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Economic news – Embassy 60

Mid-size firms key to jobs, growth

Governments should follow the German  model to support medium-sized enterprises for jobs and economic growth, a leading business consultant advised economic attachés.

Speaking at an AERL breakfast briefing, Darren Shirlaw said: “Most governments tend to focus their policies on startups at the bottom of the market or the corporates at the top, but there is a massive gap in the middle where most jobs and innovation come from.”

The financial markets set-up and regulatory policy of a country will determine what type of business is likely to thrive, he continued.

“London has more incubators and startups than any city in Europe because there are government incentives and there is a mature infrastructure for so-called ‘angel investors’, usually City executives with a bit of extra cash to invest. There are platforms that match startups with investors.”

But he warned that this sector could “run out of steam” due to the high number of exits.

When a business matures and moves from seed capital to growth capital, the pool of investment money dries up in the UK (and most other countries). UK government policy in this area – such as the British Business Bank – has yet to deliver results, said Shirlaw.

Germany leads the way in supporting middle enterprises, according to Shirlaw. “Germany has created a ‘sub-corporate bond market’ which makes it easy for mid-sized companies to access capital they need to employ more people or buy more capital for growth.”

This explains why Germany has a high number of mid-sized businesses and why the economy has sustainable growth, he said.

“If you want to support the middle market, copy the German style bond market to finance and regulate these businesses,” he concluded.

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