Imagine a sector that accounts for approximately USD11.5trn or 30% of the global economy. It is fast-growing, productive and innovative, directly supporting 169m jobs; nimble enough to respond quickly to changes in consumer tastes, but robust enough to export and invest heavily in R&D.
Surely this is a sector too important to be ignored?
According to HSBC's recent report, Hidden Impact: The Vital Role of Mid-Market Enterprises, mid-market enterprises (MMEs) play a crucial role in the economies of 15 of the world’s largest countries. Despite their significant economic contributions, MMEs often suffer from what is called "middle child syndrome." This means they lack the financial resources to influence policy through expensive lobbyists and miss out on the incentives and support typically provided to start-ups and small businesses. Consequently, the sector runs the risk of being overlooked and undervalued.
The HSBC report impressively demonstrates the economic importance of this segment. It finds, for example that MMEs support approximately close to two-fifths of GDP in Brazil, China, France, Turkey and the UK. Even in India and the US, which are at the lower end of the spectrum, MMEs support 31% of total output. Employment contributions are equally impressive, ranging from over 40% in China to 29% in the US and 22% in Hong Kong.
The findings echo those of Agents of Growth, the Grant Thornton UK series on supporting the growth of mid-market businesses, which not only found that UK MMEs are spending more on R&D and capital than larger and smaller peers, but also that they are the most productive segment of the economy.
The conclusion that both reports make is that the mid-market is too important to be overlooked by policymakers. Businesses require support in specific areas such as international expansion and attracting the right workers, and governments could also look at the removal of perverse incentives (for example, tax breaks which end when a company reaches a certain size) that encourage businesses not to grow.
MMEs contribute in many high value-add sectors such as business services and others with strong supply chain effects such as manufacturing, while outstanding levels of productivity means any government looking to grow its economy (hopefully all of them) should be working to unlock the potential of this segment. Their impact on economic and employment prospects is simply too big to be ignored.