Mid-sized businesses ‘crucial’ to growth of Australian economy: MYOB

A new report commissioned by MYOB has found that the mid-sized business sector is leading the way in research and development. The sector’s importance for research and development now almost rivals that of the large business sector.

The Bigger Picture Report, authored by Impact Economics and Policy, combined industry and government data, representing around 70,000 Australian mid-sized businesses, with insights from a new poll of over 500 business leaders.

The report outlined that mid-sized businesses were “crucial to Australia’s economy”, with many of these driving innovation and employment and supporting economic resilience.

The report's findings revealed that the productivity of the sector has risen at a faster rate than that of larger and smaller businesses, increasing by 1.2 per cent per year since 2009–10.

As a result, the gap between mid-sized business and large business productivity had narrowed to around 12 per cent by the end of FY2022–23.

This was partly driven by higher participation and technical efforts in particular industries.

According to the report, mid-sized businesses’ spending on R&D rose around 200 per cent over the past 15 years, with investment now accounting for 30 per cent of total private-sector R&D expenditure.

Kim Clarke, executive general manager – enterprise for MYOB, said that with their eyes firmly on growth, this segment of businesses and their position in Australia’s business ecosystem shouldn’t be underestimated.

“Mid-sized businesses are incredibly ambitious, and it’s their consistent push to be stronger tomorrow than they are today that has seen a growing number benefit from year-on-year revenue increases and greater resilience in the face of difficult conditions.

“Underpinning their success is a relentless approach to innovation. These businesses recognise the benefits emerging technologies can bring to their operations, and we know they’re committing substantial spend to realise them.”

While the report indicated strong investment in R&D, it also showed that mid-sized businesses were hindered more by financial limitations than their larger counterparts.

The report found that mid-sized businesses tended to face constraints in improving their productivity, such as difficulty obtaining finance.

“While less constrained than small businesses, mid-sized firms still face similar challenges in accessing capital, and this has become more challenging over the last two years,” the report said.

“This lack of available finance for new systems or machinery is the number one factor business leaders believe is hindering their productivity, and the ask for more support or action here from policy makers is coming through loud and clear,” Clarke said.

Other constraints on productivity were related to internal processes and systems.

Around one-quarter of the survey respondents reported that siloed internal systems or administrative delays were hindering improvements at the firm level.

Clarke said the impact that mid-sized businesses could have on the economy was clear.

“We should be playing to their strengths and supporting their focus on productivity and innovation. If we do this, then watch them chase down their ambitions with full force,” she said.

“From our conversations with mid-sized customers and the insight this report has surfaced, there’s a solid consensus that government-led initiatives incentivising further capital investment in technology and in building a skilled workforce, will determine if – and by how much – this impact grows.”

Speaking at an MYOB event, Dr Angela Jackson, economist for Impact Economics and Policy, said while mid-market businesses are often overlooked in terms of their contribution to employment and economic activity, the sector can play a critical role in lifting productivity growth.

The sector only comprises around 3 per cent of businesses in Australia but accounts for 30 per cent of output, making it an exceptionally important part of the economy, Jackson said.

“We've had this real challenge in Australia about low productivity growth, and you can't have higher living standards in Australia in the long term without that productivity growth.

“[However], we can see the mid-market has been outperforming and closing the gap with big business [in terms of productivity].

“The [mid-business sector] is an engine room in terms of where we are seeing that productivity growth.”