Mid-market enterprises are the overlooked engine of the economy: HSBC

Manufacturing MMEs provide $38.9 billion to Canada's economy, the bank's report said.

VANCOUVER — Mid-market enterprises (MMEs) contribute $275.1 billion to Canada’s economy, HSBC says in a global report highlighting the unsung role those business play in the life of nations.

The report, Hidden Impact: The vital role of mid-market enterprises, commissioned by HSBC from Oxford Economics, showcases the enormous contribution to GDP, employment, and the supply chain that MMEs contribute to developing and developed economies.

HSBC analyzed publicly available data from MMEs across 15 countries and territories spanning Asia, Europe, the Middle East and the Americas, and calculated 161,800 MMEs, with a combined turnover of US$16.6 trillion that contribute US$11.5 trillion to GDP and directly employ 169 million people.

There is significant variation between countries, though, with MMEs globally contributing from 20% to nearly 40% of GDP.

Canada is home to 5,950 MMEs – defined as companies with earnings between $50 to $ 500 million – ranking 8th among the economies in the study, generating approximately $830.5 billion in turnover, and employing 1.9 million Canadians – 14.5% of jobs in the country.

Canadian MMEs also contribute 31.8% to Canada’s GDP (excluding health, education and public administration).

Other Canadian MME sector highlights include:

  • companies are often privately-owned, usually with a professional management team that has replaced the owner-manager leadership structure common to many small and medium enterprises (SMEs);
  • the largest proportion of Canadian MMEs falls in the wholesale & retail sector (27.2%), followed by the manufacturing sector (19.2%).
  • Canadian MMEs in the wholesale and retail sector generate the largest amount of turnover, at US$182.7 billion. However, at only 2%, the sector only provides the third largest contribution to Canada’s economy. Instead, the higher value-adding business services sector provides US$71.1 billion (equivalent to 5.1% of the national total); and
  • manufacturing MMEs provide the second largest contribution to the national economy, with US$31.3 billion.

The US is home to the largest number of MMEs with around 55,700 firms supporting 16.5 million jobs, or 13% of employment, and directly contributing US$1.7 trillion to the US economy. China has an estimated 40,200 MMEs, contributing 74 million jobs, or 12% of employment, and directly contributing US$4.5 trillion to the Chinese economy.

The two countries combine for 60% of all MMEs in the study, and both are important strategic partners for Canada – through historic trade and commerce with the US, and a recent agreement with China designating Canada as the first renminbi clearing centre for the Americas.

“Mid-market firms are in many ways the unsung heroes of the global economy — not large enough to influence government policy, but too big to benefit from incentives and support afforded to smaller companie,” said Linda Seymour, executive vice-president and head of commercial banking, HSBC Bank Canada. “Despite their substantial contribution to their respective national economies, MMEs often reach a point where, having grown successfully for some time, they plateau – in some instances, they outgrow their banker.”

MMEs tend to be highly productive, contributing more to GDP for each employee than do smaller companies, employing and training more staff, exporting more, and investing more in research and development. They can be counted on to support local, regional and national communities through employment, to trade with other local firms, and to pay local taxes. They also contribute to the diversity and dynamism of the economy as a whole – often working in its fast-growing and innovative parts and providing an alternative to increasingly dominant multinationals, forcing them to raise their game.

“A healthy MME sector is the key to a prosperous, dynamic economy, and Canadians deserve no less,” added Seymour. “Beyond their direct contributions, their role in stimulating the innovation and competition so essential to a vibrant economy must not be overlooked.”

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