well supported by the Government for the year ahead. 73% agreed the Chancellor promised enough to support the regional “levelling up” agenda in his March budget, while 59% believe that their region will be given enough financial support over the next 12 months as a direct result of the pandemic.
Investment plans also received a boost in the March budget. Nearly half of businesses (47%) are planning new investments following the “super deduction” initiative, which allows companies to cut their tax bill by up to 25p for every £1 they invest.
There is cause for further optimism as three quarters of businesses (75%) expect revenues to return to pre-pandemic levels within a year of the strictest restrictions being lifted.
That said, few businesses have come away from the crisis unscathed. Over a third (38%) of businesses stated that their business model or product line will change in light of the pandemic. Another third (33%) expect pricing of products and services to increase, likely reflecting a need to pay back debt or recover higher costs.
Reflecting on the findings Ed Dwan, Partner at BDO, commented: “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, the strength of the mid-market economy 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.”
Mid-sized, PE owned and AIM listed businesses, what BDO calls the economic engine, account for less than 1% of businesses overall but contribute £1.4tn in revenues and provide one in four jobs. In the five years leading up to the start of the pandemic, these businesses grew revenues by 46% despite Brexit-related uncertainty.
The role of the economic engine in the UK’s wider economic recovery should not be overlooked. In 2015, the CBI estimated that the growth of just 3,000 mid-sized firms from 2010 to 2013 was enough to drag the country out of recession and into growth after the financial crash. If more firms had rebounded quickly and hit pre-recession growth rates, then it could have added tens of billions of pounds to the UK economy.