Manufacturers lead surge in activity

Mid-sized firms ‘should get priority’ for growth

Wireline industryBritain’s mid-sized firms should be given priority to help build the new economy after the country withdraws from Europe, according to a new report.

The research from BDO lists a number of measures, including action on tax and red tape, to help this sector of the economy thrive in the post-Brexit world.

It comes as the latest Bank of Scotland Regional Purchasing Managers Index says business activity has picked up pace in the early weeks of the year with new order growth accelerating to a 20-month high.

The rise in business activity was centred on Scottish manufacturers, with firms raising production at the quickest pace for 34 months.

Service sector businesses maintained the same level of output as in December. Prices rose at their fastest rate for six years because of the fall in the pound.

BDO’s report calls for mid-sized businesses to be ‘prioritised’ by government to help build a post-Brexit economy.

Its New Economy report says they have created nearly 80,000 jobs in Scotland over the last five years, outstripping the job growth of the country’s large and small businesses.

Since 2011, job numbers in Scottish mid-sized businesses have increased by 23% from 336,000 to 414,000.  In comparison, jobs in Scotland’s large businesses saw a reduction of jobs of 15% over the last five years from 568,354 to 480,000.  Small businesses in Scotland have seen an increase of 11% from 87,000 employees to 97,000.

Martin Gill BDOBDO notes that despite having such an impact in Scotland, mid-sized businesses risk being overlooked as the UK prepares to leave the European Union.

Its report is calling on the UK Government to prioritise the needs of mid-sized companies as one of three areas that policymakers must get right in the post-Brexit environment. 

The report’s proposals include a call for the UK Government to choose ‘simplicity over subsidy’ for the UK tax code, helping to simplify the tax system to support mid-sized companies; to cut through red-tape and commission ‘shovel-ready infrastructure projects that bring immediate economic impact; and battling hard to retain a variant of the financial services passport which is a core pillar of the UK’s economic success.

Martin Gill (above right), head of BDO in Scotland, said: “High-growth mid-sized businesses are the backbone of the Scottish economy. They contribute jobs, revenue and profits to our region yet, because they are so hard to define, they are overlooked and undervalued.

“With Brexit and more uncertainty looming, this is the time for the Government to engage with this part of our economy and draw on their natural energy, ambition and entrepreneurial spirit to create a ‘new economy’ and help the UK succeed post-Brexit.”

Commenting on Bank of Scotland PMI data, Nick Laird, regional managing director, Bank of Scotland commercial banking said: “Pleasingly, the expansion in new work came in the face of the fastest increase in selling prices since February 2011, with this trend looking likely to be maintained over the coming months.

“A key driver to this trend is undoubtedly the ongoing upward pressure on input costs, with the weakness of the pound continuing to drive these ever higher as seen in the latest results.

“Underneath the positive headlines however, we note that the increase in demand was more positive for Scotland’s manufacturers than their service sector counterparts.

“Whilst the former raised production at the fastest pace for 34 months in January 2017, the latter saw their service output unchanged since the end of 2016. As such, whilst the latest figures give cause for optimism, the overall improvement in business conditions for the Scottish private sector remained modest.”

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