Learning Lessons from the German Mittelstand
This week, I have been visiting Germany and speaking to Mittelstand companies like Wickeder Group to learn lessons about company growth.
When the First Minister appointed me as Minister for the Economy in May, she tasked me with implementing our Plan to transform Northern Ireland into a globally competitive economy.
As a Party we campaigned unapologetically on the basis that growing our economy was front and centre of our thinking. In particular, part of the DUP’s five point Plan was about securing more and better jobs and achieving this will require a consistent and concerted effort on a number of fronts. We must encourage innovation, enterprise and growth, and we need to address challenges around skills, energy and reducing red tape.
One by one we are addressing these issues. Last week I launched a new Trade Accelerator Plan http://www.investni.com/trade-accelerator-plan.html . It’s aim is to build on Northern Ireland’s recent export successes and encourage more local businesses to sell their goods, products and services outside of our region for the first time.
I will also be focusing on company growth. Yes, we want to bring new companies to Northern Ireland, but we must also consider how to grow our small local firms.
Northern Ireland’s economy is dominated by our SME sector. Some 70% of our private sector workforce are employed in small or medium sized enterprises. I am really proud of the many successes of our small and medium sized companies. As part of our Plan to drive Northern Ireland forward I am absolutely determined that we should place particular emphasis on encouraging local firms to grow in size.
I want to see more businesses follow the excellent example of local firm Dunbia. The Dobson brothers have grown their business from a small butchers shop near Dungannon in 1976 to one of the biggest meat processors in the United Kingdom, exporting into over 30 markets and employing around 4,000 people. It is this sort of impressive growth that I want more local firms to follow.
I am keen to look at the positive experience of other regions too. That’s why I have been visiting the Invest NI team in Germany this week. Not only will I meet some of our employers who are based in Germany, but I will also take a closer look at the success of the German Mittelstand.
Mittelstand is the name given to Germany’s large number of SMEs which are highly specialised, often family owned and based largely in the manufacturing sector. It has earned a reputation as the engine of the German economy.
Our impression of the German economy is perhaps dominated by big brand names like BMW, Mercedes and Bosch but recent analysis by the German Savings Bank Association show that it is the SMEs of the German Mittelstand who are outperforming the country’s larger companies in terms of profitability.
Mid-sized manufacturing firms like those that I will be visiting make a huge, almost disproportionate contribution to the German economy. They account for an estimated 52% of Germany’s economic output, employ 60% of all employees and generate approximately €3 trillion in turnover annually. The Mittelstand is also incredibly innovative and plays a central role in the education and training system in Germany. Its success is something we should seek to emulate in Northern Ireland.
Whilst it is clear that the German economy is very different to ours in many ways, I firmly believe that there are similarities between our SMEs and the Mittelstand which we can learn from. A similarity that stands out is the fact that 95% of German businesses are family owned with many Mittelstand companies under their 4th or 5th generation of family ownership and control. There is clear evidence from Germany that businesses can remain in family hands and still grow in size and make a greater contribution to the local economy. I am keen to explore the cultural and structural reasons for this and see if they can be adapted and adopted in Northern Ireland.
Transforming Northern Ireland into a globally competitive economy will require considerable effort on many fronts and that includes encouraging and assisting local companies to grow in size. In the weeks ahead, I intend to outline how we hope to scale up more SMEs in terms of their turnover, employment levels and exports and our plan will draw directly on what I see in Germany.
Following the referendum on EU membership the Prime Minister and her team are focused on building new relationship and negotiating new trade deals across the world. We are on the cusp of an exciting new era for the whole of the UK and as part of that I will be focused on exploring new opportunities for Northern Ireland.
Through a relentless focus on exports, company growth and innovation as well as tackling issues with bureaucracy, energy and skills, I want to ensure Northern Ireland is perfectly placed to seize the opportunities that the time ahead will present.