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1 Growth review: Mid-sized businesses evidence base 29 November 2011.

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1 1 Growth review: Mid-sized businesses evidence base 29 November 2011

2 2 Executive summary MSBs are an important part of the economy accounting for 20% of firm turnover.* Government has traditionally focused on the small and large firm size groups, which face distinct challenges and opportunities, and where the role for government is reasonably well understood. MSBs have a less clear identity, and can behave more like SMEs or large firms. What they have in common is that they are more likely to be owner-directed (whereas SMEs are more likely to be owner-managed, and large firms to be professionally managed) with restricted sources of external finance (M Institute, 2006). Optimal firm size is determined by factors such as Minimum Efficient Scale, managerial preferences, firm capabilities and market potential. The reason that so few UK MSBs become large has long been a puzzle. The growth performance of the MSB group is remarkably static. The evidence suggests that there is potential to improve MSB growth relative to the business population as a whole, but closer investigation is needed. Static growth is not a recent event or a recession effect : –Detailed studies of firm growth in the 1980s raised the puzzle of the stagnant middle (Storey, 1987 and 1994) –Job creation of MSBs has been on a significant downward trend over the last 12 years, in contrast to stronger job creation rates elsewhere in the UK private sector. –Nearly all MSBs have growth aspirations but more than half have stable or falling turnover (more analysis is needed to establish why). Some of the barriers to growth facing MSBs are similar to other size groups, but some are unique. –For example, export performance has not improved, investment has been on a significant downward trend, and there is evidence of lower management capability than key competitors. –However, MSBs which want to grow into large firms face the inter-related challenges of developing the professional management and formal structures and processes, and access to wider forms of finance of large firms. *turnover of all businesses registered on the IDBR.

3 3 1.Introduction (slides 4 – 8) 2.What do MSBs look like? (slides 9 – 23) 3.Growth performance of MSBs (slides 24 – 36) 4.Ownership, Management & Capabilities (slides 37 – 44) 5.Exporting & international investment (slides 45 – 54) 6.Investment & Finance (slides 55 – 62) Contents

4 4 Introduction

5 5 Introduction: Growth Review on MSBs In 2010, there were approximately 10,000 Mid-Sized Businesses (MSBs) in the UK*, accounting for around one-fifth of registered private sector employment and output. The Growth Review is looking at the contribution that these firms make to the economy and whether there is potential to increase that contribution. This document presents the evidence collected during the Growth Review on the growth performance of MSBs, and takes a more in-depth look at three drivers of performance – ownership, management and capabilities; exporting and international investment; and, investment and finance. It draws on both the existing evidence base and BIS’ new analysis on MSBs, which includes the results of data extracted from business databases, and structured interviews conducted with MSBs. *Aston University Analysis of Business Structure Database Note: “Registered” private sector employment and output – registered because only businesses that are registered for VAT or PAYE are on the IDBR.

6 6 Introduction The MSB Growth Review focuses on the population of firms that have grown beyond the definition of SME and looks at the ways in which the firms in this group can achieve their growth potential. This slide pack presents the core evidence underpinning the MSB Growth Review and its announcements, and draws on new research conducted or commissioned by BIS, including: –New analysis of the ONS Inter-Departmental Business Register (IDBR) to provide demographic data on MSBs. –New analysis undertaken by Aston University of ONS micro-datasets, including the Business Structure Database, to explore the growth performance of MSBs over time. –Detailed case study research by Middlesex University of a sample of 35 MSBs across a range of sectors to examine the growth plans and potential of MSBs. –Other evidence includes some new international comparisons (Germany, France, Sweden and Finland) conducted by NIESR plus some new capital expenditure data from ONS.

7 7 Economic case for focusing on MSBs For smaller businesses, it is widely acknowledged that their start-up and growth is affected by market failures (see for example: HMT and SBS, 2003, and; HMT and BIS, 2010). Whilst this is less likely to be the case for MSBs - they are unlikely to be affected by problems to the same extent as SMEs - they may still face some barriers to growth where government can effectively take action to improve their business environment. Previous research has identified that underperformance in the UK economy has been due to a long tail of underperforming companies. MSBs account for a sizeable chunk of the economy (around a fifth of registered private-sector turnover). So, the Government decided that as part of its Growth Review, we needed to see if more could be done to help these companies reach their potential to grow. With MSBs accounting for a significant share of economic activity, any improvement in the performance of the MSB segment of the economy would be positive for UK GDP growth.

8 8 What is an MSB? The Growth Review uses a definition of MSBs based on turnover size of £25m - £500m a year. A turnover definition has been used to enable quick and easy identification of the MSB population. £25m is the upper bound of the SME turnover definition, whilst £500m was chosen as the cut off point for large firms. To count as an SME, a firm must meet two of the three characteristics of SMEs – turnover, number of employees and gross assets – as set out in the Companies Act definition of an SME*. –However unless otherwise stated, in this report when we refer to “smaller firms”, we are not using the standard definition, but rather we are including just those registered firms with annual turnover less than £25m. –Similarly, “larger firms” refers those firms with annual turnover greater than £500m a year BIS estimates that over half of MSBs (with turnover greater than £25m) also had fewer than 250 employees, hence there is a potential overlap between the SME and MSB populations. * The Companies Act definition of SMEs is based on turnover (less than £25m), employees (less than 250) and gross assets (less than £12.5m). Note: “Registered” private sector employment and output – registered because only businesses that are registered for VAT or PAYE are on the IDBR. BIS estimates based on the IDBR.

9 9 What do MSBs look like?

10 10 The UK has a growing population of nearly 10,000 MSBs… In 2010, there were around 10,000 MSBs with a turnover of £25m - £500m a year. This compares to 666 larger firms and approximately 4.5m smaller firms and enterprises. Around half of MSBs have turnover below the £50m. An estimated 10-15% of MSBs are part of larger groups with turnover greater than £500m a year. 50% are in £25–50m turnover band Source: Analysis of Business Structure Database Source: Aston analysis of BSD/ IDBR and BIS analysis of IDBR - does include some firms part of larger groups (10 – 15% best estimate) weighted to top end; includes UK incorporated and also firms with foreign ownership. Note that not uprated size bands so would expect number of firms to grow.

11 11 … the number of MSBs has been growing again since 2005 The number of MSBs has grown more rapidly than the number of small and large firms. And unlike small and large businesses, the number of MSBs has not declined since the recession. The stock of MSBs grew proportionately more than the stock of small firms (turnover less than £25m) or large firms (turnover greater than £500m) between 1997 and 2002, but the number of MSBs as a proportion of the total stock of registered businesses has been fairly static since Source: Analysis of Business Structure Database

12 12 But MSB share of private sector turnover flat since 2002 MSBs’ share of all firm turnover rose from 14% in 1997 to 20% in 2002, remaining roughly constant since then. The share of small firms grew and kept growing at the expense of larger companies until The decline in the share of large firms was associated with the trend towards increased specialisation, focus on ‘core competencies’, and global distribution of production (see, for example, BERR, 2009). Since 2007, the share of larger companies has recovered somewhat at the expense of smaller companies, which could be due to their greater resilience to the impacts of recession. Source: Analysis of Business Structure Database Note: All turnover data here refers to UK activity, (not global activity of firms based in the UK).

13 13 Regional importance of MSBs varies (I): employment Employment attributed to MSBs (employment as a proportion of total employment for each region) is highest in the North West, West Midlands and London, respectively. Northern Ireland, Wales and the South West have the smallest shares of employment attributed to MSBs – in these regions, smaller companies tend to be responsible for higher- than-average shares of employment. Source: ONS, IDBR

14 14 Regional importance of MSBs varies (II): turnover measure Private-sector turnover attributed to MSBs (MSB turnover as a proportion of total turnover for each region) is highest in the North West, Northern Ireland and the West Midlands, respectively. London, the South West and Scotland have the smallest shares of turnover attributed to MSBs – in these regions, larger companies tend to be responsible for producing most of the regional turnover. Source: ONS, IDBR

15 15 Regional importance of MSBs (III): dispersion of firms MSBs (middle chart) are slightly less regionally dispersed than larger firms, but more regionally dispersed than smaller firms. Source: ONS, IDBR Regional dispersion of small firms, MSBs, large firms

16 16 Growth in SMEs driven in part by rising number of construction and property/ business services firms For the population of SMEs, within the main sectoral groupings, the largest growth of firms has occurred amongst financial and business services (with the latter being the driver of the rise). The number of firms in distribution has also grown, but growth here has been steadier. The number of smaller “production” firms also grew rapidly – especially at first, but this was solely due to a rapid rise in construction numbers; the number of small manufacturers fell over the period. Source: BIS 'Small and Medium-sized Enterprise Statistics ' and 'Business Population Estimates 2010 The broad sectors are defined as: Production – manufacturing, utilities, and construction; Distribution – wholesale and retail distribution, hotels and restaurants, and transport, storage and communication; Financial and Business Services – financial intermediation, business services and other services; Other sector - education, health social work, “other community, social and personal service activities” as well as primary economic activity.

17 17 More MSBs in distribution than production or financial and business services From a broadly equal split of MSBs across distribution, production and financial and business services in 1997, the number of MSBs in distribution activities has grown most rapidly - the number of financial & business services MSBs grown by approx 50% since It is likely that firms growing from small to becoming MSB is the biggest driver of these trends. Source: Analysis of Business Structure Database The broad sectors are defined as: Production – manufacturing, utilities, and construction; Distribution – wholesale and retail distribution, hotels and restaurants, and transport, storage and communication; Financial and Business Services – financial intermediation, business services and other services.

18 18 …But by share of employment, the MSBs in manufacturing, transport and wholesale are overweight A breakdown of employment by sector shows the wide variation in sectoral employment share of MSBs from 30.5% in manufacturing to 2.7% in agriculture. MSB manufacturing is a strong feature both from the MSB and the manufacturing perspective. –MSBs account for 30.5% of all UK manufacturing employment, compared to 21.2% (around a fifth) of the employment of all private-sector registered firms. –manufacturing is responsible for 19.4% of UK MSB employment, compared to just 10.9% of UK "large" employment. Source: BIS analysis of IDBR data March 2010

19 19 The MSB population is dynamic and evolving, but theory would expect there to be less churn amongst the group of MSBs than amongst SMEs, with firms both growing in and out of the population, including some firms born as MSBs and others exiting. Of the 2010 population of 9,377 MSBs, –more than two-thirds (6,756) were born before –But only a quarter (2,233) had been a mid-sized business from before 1998 and survived all the way to 2010 as an MSB. To interpret this data on low survival rates, we investigated in more detail what happened to some MSBs in existence at a given point in time, 2003, and then how they progressed up to the present day - for instance, if the MSB exited, whether the exit was due to a liquidation or a takeover/spin-off. We did this by selecting a 1% sample of the 2003 stock of MSBs at random; –2/3 (50 out of 73) had survived through to –1/3 (23 out of 73) were no longer in existence (and mostly this was because of a liquidation or a closure rather than because of corporate activity such as a takeover). MSB population evolves considerably over time The year 2003 was chosen as on one hand we needed an early year in the period that allowed sufficient time to elapse for the companies to change, but choosing an even earlier year would have made it harder to verify what happened to the companies. So 2003 balanced both factors out. For further research, another possible validation exercise would have be to take a random sample of new MSB births (rather than the stock) in Even examining the established MSB stock, there was some uncertainty as to the exact fate of what happened to some companies up to 8 years ago, (and the precise balance between the proportion of exits that were due to closure or M&A is not possible, but the analysis proved that most of the exits were due to some sort of closure).

20 20 As with all firms, in any given year, life-expectancy is much greater for the existing stock of MSBs than it is for new MSBs. The same is true for the stock of all firms, which is dominated by SMEs. The table below shows that almost 50% of all new start-ups (dominated by the small firms) do not survive more than fours years. By contrast, slightly more up-to-date Aston analysis of data from the Business Structure Database shows that only 33% of those MSBs born in 2006 survived to 2010, albeit general economic conditions were particularly difficult during this 4-year period. …and this is similar to the survival of all firms. ONS Business Demography data Source: ONS, 2010 The flattening in the survival function as time goes by shows that the probability of closing decreases the longer the firm has been in existence. Therefore the stock of businesses has a lower probability of closure than new start ups.

21 21 The number of firms born as MSBs is falling The number of firms born as MSBs (i.e. in their first year of establishment the firm had sufficient turnover to count as an MSB) has declined since From 1998 to 2004 the number of firms born as MSBs each year averaged 295, since 2005 the average is 102. One explanation is a reduction in the number of MSBs created due to inward investment. UKTI analysis shows the proportion of foreign investments involving the setting up of large subsidiaries has fallen in favour of more investments that start small and grow. Most multi-national companies already have existing investments in the UK and have focused on expanding these. By contrast, inward investments coming from emerging markets tend to favour smaller projects. Both of these factors have tended to reduce the number of firms “born” as MSB*. Other factors in declining MSB births could be a reduction in the importance of corporate downsizing and spin-offs. The relative contributions to MSB births from these trends is not known. Source: Analysis of Business Structure Database *See for example UNCTAD, 2011

22 22 It takes several years for most firms to reach MSB size Charting the origins of MSBs that still existed in 2010, the higher blue line shows it typically takes a number of years to grow to MSB, as there are more firms ending up MSB in 2010 that were born earlier than later in the period Aston research suggests such growth is typically organic. The fall in the blue line closer to 2010 is because there are many other firms born since 2003 that are yet to reach MSB status. The red line shows the survival of new-born MSBs – i.e. born specifically as MSB in a certain year and still MSB in The closer that birth is to the present time, the higher should be the survival, so the line should be upward-sloping. However, because of a recent decline in the MSB birth rate, this depresses the slope. Source: Analysis of Business Structure Database

23 23 And MSBs are typically born as relatively small SMEs The chart shows clearly the growth story – that most MSBs started off as a small business. Of the (2621) MSBs in 2010 that were born since 1998, the majority were born as smaller firms and had grown to become mid-sized by Taken together with the regression results (see slide 31), this suggests that there is dynamism coming from growth into the MSB band, but much less so from firms growing within the MSB band (from small MSB to large MSB). Source: Analysis of Business Structure Database

24 24 Growth performance of MSBs

25 25 Growth performance Firm growth is associated with job creation, investment and productivity improvements. –Productivity improvements at the firm level depend on a range of inter-related drivers such as skills, innovation, enterprise, capital investment and management. –At the economy level, churn (the entry of more productive and exit of less productive firms), and changes in firm market shares are even more important than within-firm productivity improvements (Harris and Li, 2007; Disney, Haskel and Heden,2003). Relative to other OECD countries, the UK has a large number of static firms (employment growth rates between -1% and 1%). However, the top 5% of UK firms tend to have higher growth rates relative to the top 5% in other OECD countries (Biosca, 2010). In recent Job Creation and Destruction research (BIS, 2011a), it is reported that: –On average, around 2.7m jobs were created and 2.5m destroyed in the UK per annum between 1998 and 2008 with little variation in rates of creation and destruction over the decade. –The majority of jobs were created by small firms: the average rate of job creation by both entry and expansion are negatively related to size-band at birth. However, the contribution of all size categories to net job creation was negative with the exception of start-ups, whose net job creation was positive. High-growth firms are particularly important to UK growth. Over three years, less than 10% of firms generated more than 50% of UK job creation (NESTA, 2011). High-growth firms are not restricted to particular sectors or firm sizes. However, researchers have identified common factors associated with higher growth including firm age, human capital, entrepreneurship, exporting activity, networks, and in particular innovation. *For more information, refer to BIS, 2010c; ‘Economics Paper Number 9: Economic Growth’

26 26 Is there evidence of untapped growth potential in MSBs? Case study evidence from the Middlesex University research suggests that most MSBs are seeking to grow (but several had aimed to merely survive in the aftermath of the global financial crisis). However, the CBI’s MSB poll revealed that just over a quarter of MSBs expected to grow by more than 20% over the next five years (CBI, 2011). In order to assess whether MSBs are fulfilling their growth potential this section looks at a number of sources of information about performance: –The share of MSBs whose turnover has increased. –Jobs creation at MSBs. –MSB performance compared to highest growth firms. –MSBs’ own expectations about growth performance. –International comparisons of MSB performance.

27 27 In any year, there is a mixed picture of MSB turnover growth There is a mixed picture across MSBs with regard to turnover growth. In each year since 2006 the turnover of around 40% of MSBs has declined and an additional 10% see nominal turnover growth of 0-5% (i.e. little increase). However, half see real growth in turnover, with around a fifth of MSBs grow by 20%+. Research by NESTA for UK businesses as a whole, suggests that over % of firms saw their turnover shrink by more than 1% (Anyadike-Danes et al., 2009). Within this, weak or negative turnover growth was concentrated in the very smallest firms (1-10 employees). Source: ONS, IDBR

28 28 Overall, job creation rates have remained fairly stable Annual data on job creation and destruction (JCD) shows that overall for the private-sector, there was very little variation in rates of JCD over the period 1998‐2008. Since 2008, job creation due to firm entry fell and there was a sharp rise in the rate of job destruction due to firms’ shrinking. However, perhaps surprisingly since 2008, the rate of job creation due to firm expansion has held up at pre-recession rates. The rate of job destruction due to firm exit also changed little from the pre‐recession period, remaining lower now than what it was for much of the previous decade. Source: Analysis of Business Structure Database Note: Data is Aston University analysis of Job Creation and Destruction taken from the whole IDBR ONS data. See BIS, 2011a

29 29 But MSBs’ contribution to job creation has declined By contrast, MSBs have become less dynamic between 1997 and 2010 with increasingly small employment changes due to MSB births and deaths. And in particular the number of jobs created by MSBs due to MSB birth or MSB expansion has been on a consistent downward trend: –1997: MSBs created 718,000 jobs. –2006: MSBs created 348,000 jobs. –2009: MSBs created 236,000 jobs. Weakening growth is due to both weaker performance from incumbents and new MSBs. Source: Analysis of Business Structure Database

30 30 Is firm size related to their rate of growth? There is a prima facie case that firm growth and size are negatively correlated: –Casual observation confirms that small firms grow more rapidly than larger ones. –Economic theory suggests that growth slows with increasing size, for example, once firms achieve minimum efficient scale, or because small firms have relatively lower adjustment costs. But the case is not as strong as it may appear: –Economics does not support a long run relation between size and growth: once firms achieve their optimal size, growth rates will be driven essentially by chance, not size (Dunne and Hughes, 1994; Hall, 1987; Lotti et al, 2007; Santarelli et al, 2006). –Careful analysis of the evolution of the firm population is required to control for bias (for example, other factors which influence growth and size), and to interpret the results appropriately. –Firm-level econometric analysis across different countries, periods and sectors tends to confirm that chance rather than size determines the distribution of firm growth (except for small and young firms), particularly over the longer term.

31 31 MSBs are under-represented amongst highest growth firms Econometric analysis for BIS by Aston University on a database of firms for finds that: In general, it is confirmed that growth rates are negatively correlated with firm size. Small firms grow more rapidly than MSBs or large firms. Looking at MSBs as a whole, we find that they are much less likely to be found amongst the highest-performing firms (top 10%) than would otherwise be expected. –This is relative not just to small firms, but also to larger ones. Within the MSB group, larger MSBs are less likely to be found amongst the population of highest performing firms (as expected by theory). But so too are smaller MSBs, so the negative correlation between firm size and growth appears to break down for smaller MSBs - the results suggest smaller MSBs are less likely to be high growth than would be expected by theory. These conclusions still apply when we control for ownership concentration, (a variable Aston created to seek to identify family-owned MSBs in the data). –This suggests poor growth performance of MSBs cannot just be explained by the presence of Family Owned MSBs* with concentrated ownerships structures. * See section on capability for a discussion of family-owned firms

32 32 Structured interviews with MSBs asked about their past performance and expectations of future performance in terms of sales, profits and employment. The share of firms forecasting falling sales and profit was lower than the share that had experienced actual falls in the previous 3 years. Firms said their performance was dependent on the overall economic outlook driving demand. When asked whether growth achieved had been ‘opportunistic’, 10 cases (29%) mentioned that this had been the case, at least to some extent, with two specifically mentioning that growth had been entirely opportunistic. An example of this was an insurance company which had benefited from fortunate market circumstances - a rise in insurance prices. A high proportion (86%) of the MSBs interviewed had a future growth aim for the next year or so, as they had done in previous years, with an emphasis on profitably growing market share. Organic growth is favoured (80%), with only 29% including acquisition plans as part of their growth strategy and 9% focusing growth on acquisitions. However, despite the plans to grow in many cases, actual performance tended to be weaker, and 40% of firms were still forecasting a further fall in employment to come. Employment performance past 3 years Up1749% Same823% Down1440% Indeed, the study concluded that overall MSBs were characterised by moderate growth aspiration but only steady performance indicating potential for improved performance. MSB performance, Past 3 Years and Next Year Forecast Source: Middlesex Research into MSB Growth Note – Comparison to SMEs: The Small Business Survey 2010 covers a different time period to the 3 years mentioned in the MSB research. SBS numbers employed compared to 12 months a go (SME Employers): More than 12m ago = 17%; same as 12m ago = 61%; fewer than 12m ago = 21%. In terms of growth ambition, 74% of SME employers aim to grow the business in next two to three years.

33 33 MSBs identify some examples of government policy as a barrier to growth The structured interviews also revealed MSBs views on the barriers they face to growing. Government policy issues most frequently mentioned as barriers to growth were: –Employment law constraining ability to manage staff numbers – staff once recruited are difficult to lay-off; new immigration laws; disincentives because of how NI works. –International trade regulations, both overseas barriers and export licenses, anti-bribery laws cited as a barrier for doing business in certain parts of the world where such payments are part of doing business. –Increased burden of financial services regulation strong message from firms in the sector, unsurprisingly given the regulatory response to the financial crisis. –more clarity regarding overseas tax law and UK reciprocal arrangements to tackle issues of double taxation. –Other regulations with financial implications e.g. customers being allowed to terminate their credit agreements at the halfway stage at no penalty cost; the role of credit reference agencies. –SMEs differ to MSB with the economy being reported as the main barrier to success. Regulation is ranked 6th behind cash flow, competition, finance and tax (BIS, 2011b). In terms of what government could do to support firms it was notable that: –Government was a key purchaser for some firms. –Some suggested government could do more to support access to finance. Notes: SME data from Small Business Survey 2010 (see BIS, 2011b)

34 34 International comparisons: Germany Germany is often considered as having a thriving population of mid-sized businesses – known as the “Mittelstand” (not a direct comparison as existing research encompasses all German SMEs). New analysis commissioned by BIS from NIESR looking at a comparable German MSB population (turnover of €25m to €500m), found that Germany has around 19,000 MSBs; nearly twice as many as the UK and accounting for a larger proportion of the overall firm population. And although German MSB’s role in generating private-sector turnover and employment is somewhat greater than that of UK MSBs, the figures suggest that they are (on average) smaller than UK MSBs. GermanyUK No. of MSBs19,00010,000 Share of MSBs amongst all private- sector firms0.5%0.2% Proportion of private-sector employment attributed to MSBs23%21% Proportion of private-sector turnover attributed to MSBs32%20% Proportion of manufacturing employment attributed to MSBs36%31% Note: Notion that German MSB manufacturing is v large is not dependent on whether we measure by share of employment or share of turnover. “Proportion of German manufacturing employment attributed to MSBs is 36%”. There is a similar figure (37%) for MSB manufacturing if measured by private sector turnover.

35 35 International comparisons: German MSBs’ performance In general, German firms appear to have higher turnover per employee than UK firms; however the gap in turnover per employee is particularly large for German vs UK MSBs. –Note: The data for the UK and Germany are not fully comparable due to differences in coverage and time periods, so these results are indicative only. In theory, this could reflect the higher share of manufacturing activities among German MSBs compared to their UK counterparts. –As a capital intensive sector, manufacturing generally has a higher turnover per employee than other parts of the economy such as service industries. –Manufacturing accounts for around 40% of German MSB employment, compared to 20% for UK MSB employment, so for Germany’s MSB segment, manufacturing is far more important than it is for the UK’s MSB segment. However, German MSB manufacturers have around 10% less turnover per employee than German MSBs overall; so their relative specialisation in manufacturing (compared to the UK) can at most be only part of the explanation for German MSBs overall stronger performance (measured by turnover per employee). The results from Sweden and Finland were broadly similar to those from Germany. Overall, the results suggest that any weakness in the performance of UK MSBs may be across the board, rather than attributed to the relative size or performance of the MSB manufacturing sector.

36 36 Characteristics of High-Growth Firms There is a growing body of evidence* on high-growth firms which highlights a number of characteristics common amongst the highest growth firms: –Skills & knowledge – including education, experience and management skills. –Networks & relationships – the highest growth firms rely heavily on building relationships with other firms through supply chains or formal strategic alliances. –Business innovations – intangible assets are particularly associated with high growth. –Access to finance – the ability to invest in growth depends on securing external finance, and equity finance can play a critical role. –Exports and overseas investment – firms with a track record of exporting or which have non-UK subsidiaries are more likely to be high growth. ** –Age – the fastest growing firms tend to be young. *See for example: BERR (2008b), NESTA (2009) ** Hart et al. (2011)

37 37 Ownership, Management & Capability

38 38 Why does ownership, management & capability matter? There is a perception that UK management and leadership capability is relatively weak, which acts as a brake on firm performance. –In practice, growth and productivity performance depend on a range of inter-related drivers such as skills, investment, knowledge, innovation, business environment, infrastructure and enterprise. UKCES argue that “strong leadership improves the ability of an organisation to innovate, to exploit new ideas and develop new propositions to enable business growth. Strong leadership and management also unlocks the potential of the workforce, harnessing the skills, ideas and knowledge required to propel business productivity” (UKCES, 2010). Surveys by the Institute of Management Development have shown that business executive opinions of management quality are lower in the UK than US, Germany and France (BERR, 2008a). Average annual spend on management training amongst UK firms was found to only be around one-third of that in Germany (Mabey and Ramirez, 2004). An influential set of surveys undertaken by McKinsey/CEP (Bloom et al., 2007) for medium sized manufacturers also show: –the UK is behind key competitors on measures of management capability. –Measures are correlated with firm performance measures including sales growth, labour productivity and the return on capital. –a lower proportion of UK managers hold degree-level qualifications compared to other countries (other studies indicate that innate ability, training and experience are more important for determining what makes an effective manager (Tamkin et al., 2006)).

39 39 Why does ownership, management & capability matter? This section looks at: –international comparisons of management capability in medium size manufacturers. –the ownership structure of MSBs and family ownership. –MSBs own assessment of their management skills.

40 40 UK management capability is weaker than rivals A series of surveys of medium sized manufacturers by CEP/McKinsey in 2004, 2006 and 2009/10 consistently show the UK has lower management capability than key competitors. Note: CEP pooled survey results from 2006 and 2009/10; Average management practice score on a 1 to 5 scale (CEP, 2011) Persistence over time i.e. well-managed firms in 2006 remain well- managed in 2009/10. Greater dispersion across firms within countries than across countries. Family owned and run firms have lower management scores than firms with other management structures.

41 41 UK management has improved but barriers remain US management capability remained constant between 2006 and 2009/10, with other countries “catching-up”. UK-US management gap closed by around one-third. For UK, hiring managers and non managers with the right skills were the main barriers to improving management capability, followed by lack of knowledge of management practices and cost effective consultancy. Source: CEP, 2011

42 42 Concentration of ownership has increased for MSBs of all sizes Ownership structure of firms is difficult to identify in databases other than looking at the number of shareholders as a proxy indicator. Ownership is often concentrated, with over 60% of MSBs having 5 or fewer shareholders in 2009 reflecting: –Family-ownership (where the business has been passed down to the next generation). –Rapid growth of a small business founded by an entrepreneur. –in some cases, private equity ownership, perhaps after a leveraged buyout. Concentrated ownership has increased for all MSB size bands since For smaller companies, concentration has declined over time, whereas for large companies it has remained high – suggesting the dominance of a small number of shareholders even extending to large companies listed on a public exchange. Source: Analysis of Business Structure Database

43 43 Does family ownership matter? The structured interviews conducted by Middlesex University with MSBs gave greater insight into the importance of family ownership. Family-owned firms were defined as businesses where the family owned % of the shares. They accounted for just under half of the sample (N=16, 46%) of 35 MSBs. Only 1 of the 16 family-owned MSBs was under first generation ownership; 5 were owned by second generation family; and 10 were under subsequent generation ownership. The remaining firm (with a 100 year history) was bought back by founding family, but now also has venture capital investors. In most of the family-owned MSBs (14 out of 16) the family were on the executive board, while only one family-owned firm was operated by a non-family “professional” management team. A lower proportion of family-owned businesses in the sample had Non-Executive Directors (NEDs) than other MSBs (31% compared to 58%). Across the full sample, those MSBs with NEDs were found to perform better in terms of sales, net profit and employment. Family-owned MSBs tended to be amongst the ‘middle’ business performers, with only 5 of the 16 experiencing growth in sales turnover, net profits and employment (and 3 firms experiencing declines in all these measures). When asked about areas for business improvement, family-owned MSBs were less likely to acknowledge perceived weaknesses.

44 44 The structured interviews also gave insight into MSBs assessment of their overall management capability. Approximately half of MSB managers reported business weaknesses, varying from around one- third for family-owned MSBs to two-thirds for other types of MSBs. Amongst those with perceived business weaknesses, a need to improve management capability was often identified, including a need to train existing or new managers, IT management and strategic management. Middle sized MSBs (£50m-99m sales turnover) were most likely to be planning management changes over the next year, followed by family owned MSBs, and then the largest and smallest turnover MSBs. MSBs with Non-Executive Directors were less likely to report that improvements in management capability were required compared to those without NEDs, although this could reflect greater levels of expected performance in MSBs with NEDs rather than a lack of managerial skills in MSBs without NEDs. Many MSBs recognise management weaknesses

45 45 Exporting & International Investment

46 46 Exporting and international investment Exporting can increase firm productivity, as exporting allows firms access to wider markets and new ideas, increasing exposure to competitive pressures and forcing firms to focus on comparative advantage. –However, to be able to take advantage of the opportunities presented by exporting, firms need to have the right capabilities, including in terms of management and organisation. –As a result for some firms, focusing on developing internal capabilities first (e.g. innovation) could be a more beneficial strategy than entering into export markets. Exposing domestic firms exposure to foreign competition (imports) increases competitive pressures, which supports increased specialisation in higher-productivity activities, lowering cost and increase the variety of consumption, and of production inputs. From a macroeconomic perspective, when there is spare capacity, exports increases sales without displacing other UK business, therefore increasing economic growth. –However, clearly not every product or service is suitable for exporting. Analysis of the Community Innovation Survey suggests that around 24% of all UK firms exported in 2008 (Harris and Li, 2010). The 2011 UKTI International Business Strategies Barriers and Awareness Survey found 48% of firms that export or have an overseas subsidiary generate up to 10% of their turnover from overseas sales, and 21% generate more than 50% from overseas sales. –The majority (57%) of respondents entered an overseas market in response to an approach/enquiry from someone in that market, suggesting firms tend to be reactive or opportunistic exporters.

47 47 MSB exporting performance I: A high proportion of MSB exporters are low-intensity exporters MSB exporting performance overall has been dominated by a rise early in the period in the proportion of exporting firms that are “low-intensity exporters” (i.e. these are exporters that export a relatively small proportion, 1-9%, of their sales). This rise is from around 35% to around 40% of MSB exporters. By contrast, smaller firms (with turnover less than £25m) performed relatively better and were less likely to be a low-intensity exporter, especially by the end of the period. Across all sized firms, the 2011 UKTI International Business Strategies Barriers and Awareness Survey found 48% of firms that export or that have an overseas subsidiary generate up to 10% of turnover from overseas sales (UKTI, 2011). Source: Analysis of Business Structure Database & FAME Notes: Larger companies (with turnover >£500m, shown by the brown line) appear to be the worse-performing in the middle of the period, but small sample size could well be a factor here, and may not be a true reflection of the actual performance of this group.

48 48 MSB exporting performance II: Proportion of MSB exporters that are high-intensity exporters remains small There appears to have been an improvement over the period in the proportion of exporting MSBs showing high-intensity exporting (exporting 75%+ of their sales) – but the uptrend has been only gradual and from a low level of around 10%. Even by 2009, the degree of high-intensity exporting of the main categories of MSB remained low (on average in the 13-15% range). By contrast, smaller exporting firms (with total turnover less than £25m) tended to have more high- intensity exporting in 2001, and the proportion of these high- intensity exporters improved further, reaching around the 22% level in Between 2002 and 2008, growth in UK exports to high-growth markets has been split relatively evenly between increases in the number of exporters and an increase in exporting intensity (BIS, 2010b). There has also been progress in low-growth markets, mostly due to more intensive exporting. Source: Analysis of Business Structure Database & FAME

49 49 MSB exporting performance III: little change in proportion of firms exporting at moderate levels of intensity The chart below shows that with regard to the proportion of exporting firms that export with moderate intensity (25-49% of turnover being exported), there has been remarkable stability in this proportion over the last 10 years. This applies for both MSBs and firms of the smaller turnover category (<£25m). This picture of stability is similar for exporting intensities on either side of this moderate (25-49%) category i.e. this applies also to the low-moderate (10-24%) intensity and the moderate-high (50-74%) intensity. Summing up on export performance, whilst there is little difference in moderate-intensity exporting between smaller firms and MSBs, MSBs are not exporting as intensively as they could be in comparison to SMEs: MSBs tended to have a lower proportion of high-intensity exporters and a higher proportion of low-intensity exporters than smaller firms - especially by the end of the period. Source: Analysis of Business Structure Database & FAME Note: The overseas turnover variable in FAME is mostly reported by firms exporting above a given threshold (defined by proportion of sales overseas). The minimum threshold for reporting increased over the time- period, potentially reducing the count of low-intensity exporters reporting overseas sales.

50 50 Manufacturing MSBs are more likely to be export intensive than business services or others The proportion of manufacturers exporting at least the majority of their turnover (50% or more of their total sales) has been 31% for MSBs (averaged over the period ). The proportion of firms in the business services category deriving the majority of their turnover from exports is 23% which is below the average - as shown below, the figure for “all” MSBs involved in high-intensity exporting is 26%. Other data, (see Table A3.7 of the Aston University Growth & Business Characteristics Analysis of MSBs) also shows that MSBs in the business services category do not tend to be particularly export intensive. Analysis of the Community Innovation Survey (2006) suggests that across all firms, manufacturers tend to be more export intensive relative to other firms. The top quintile of export-intensive manufacturing and non- manufacturing firms generated on average 44% and 31% of sales overseas respectively (BIS, 2010a). Source: Analysis of Business Structure Database & FAME Note: Care should be taken when interpreting these figures as the sample coverage for the data on export intensity by sector or region is less robust than for overall BSD- FAME figures for the UK as a whole.

51 51 Regional exporting intensity is mixed The chart below shows regional export performance of MSBs, highlighting the proportion of firms with high-intensity of exports (50%+ of total sales turnover). Although MSBs in Greater London/ SE England have export-intensity above the UK average, they are below those for the devolved administrations according to the BSD-FAME data. By contrast, the Small Business Survey (BIS analysis of SBS 2010) found that SMEs exporters in general are more likely to be based in London (30%) than other regions of the UK (although this data does not focus on the export-intensive subset of SMEs). Source: Analysis of Business Structure Database & FAME Note: Care should be taken when interpreting these figures as the sample coverage for the data on export intensity by sector or region is less robust than for overall BSD-FAME figures for the UK as a whole.

52 52 Foreign ownership of MSBs is substantial, but has declined slightly Foreign “ownership”* (in many cases only partial ownership – see notes below) of MSBs is substantial, especially for larger MSBs. Analysis of data produced by Aston University suggests that in the period between 2007 and 2009, around 40% of all MSBs were partially or wholly under foreign ownership. The chart below, showing the number of UK MSBs under foreign ownership for different turnover size- bands, illustrates a few key points: The share of firms under foreign ownership increases with MSB turnover size category. Over time, there is some evidence of a slight decrease in foreign ownership of smaller MSBs (£25-100m turnover band). Foreign ownership of larger companies including larger MSBs has been remarkably stable, finishing the period at a similar proportion to where it started. As for smaller companies, foreign “ownership” started the period at a relatively low level – under 10% and ended even lower at under 7%. Source: Analysis of Business Structure Database & FAME * A foreign firm is defined as one in which at least 10 per cent of equity is owned by a foreign business entity. This threshold is suggested and used for statistical purposes by the IMF, UNCTAD (2005), OECD; many OECD countries, including Germany and is common in the literature (e.g. Griffith et al. 2004; Doms and Jensen 1998). The threshold of 10 per cent is considered to represent a meaningful stake and effective voice in the management of the firm.

53 53 Before credit crunch, no evidence that MSBs getting more involved in outward investment. Taking MSBs’ as a whole, involvement in outward investment has been fairly flat over the period between 2001 and 2009 (as shown by chart below of the % of all MSBs with an EU subsidiary). Data on firms with non-EU branches as well as EU branches shows that the ratio of MSBs with EU to non-EU subsidiaries is slightly less than 3:1, (and this ratio is fairly stable over time). So, those MSBs with EU branches dominate the pattern of outward investment. Looking at the data on the number of MSBs with overseas branches, overall there is little evidence that MSBs (in aggregate) became more globalised through foreign direct investment in the period since 2001 – which would appear to be a weak performance given the increase overall in global flows of FDI. Source: Analysis of Business Structure Database & FAME

54 54 Larger companies more involved in overseas investment than MSBs Comparing the MSBs group with the group of firms in the UK economy that are smaller and larger than MSB, we can see that over the period , whereas FDI involvement of MSBs was fairly flat, the number of smaller firms with overseas subsidiaries declined over the period, whilst the number of large firms with overseas subsidiaries increased slightly over the period. Data on firms with non EU branches as well as EU branches shows that the ratio of small firms (firms in the “less than £25m” size band) with EU to non-EU subsidiaries is around 2.3:1*, which is smaller than for MSBs. So, for smaller firms with overseas investments, the presence of EU branches is less dominant. For larger companies, there is not enough data on those with non-EU subsidiaries to be able to make a comparison between the relative dominance of those with EU and non-EU subsidiaries. *ratio of EU to non-EU subsidiaries for smaller firms: in 2001, it was 617:261 and in 2009, it was 621:277; i.e. this approximates to 2.3:1. Source: Analysis of Business Structure Database & FAME

55 55 Investment & Finance

56 56 UK business investment performance has been weak Investment is necessary for sustained growth, in combination with other key drivers, with its impact depending on quality and type (Solow, 1970; OECD, 2003; World Bank, 2010; BIS, 2010c; BERR, 2009). UK Business Investment grew by 2.5% pa over , slower than the USA (4.6%), but faster than Germany (2.4%) and Japan (1.0%) (OECD.stat). –Between 1998 and 2008 the ratio of Business Investment to Gross Domestic Product (GDP) fell from 12.8% to 10.0% in the UK, from 12.1% to 11.6% in the US, and was unchanged in Germany at 12.1%. The recession had a severe impact on business investment. In the UK quarterly business investment fell 21% between 2007 Q4 and 2009 Q4 (ONS, 2011). –There has been some recovery - business investment was 8% higher in 2011Q2 than in 2009 Q4, but, –investment remains around 15% below its level at the end of Business confidence continues to be low due to weak demand, tighter credit conditions, and continued eurozone uncertainty (CBI Quarterly Industrial Trends). –Evidence from past financial recessions suggests that investment can take years to recover (Reinhart and Rogoff (2010)). –Future investment intentions have been relatively strong, but there is uncertainty about the extent to which this will be located in the UK. –Since 2001, the liquidity of UK Non-Financial Companies has more than doubled, particularly in larger businesses and those in stable cash-generative sectors.

57 57 …and performance has been weak across all size bands New ONS analysis for BIS using microdata from the ONS’ Annual Business Survey shows that larger firms tend to invest more (as a proportion of their Gross Value Added, “GVA”) than smaller firms. The chart also shows that investment as a share of GVA has been declining fairly consistently across all size categories over the last 10 years. Specifically with regard to MSB investment rates, they have been on significant downward trend over the period, although there is some volatility from the two larger MSB size bands (probably due to some of the more capital-intensive firms in the £250m- £500m turnover category dropping down into the £100m-£250m category). However, MSB investment performance appears to be consistently worse than that of the larger firms; this may be somewhat surprising and needs further investigation as MSBs’ high share of manufacturing activity ought to push up average capital intensity for MSBs as a whole. Source: ONS analysis of data from the ONS Annual Business Survey

58 58 MSBs use external finance, but often not for investment Research suggests that the overwhelming majority of MSBs use external finance. –88% of MSBs sought external finance in 2010, down slightly from 2009 (92%). –By contrast, 51% of SMES used external finance over the last 12 months. From 2009 to 2010 there was a significant decline in proportion of MSBs seeking new external finance from 41% to 32%. In 2009 and 2010, finance was typically sought for working capital/cashflow purposes rather than investment or acquisitions. Evidence from SME employers shows this was indeed the case before the credit crunch/ recession, with the proportion of SME employers seeking finance for investment declining further in To note that in 2011, there has been a rise in SME employers seeking finance for investment, and investment has been the main or joint main reason for seeking finance in the last two BIS Barometer surveys (BIS, 2011c). Source: Results from the BIS 2010 Finance Survey of Mid- Cap Businesses (BIS, 2010d) *In this research, MSBs were known as “mid-cap businesses”. But the “mid- cap” definition is the same as for an MSB.

59 59 MSBs typically seek finance from banks Where external finance is required, MSBs are currently quite reliant on banks for finance, with bank overdraft, leasing & hire purchase and secured loan or mortgage the most commonly sought forms of finance in 2009 and Although the share of firms seeking bank finance declined between 2009 and 2010, reliance on other forms of finance such as leasing or secured loans fell by more. In general there is little difference between sectors in terms of their use of different types of finance, apart from: –Manufacturing sector was less likely to use secured loans (possibly due to relatively low levels of investment in the run up to the survey). –Service sector was less likely to use credit cards. Source: Results from the BIS 2010 Finance Survey of Mid-Cap Businesses (BIS, 2010d)

60 60 MSBs’ use of finance (external and internal cash) In the structured interviews conducted by Middlesex University: Many firms do not use external finance, and of those with bank finance several reported that qualitatively, they were experiencing an increasingly difficult banking relationship. Although those where loans could be secured against specific assets reported less problems. Notably the two firms with private equity investors had made significant use of large amount of debt finance. Many MSBs are cash-rich. During the structured interviews, the high cash balances held by cash-rich MSBs were explained in a number of ways: –precautionary, in the event of further difficult trading conditions. –reserves for future investments. –to meet regulatory requirements.

61 61 Interviews with firms suggest that of those interviewed, investment levels as low with more than half of MSBs having invested less than £4m in the last three years. And only 17% of the firms interviewed planned to invest more than £10m in the next three years. MSB investment have limited investment plans Source: Middlesex University, Research into Mid-Sized Business Growth Investment levels

62 62 Investment plans In the structured interviews: Investment plans varied greatly between firms, however investment in IT systems frequently mentioned as a pressing need. Reflecting the investment expenditure pattern, IT skills and updating IT and management systems identified as a barrier to growth by many firms. A small number of firms were looking to expand through investing in acquisitions including acquisitions abroad. Many firms do not use external finance, and of those with bank finance several reported increasingly difficult banking relationship, although those where loans could be secured against specific assets reported less problems. Notably the two firms with private equity investors had made significant use of large amount of debt finance. The cash balances held by firms were explained in a number of ways, some was precautionary, in the event of further difficult trading condition, others to build up reserves for future investments and in a couple of cases to meet regulatory requirements.

63 63 References

64 64 References Anyadike-Danes, M., Bonner, K., Hart, M. and Mason, C., 2009; ‘Measuring Business Growth: High-growth firms and their contribution to employment in the UK’; available at; BERR, 2008a; ‘The 2008 Productivity and Competitiveness Indicators’; available at BERR, 2008b: ‘BERR Economics Paper No.3: High growth firms in the UK: Lessons from an analysis of comparative UK performance’; available at: BERR, 2008c; ‘Productivity and Competitiveness Indicators’, available at; BERR, 2009; ‘The Globalisation of Value Chains and Industrial Transformation in the UK’, BERR EP6; available at; Biosca, A. B., 2010; ‘Growth Dynamics: Exploring Business Growth and Contraction in Europe and the US’; NESTA Research report: November 2010, available at BIS, 2010a; ‘BIS Economics Paper No. 5: Internationalisation of Innovative and High Growth SMEs’; available at; BIS, 2010b; ‘BIS Economics Paper No. 8: UK Trade Performance: Patterns in UK and Global Trade Growth’; available at; growth-patterns BIS, 2010c; ‘Economics Paper Number 9: Economic Growth’; available at;

65 65 References BIS, 2010d; ‘Results from the 2010 Finance Survey of Mid-cap Businesses’; available at; BIS, 2011a; ‘Job Creation and Destruction in the UK: ’; prepared by Anyadike-Danes, M., Bonner, K. and Hart, M.; Economics & Strategy Group at Aston Business School; available at; BIS, 2011b; ‘BIS Small Business Survey 2010’; available at; BIS, 2011c; ‘SME Business Barometer August 2011’; available at; BIS, 2011d; ‘Research into Mid-Size Business Growth’; Centre for Enterprise and Economic Development Research; available at; Bloom, N., Dorgan, S., Dowdy, J. and Van Reenen, J., 2007; ‘Management practice and productivity: why they matter’; available at: Carree, van Stel, Thurik and Wennekers (2003) Economic Development and Business Ownership: An Analysis Using Data of 23 OECD Countries in the Period 1976–1996, Small Business Economics Volume 19, Number 3, CBI, 2011; `Future Champions’, available at; CEP, 2011; ‘Constraints on developing UK management practices’; BIS Research Paper No. 58; Bloom, N., Lemos, R., Qi, M., Sadun, R. and Van Reenen, J.; available at; papers

66 66 References Disney, R., Haskel, J. and Heden, Y., 2003; ‘Restructuring and Productivity Growth in UK Manufacturing’; Economic Journal, Royal Economic Society, vol. 113(489), pages Doms, M. E. and Jensen, J. B., 1998; ‘Comparing Wages, Skills and Productivity between Domestically and Foreigh-Owned Manufacturing Establishments in the United States’; available at; Dunne, P. and Hughes, A., 1994; `Age, Size, Growth and Survival: UK Companies in the 1980s’, Journal of Industrial Economics 42, Griffiths, R., Redding, S. and Simpson, H., 2004; ‘Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab’; Oxford Review of Economic Policy, Vol. 20, No. 3, pp. 440 Hall, B., 1987; `The relationship between firm size and firm growth in the US manufacturing sector’, Journal of Industrial economics 35, June. Harris, R. and Li, Q. C., 2007; ‘Firm Level Empirical Study of the Contribution of Exporting to UK Productivity Growth’; available at; Harris, R., and Li, Q. C., 2010; ‘Study of the Relationship between Innovation, Exporting and the Use of E- Commerce’; available at; Hart, M., Bhaumik, S., Bonner, K., Gong, Y. and Temouri, Y., 2011; ‘Contribution of Trade and Investment to High-Growth Firms’; Forthcoming HMT and BIS, 2010; ‘Financing a Private Sector Recovery’, available at;

67 67 References HMT and SBS, 2003; ‘Bridging the Finance Gap: A Consultation on Improving Access to Growth Capital for Small Businesses’; available at; /http:/ Lotti, F., Santarelli, E. and Vivarelli, M., 2007: ‘Defending Gibrat’s Law as a Long-Run Regularity’; Institute for the Study of Labor (IZA) DP2744; M Institute, 2006; ‘Behavioural differences between small, medium and large organisations’ Mabey, C. and Ramirez, M., 2004; ‘Developing managers: a European perspective’; Chartered Institute of Management, London NESTA, 2011; ‘The Importance of High-Growth Businesses to the Recovery’; NESTA Research Summary: March 2011; available at; OECD, 2003; ‘The Sources of Economic Growth in OECD Countries’; available at; ONS, 2010; ‘Business Demography 2009: Enterprise births, deaths and survival’; available at: ONS, 2011; ‘Business Investment, Q Provisional Results’, available at; invest/business-investment/q provisional-results/index.html Reinhart, C. and Rogoff, K., 2010 `Debt and Growth Revisited’, MPRA ; available at; mpra.ub.uni- Reinhart, C. and Rogoff, 2010; ‘Growth in a time of debt’, CEPR DP 7661, draft for American Economic Review Papers and Proceedings’

68 68 References Santarelli, E., Klomp, L. and Thurik, A., 2006; ‘Gibrat’s Law: An Overview of the Empirical Literature’; in E. Santarelli (Ed) Entrepreneurship, Growth, and Innovation: the Dynamics of Firms and Industries, Springer, New York, 41-73; available at;'s%20Law,%20an%20overview%20of%20the%20empirical%20li terature.pdf Solow, R., 1970; ‘Growth Theory: an Exposition’, chs.1-3 OUP. Storey, D. and Johnson, S., 1987; ‘Job Generation and Labour Market Change’ Storey, D., 1994; ‘Understanding the Small Business Sector’, Routledge. Tamkin, P., Mabey, C. and Beech, D., 2006; ‘The comparative capability of UK managers’; SSDA Research Report 17; available at; UKCES, 2010; ‘Developing leadership and management skills through employer networks’; available at; through-employer-networks.pdf UKTI, 2011; ‘International Business Strategies, Barriers and Awareness Monitoring Survey 2011: Research Report’; available at; UNCTAD, 2011; ‘World Investment Report 2011: Non-Equity Modes of International Production and Development’; available at; World Bank, 2010; ‘Long Swings in Global Growth Drivers’, available at; swings-in-global-growth-drivers-0

69 69 Data Sources and Analysis Aston University analysis of ONS and FAME data (from the ONS Business Structure Database - BSD) BIS analysis of the Office for National Statistics (ONS) Inter-departmental Business Register (IDBR) BIS analysis of ‘Small and Medium Enterprise Statistics’ 2001 and 2005 BIS analysis of ‘Business Population Estimates 2010’ CBI Quarterly Industrial Trends; business confidence data sourced from the quarterly industrial trends (not publically available) London School of Economics and Centre for Economics Performance (LSE/CEP) study and survey of management capability Middlesex University case studies of MBS firms, providing qualitative evidence National Institute of Economic and Social Research (NIESR) study to provide International Comparisons OECD Economic Outlook, June 2011; Economic projections data accessed through OECD.stat website (not publically available) ONS analysis of ONS Capital Expenditure (CAPEX) data from the Annual Business Survey (ABS)

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