Scotland’s mid-sized businesses generate over £5bn in overseas turnover but remain ‘overlooked and undervalued’

Scotland’s mid-sized businesses generated over £5 billion of overseas turnover last year but risk being ‘overlooked and undervalued’ as the UK Government looks to invoke Article 50 and begin the process of EU negotiations this week, according to new research from accountants and advisers BDO.

Scottish mid-sized businesses grew their overseas turnover by 0.5 per cent last year to over £5 billion compared to a 34 per cent contraction in overseas revenue to £9 billion for Scotland’s large businesses and a contraction of 18 per cent in overseas turnover to £0.5 billion for Scotland’s small businesses.

Despite a volatile 2016 and with the shadow of Brexit negotiations looming, mid-sized firms remained confident throughout the UK and continued to grow overseas turnover; increasing overseas trade by 7 per cent (from £119 billion to £127 billion).

In comparison, the levels of overseas trade of FTSE350 and small businesses across the entire UK in 2016 fell 30 per cent (from £524 billion to £366 billion) and 13 per cent (from £12 billion to £10.4 billion) respectively.

To ensure that this growth continues, BDO said it is calling on the Government to place these ‘overlooked and undervalued’ mid-sized businesses (what BDO calls the UK economic engine) at the heart of its thinking as it prepares to invoke Article 50 on Wednesday.

While the UK’s economic engine consists of only 30,000 UK companies (1.5 per cent of all UK companies) it contributes one third (£1.2 trillion) of all UK turnover. Yet despite driving overseas growth and making a significant contribution to domestic markets, the UK economic engine falls into a policy and profile gap: too big to benefit from government initiatives aimed at small firms but too small to win the attention that FTSE firms command from the media and policy makers.

In response, BDO has set out twenty-two policies which it thinks will put the UK’s mid-sized businesses at the centre of a ‘new economy’ which will thrive post Brexit. For example, the ‘New Economy’ report suggests introducing a VAT zero rating on supplies to companies that export once Brexit negotiations are finalised and a call for the UK Government to battle hard for a variant of financial passporting as part of the Article 50 negotiations.

Martin Gill, Lead Partner at BDO in Scotland, said: “High-performing and entrepreneurially-spirited mid-sized businesses are the economic engine of international growth in Scotland and the UK. Despite all the uncertainty of the past twelve months these companies have taken calculated investment risks and prospered. The success of these businesses should not be taken for granted and, with Article 50 being invoked in two days’ time and the prospect of a second independence referendum in Scotland, it is crucial that the Scottish and UK Governments factor the needs of Scotland’s mid-sized businesses into their thinking ahead of negotiations.”

BDO’s New Economy report can be downloaded here