Tuesday - Sep 26, 2017

UK seem to be interested in emulating the German speaking nations of Central Europe’s Mittelstand

UK seem to be interested in emulating the German speaking nations of Central Europe’s Mittelstand

Germany, as well as their surrounding neighbours Austria and Switzerland have long since taken pride in the “Mittelstand”, small and medium-sized enterprises based in the German-speaking countries, whose policies have seen these countries consistently achieve sustainable growth, and quickly since the economic collapse of 2008.

For that reason, the Mittelstand has been consistently admired, but rarely emulated, all of this is about to be changed if the UK Conservative government, and in particular the British Business Bank have their way.

Working in conjunction with Lord Livingston, the UK trade minister, the British Business Bank is about to launch a major campaign, aimed at supporting mid-sized companies’ financial needs with the support being concentrated on medium-sized UK companies with an export slant.

With the UK economy now moving steadily out of recession largely driven by mid-market companies, the United Kingdom are now confident of overtaking their German counterparts during the coming year, according to research carried out on the issue by one of the U.K.’s leading financial analysts.

In general, it is being reported that British and German companies are not only more optimistic than their French and Italian counterparts, but are pulling well ahead in terms of their countries’ respective economic recoveries.

Economists have long observed that the strengths of the “Mittelstand” or mid-market way of thinking has proven difficult to export, especially to the larger Eastern European economies where an individualised style of management is preferred.

In Germany and to a certain extent in the United Kingdom, medium-sized generally family-owned businesses, which are more likely to specialise in marketing their products or services in advanced niche markets, whilst making every effort to train and retain skilled workers as well as keeping their debt level ratios at a manageable level, have survived during difficult conditions and thrived during more buoyant times.

It is interesting to note that in Germany, companies that fall into the “Mittelstand” category make up for more than half of Germany’s economic output.

According to a representative of the the British Business Bank, while such a network exists in the United Kingdom, it is nowhere near as widespread as in the German-speaking nations of central Europe, and UK companies are liable to need several years of rethinking and strong growth to narrow the gap, with particular necessities to increase levels of specialist skills and productivity, with British businesses providing half as many apprenticeships and internships as their German counterparts.

Another factor which may be considered significant is that in the German-speaking countries of Central Europe, only one out of ten of family owned businesses were being managed by the eldest son, compared to 50% cent in the UK, with statistics showing that companies who continued the traditional practice of appointing the eldest son, irrespective of the talents or abilities, were drastically restricting the company’s chances for growth and often harming their chances of survival.

Another factor where the UK companies may have something to learn from the German-speaking counterparts, is through reducing their reliance on bank loans whilst at the same time embracing a wider mix of funding methods.

Playing the part in helping UK companies to adapt to the mid-market way of thinking, the British Business Bank is in negotiations with Lord Livingston to adjust the government threshold at which companies must pay taxes quarterly rather than annually to be considerably raised, whilst increasing access to research and development tax relief among a number of other measures that will make life easier for small to medium-sized businesses.

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