Something to Copy from Germany


The ‘Winter Wonderland’ Christmas market staged annually in London’s Hyde Park is a seasonal shrine to all things German; a blatant pastiche of the original Christkindlmarkts located here on British shores. So popular is this imitation, too, that it would be no surprise to hear that more glüwein was drunk and more bratwurst eaten here this Christmas than at many markets on the other side of the North Sea. And this success has perhaps proved instructive, with various UK financial figures suggesting that copying a rather less frivolous Teutonic phenomenon might also bring benefits to Britain.

outside the box

The Mittelstand – a term that has no English equivalent (the closest is perhaps the bureaucratic term Small and Medium Sized Enterprise or SME) or firm definition (definitions for SME abound), but which generally relates to businesses with fewer than 500 employees, turnover under £50m and usually family controlled – is often touted as the bedrock of the German economy. The Mittelstand is recognised as their economic “engine”, contributing robustly to private sector employment and GDP. The story is similar in the UK, where, according to the FT, the 2% of UK companies which are ‘medium-sized’ generate nearly 25% of private sector GDP. Where the fortunes of the two Mittelstands diverge is in their ability to access finance. Once businesses become medium-sized in the UK, they can no longer expect to receive the government backing afforded to smaller firms, whilst in Germany, where the value of these businesses is perhaps better appreciated, government backing would likely continue.

This situation has caused the head of the CBI to call for the development of “a private placement market to issue debt to institutional investors” to fill this UK policy gap. With bank lending to SME businesses continuing to fall, he is surely right to do so.

Bank lending down

Yet in many ways such a market is already being developed by the nation’s marketplace lenders.


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