Mid-market enterprises – the neglected middle child

Business | Fri 20 Apr | Author – Business & Finance
sme mme enterprise

Andrew Bowen, Head of Mid-Market Enterprises, HSBC Ireland, says that harnessing the potential of mid-sized firms would be a boost to the Irish economy.

andrew bowen hsbc ireland

Andrew Bowen

Widespread discussion of Ireland’s successful attraction of multinational companies mean large corporations are never far from the public eye. Likewise, government support for Irish SMEs is also well publicised, with Budget 2018’s earmarking of €300 million for a loan scheme for SMEs in the wake of Brexit receiving considerable attention. However, not so much is heard about the companies which do not fit neatly into either category, which is perhaps surprising given that a significant percentage of Irish enterprises can be found in this middle ground.

Mid-market enterprises (MME) are companies which have between 200 and 2,000 employees. The vast potential for MMEs is highlighted by a recent report produced by HSBC, entitled Hidden Impact: Unlocking The Growth Potential of Mid Market Enterprises 2017, in which 1,400 MMEs were surveyed across 14 countries. While the direct contribution of MMEs to global GDP has increased by 9% in just two years, the report concludes that if MMEs can grow their export-based revenues by just 1%, they would increase their economic impact by $12.5 billion across the 14 economies surveyed. Evidently, there is huge potential in this sector.

The fundamental benefit of MMEs is their unique combination of some of the best elements of large and small companies. MMEs are often privately-owned specialists in their field that maintain a direct line to their customer base, keeping a close eye on their customers’ needs and boasting more agile responses to changing market demands than larger companies. In comparison to bigger firms, MMEs have more streamlined decision-making processes, are more willing to take risks and can provide attractive employment opportunities by offering responsibility at an earlier stage. When compared with smaller companies, MMEs possess established management, infrastructure and business processes, established brands, greater understanding of market needs, greater resilience and ability to manage stocks, increased efficiency and better access to financing for investment.

However, there is truth behind the perception that MMEs are neglected. MMEs are negatively affected by the view that they are not large enough to be regarded as influential stakeholders of government while also missing out on the benefits government affords smaller companies. It should be recognised that the economic impact of MMEs extends far past the direct economic contribution made by firms of this size as the effects of their activity ripple out across the wider economy through supply chain spending and consumption effects.

Therefore, the MME sector is too valuable to be overlooked by policymakers. International trade is a major source of revenue for MMEs and gaining access to new markets is a key priority for MME leaders who recognise that there is considerable potential for growth in this respect. While sales to overseas markets already contributes to an above-average share of MMEs’ revenues, support to enhance market intelligence and build international collaboration, as well as governmental action to reduce red tape, would be highly beneficial. Likewise, the creation of partnerships with established multinationals would assist MMEs to expand and in turn create benefit for the overall economy.

While Brexit is a definite challenge for MMEs it may also present an opportunity. Ahead of Britain’s exit from the EU in 2019, MMEs are moving to become more customer-orientated by investing in improved customer service, increasing interactions with customers and investing in improved market intelligence.

Whereas 70% of those surveyed for the HSBC research had a positive economic outlook, the UK MME sector was the lowest, presumably as a result of lower projected economic growth and uncertainty around the implications of Brexit (highlighted by half of UK respondents as one of their top three concerns). This should present some interesting opportunities to the Irish MME sector, particularly where those MMEs recognise that they have an advantage.

One local challenge, as the Irish economy nears full employment, is that some companies have already reported difficultly filling vacancies, creating the necessity for MMEs to have initiatives in place to secure scarce talent. While a competitive salary is critical to attracting staff, MMEs are also working at retaining talent by offering long-term career enhancements to compete with competition, particularly from larger firms. Initiatives such as mentoring, career development, diversity initiatives and supportive culture are all being developed.

Another issue facing Irish MMEs relates to delays in the implementation of the National Broadband Plan. This significantly impedes the growth of MMEs in Ireland. In fact, improved communications with fast, reliable broadband has been shown by HSBC’s research to be the greatest single priority for MMEs. Furthermore, in order to move with the times, MMEs must keep up with rapidly-developing technology and undoubtedly support for developing greater capacity for using digital platforms would be highly beneficial. Customer-facing technology such as websites, apps, social media and customer analytics are highlighted as priorities over the next three years.

Undoubtedly, harnessing the potential of Irish MMEs will strengthen their position as the backbone of the Irish economy and help them move past their current position as the overlooked middle child of the corporate landscape. With greater focus on this segment, particularly in an Irish context, there is an opportunity to unlock huge growth potential for both the enterprises in question and those in the greater economy.