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23 May 2004
Scotland of Sunday
If the medium-sized shoe fits, Cinderella firms can go to the ball

IT WAS gratifying to see the Royal Bank of Scotland last week catch up with the debate on what might be termed the Cinderella sector of the Scottish economy: those medium-sized companies destined to spend their days and nights working in the cellar of the Scottish economy while the spotlight shines on everyone else.

In its report, Wealth Creation in Scotland, Andrew McLaughlin, the bank’s deputy chief economist, notes that 'the importance of the mid-corporate sector is often lost in the competitiveness debate which has tended to focus on start-ups and new entrepreneurial activity'.

Well, it has not been lost in this column. The importance of the medium-sized company was made here on May 25 last year, and to re-emphasise the point made then: the M in SME has long been overlooked, its charms concealed by the attention focused on others, namely the start-ups and the big boys.

The debate over the role of medium-sized companies has concerned many of those working in the field of enterprise as the arguments over stimulating the economy have concentrated on how many new firms Scotland is creating, with little regard to what contribution these firms make to our general wellbeing. So we have proclaimed a kite-maker in Glasgow as the city’s company of the year (this is not a joke, it actually happened one year), and wrung our hands as business birth-rate figures have fallen.

Arguably more important is how many of these new firms are sustained and are encouraged to grow. What we need is support for those that are already viable and ready to become serious players. The medium-sized company, the equivalent of the not-so-good-looking-but-quite-sensible girl at the office party, needs to be seduced into being a little more adventurous.

The Entrepreneurial Exchange, the tycoons’ networking group now part of the Scottish economic fabric, noticed this some time ago, when it found itself swamped by what it terms 'lifestyle' businesses - one and two-man consultancies, hairdressers, garage mechanics and the like.

Entrepreneurs? Mmm... I’m not so sure, and nor was the Exchange. There’s a fine line between an entrepreneur and somebody who is simply self-employed. The Exchange was not persuaded that these people merited membership and it decided it needed to discourage them. They may have been doing all right for themselves, and learned something along the way, but just as they launched as one and two-man bands, so five or six years later they were still one and two-man bands.

What Scotland needs are business ventures that quickly become 10, 20, 50, 100-employee companies. From there, they need to be encouraged to become even bigger. That is when cultural factors kick in and need to be nurtured. It is when management may need to change, when refinancing becomes a factor, and expansion to England and overseas becomes a prerequisite of growth - even mergers with other companies to reach critical mass. It is also when advice can be most in demand, but is rarely offered. Where is the support for the M companies?

Come in Scottish Enterprise. Your country needs you.



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