Medium-sized firms are overlooked by the government but could inject between £20bn and £50bn into the economy by 2020.

Medium-sized businesses are the UK's "forgotten army", too long overlooked by government but with the potential to inject between £20 billion and £50 billion into the economy by 2020, according to the CBI.

Firms with a turnover of between £10 million and £100 million represent less than 1% of businesses but generate 22% of economic revenue and 16% of all jobs.

The CBI is calling for a broader range of finance to be made available to medium-sized businesses. With banks' lending constrained, these firms can no longer rely solely on bank lending for long-term growth capital to invest in their companies.

Creating jobs

Figures provided to the CBI by NESTA reveal that just 6% of MSBs create 60% of all the new jobs created by the sector. If more firms could reach their potential to grow, this could help achieve an extra £20 billion to £50 billion by 2020, a major boost to the UK's GDP.

MSBs could play a crucial role in rebalancing the economy, and create new jobs in areas most affected by public spending cuts. In the North East, where unemployment reached 11.3% in the three months to August 2011, MSBs already account for about 20% of all jobs. Mid-sized firms also represent 30% of the UK's manufacturing base.

John Cridland, CBI Director-General, said: "We should be championing, nurturing and encouraging our mid-sized firms so that more of them grow and create jobs. For too long these companies, which could inject tens of billions of pounds into our economy, have fallen under the radar of policymakers.

"To achieve extra growth, medium-sized firms must have access to new kinds of finance. This means opening UK bond markets to medium-sized businesses, encouraging use of venture capital, and making it easier for large companies to invest in medium ones, possibly in their supply chains."

Proposals

- The CBI wants the Government to make bond markets more accessible to MSBs in the UK.

- The report calls for MSBs to be able to access a broader range of capital release equity. The CBI suggests re-instating a Corporate Venturing Incentive to encourage large firms to invest in medium ones, and making equity investments tax deductible so that they are on a par with debt investments.

- Entrepreneurs' Relief should also be restructured to incentivise longer-term investments with the threshold for qualifying for the relief brought to below the current 5%.

- The CBI and the Department for Business should encourage large firms to work with MSBs in their supply chain to share best practice and increase levels of leadership, innovation, exports, recruitment and financing.

- The CBI needs to bring firms together to share experiences of management challenges, financing options and exporting to help them plan for growth by learning from other MSBs and industry experts.

- The Department for Business and trade bodies should identify sectors which would benefit from surveys of management skills, working with specialists such as the British Quality Foundation to establish a cost effective method of helping MSBs identify ways to improve capability.

- To encourage more MSBs to export their products and services, UK Trade & Investment (UKTI) should proactively target medium-sized firms, suggesting sources of advice and providing insights into international competition.

- The CBI would also like to see more MSBs included on international trade delegations.