By Daniel Hunter

Ensuring the UK’s medium-sized businesses (MSBs) have access to growth finance and can recruit skilled employees will be critical to a sustainable economic recovery in the UK, the CBI Director-General said in a speech to business leaders in London.

John Cridland, CBI Director-General, said: “Our economic growth relies on being able to mobilise the UK’s medium-sized firms into a powerhouse to match the German Mittelstand.

“Despite GE Capital’s encouraging research, which shows that many medium-sized businesses are at the top of the growth table, we cannot ignore the fact that two thirds of them have little or no growth.

“Boosting productivity in those firms could be worth an additional £20 billion to the UK economy by 2020.”

On finance he said: “There is no growth in this market if firms haven’t got the capital to fund expansion and, in recent years, it has been difficult.

“There have been many painful, but necessary, steps since the crisis to reboot the banking system. Capital and liquidity reforms have been a key pillar in making banks more resilient and stable — a good thing for all of us.

“But there are consequences and now we need to get the banking market firing on all cylinders again. Not just because it’s always going to do the lion’s share of lending to SMEs, but also because without bank finance to provide working capital, a critical rung in the financing ladder is missing.

“That’s why we’re urging policy makers to tread carefully as they regulate to stabilise the market. Choking off supply to shore up recovery will only hold back the very firms that should be driving growth.

“But it’s not just about lending by banks.

“One consequence of the banking crisis has been a revolution in alternative sources of finance, from crowd-sourcing to corporate venturing. We must raise awareness amongst growing businesses to have the confidence to give alternatives a go.”

On skills he said: “We need to broaden the skills base and capabilities of MSBs so they can get on and help themselves.

“These firms need better management capabilities, and the skills and knowledge to grow, export and innovate. And right near the top of this list is the capability to find, develop and retain top talent.

“CBI research shows that growth in employment across the economy will continue to be in professional, managerial and technical roles, which is exactly where the most severe shortages persist.

“39% of firms are already struggling to recruit workers with the advanced, technical STEM skills they need — with 41% saying shortages will persist for the next three years.

“To tackle this, universities and businesses must work more closely to better align skills development and research with economic and business needs across managerial, professional and technical roles.

“We are very good at research partnerships between large firms and universities, and very good at providing a quality standardised degree product.

“We must build on that strength. I want to see research and teaching relationships blossom between universities and medium-sized businesses too, using cluster models like the Warwick Manufacturing Group.

“We should develop specialisations, like the work done on high technology textiles at Manchester, which has proved so valuable to CBI members like Heathcote Fabrics down in Devon.

“Of course business schools see the immediate attraction of partnering with well-known global brands like Boeing, Vodafone or Jaguar Land Rover. But with their help our medium-sized businesses can become the Boeings or Vodafones of tomorrow.

“It’s also important that business is involved in curricula - developing what is learned as well as researched.

“I want to see business schools leading the way — reaching out to firms in their area to help them fulfill their growth potential and in turn creating graduate employment opportunities locally.

“Business schools should always be with business, not just about it.
“The upcoming Witty review offers us an opportunity to discuss how best to seize this opportunity — building business-oriented universities across the country and working to drive growth and innovation.

“To complement this, apprenticeships need to be much more closely aligned with the needs of business, particularly high-growth businesses like tech firm Sophos, who are having to recruit from Singapore because the skilled engineers aren’t coming through the UK education system.

“On skills reform, we want the apprentice budget to follow industry demands. This means giving employers more control over qualification content and structure, while routing funding more directly to businesses.”

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