About The Study
Purpose and importance of the research and report methodology
Importance of the research
The importance of providing MSBs with a classification – a definition of their unique features, challenges and opportunities – should not be underestimated in terms of the direct value it provides to them in the search for, and provision of, relevant and therefore effective solutions and support. A clear, industry-shared classification would also allow for more informed understanding of the relationship, intersections and graduations between small, mid size and large businesses.
Purpose of the research
Accounting firm BDO suggests that part of the reason for the relative obscurity of MSBs is that they are hard to define: “mid size firms cover a broad swathe of the UK economy and encompass family owned businesses, private equity-backed companies and AIM-listed businesses. But despite the variety of shapes, sizes and funding structures, these businesses share some common characteristics.” Until this study, neither empirical evidence as to these characteristics nor a classification existed – and the report set out to address both.
The research is wide-ranging and ambitious in its scope for a number of reasons: Most significantly, MSBs are vital to the UK economy. MSBs represent 1.5% of UK business but contribute a staggering 1/3 of UK turnover and 22% of HMRC receipts.
The financial contribution made by these businesses to GDP is only one aspect of their significance. The balancing of size, risk aversion, talent retention and dynamism found with MSBs also enables them to be national drivers of innovation, value creation and leadership philosophy.
Yet despite the clear importance of MSBs, there has to date been extremely limited independent, academic-level research undertaken to understand these businesses as a separate and distinct segment.
Instead, the still very limited existing research lumps small businesses and MSBs together and is either supplier-produced or without academic rigour.
We also know that industry fails to appreciate the differences between small and mid size businesses, offering very little thought leadership, resources or services tailored specifically to MSBs. Furthermore, industry and many key professional service and membership organisation offerings reflect the assumption that all directors lead large enterprises, failing to recognise the unique challenges and distinct differences of being a director, NED or chair of an MSB.
This research aims to correct this imbalance and the underserving of MSBs that are of critical economic and social value to our communities – particularly regionally. On this basis, our research had two primary domains of enquiry: the first was to provide a classification or definition of what an MSB is, and the second to identify the priorities and challenges facing MSB leaders.
Our research hypothesis was that an MSB classification should be based on structural, operational and aspirational similarities – put simply, the businesses with the most in common when it came to complexity of issues, challenges, ambitions and performance.
The combination of an evidence-based definition for MSBs and identification of their priorities and challenges should act as a catalyst for government, vendors, suppliers and advisors to provide policy, regulation, services, solutions, support and resources that are:
· Relevant, specifically addressing MSB issues
· Contemporary, needed topics – not just vendor/supplier determined
· Credible and independent
· Practical and usable
· User-friendly – rich media, accessed privately, on demand and affordable.
Structure of the Report
This report provides a comprehensive overview of the state of the mid size business (MSB) sector in the UK. It is based on a rigorous and robust research programme with those businesses, designed to identify their nature and challenges.
For the purposes of this report, the terms ‘mid size business’ and ‘MSB’ are used interchangeably. Unless otherwise stated, or referenced, they reflect the category of UK private sector businesses turning over between £10m and £149m annually and with an employee headcount of 50 to 499.
To provide context to this report we first share the importance of MSBs and resulting purpose and importance of this research. Readers can then be assured by the robust and valid quantitative and qualitative research methodology and go on to appreciate the evidence-based classification for MSBs and their defining characteristics.
In the remainder of the report, we explore MSBs’ relationship with, perspective on and approaches to Brexit, productivity, technology, finance, the workforce, growth, innovation, leadership capability and competency, and professional memberships. These represent significant themes identified in this research for MSBs and their development. Against these, the challenges, opportunities and priorities for MSBs are explored, drawing on both the results of this study and other robust (but limited and highly dispersed), recent related studies. These are acknowledged in References.
Implications and recommendations are proposed and are based around what actions should be followed in order to improve MSB productivity and performance with the implication of resulting community prosperity. The recommendations are not exhaustive and we aim to build on these over time in the resources section.
The report then concludes with an Expert Commentary series, where key leaders from the MSB sector offer their personal perspectives on the issues and challenges for their organisations. These seek to ground and reinforce the findings and recommendations of the academic study summarised here.
An academic and industry literature review was first conducted. A largely quantitative, mixed-method survey was then designed for electronic distribution to directors of UK businesses. The questions were based on the existing academic and industrial literature relating to the management and governance of small, mid size and large enterprises.
The survey was active over an extended 12-month period. Random, personal invitations were sent out through LinkedIn that included a link to the survey. Follow-up contact was made to prompt completion. This approach produced a large random sampling of national businesses. 476 valid responses were received from directors across the UK. Accepting that the number of businesses in the UK is large and indefinite at a confidence level of 95%, this produces a confidence interval of ±4.49. Given the difficulty of surveying business directors and the relatively small sample sizes of previous academic work in this area, this enables our analysis to produce robust and defensible results. The survey was then collated and analysed.
In addition to the quantitative work, a qualitative effort was undertaken with one-to-one interviews and focus groups conducted with a random sample of leaders from MSBs nationally. These were used to further explore the themes and issues identified for MSBs through the survey. In total, 40 MSB directors contributed to the interviews and focus groups.
The research results are made all the more valuable considering MSB leaders are a particularly difficult group to engage with in terms of structured research activities. The combination of a lack of recognition from government bodies as a distinct group and the resulting sense of being undervalued for the economic contribution of their organisations, as well as the time pressures felt by all directors, means there is resistance in coming forward to participate in any research that is not attached to an immediate, direct and tangible benefit for these directors or their organisations.