Want to grow the British economy? Learn the lessons of Germany's Mittelstand

A Berlin factory in 2008. Image: Getty.

Low productivity and limited access to finance have bedevilled Britain's SME manufacturers for decades. Beverley Nielsen, the LibDem candidate to be mayor of the West Midlands, believes the solutions lie in Germany.

I've been on many overseas trade missions since becoming the CBI's West Midlands director in 1995, and Germany's remarkable achievements in export markets were always cited as the model to follow.

However, I think this country has more to learn from the harmonious relationship between Germany's financial sector and its so-called “Mittelstand” – the vast array of successful enterprises operating between the giant quoted PLCs, and its small businesses.

These companies tend to be family-owned and managed. Their planning horizons span generations, rather than extending merely as far as the next set of results, and although they tend to be rooted in their regions, they have global ambitions.

I have been working to support our manufacturers for more than 20 years, and although successive governments have preferred financial engineering to the real thing, in the West Midlands we still compare favourably with Germany.

Roughly 5 per cent of our manufacturers in this region are medium-sized, and able to power future growth and innovation, compared with 4 per cent throughout Germany.

However, when we look at the access to finance enjoyed by the Mittelstand, there is no comparison with the West Midlands – or any other UK region. German companies enjoy far greater support, and from a wider mix of banks in their regions, notably via municipal savings banks, co-operatives and development banks.

They also have a well-established nationwide structure of grants, and governments at the state and national level offer continued and long-term support to reduce the risk faced by the Mittelstand. The whole focus is for the long-term, and about building regional jobs and regional economies so that their national economy is balanced and sustainable.

Sadly, in this country, we see politicians – notably, the previous chancellor – only paying lip-service to “rebalancing” our economy. And when the current government abolished the highly-successful Manufacturing Advisory Service last year, it said everything about its approach to our mid-sized manufacturers.

I also believe we have much to learn from how Germany encourages those ventures to not only deliver high-quality training to their employees, but to deliver it to the wider business community.

Germany has more than 4,000 family businesses with a turnover above €50m, and more than 600 industrial family-owned companies with more than 500 employees.


The Mittelstand trains its nation: establishments with fewer than 500 employees (including branches of large companies) provide more than 80 per cent of all training in Germany. That’s 1.27m of the 1.54m training places in German companies at the end of 2013.

In sharp contrast, 57 per cent of British SMEs do not offer any staff training or development, according to a 2016 survey by the Federation of Small Businesses.

As a result of greater access to finance, and a willingness to think beyond the next set of results, the Mittelstand is far more productive than its British equivalent.

Employment in SME manufacturing in Germany accounts for 20 per cent of all employment and 22 per cent of value added. In the UK, the figures are just 15 per cent for employment and just over 15 per cent value added.

In the UK, policies towards manufacturing chop and change as government programmes swing between Conservative and Labour administrations – but always with a relentlessly centralist view.

However, the German approach to the Mittelstand combines long-term business viability, and a relentless focus on delivering the bottom-line results required for survival and success, embedded in regional culture.

As mayor of the West Midlands, I will set the building blocks in place so that our SME manufacturers can finally get the support they have deserved for so long.

I will establish a West Midlands Bank, and a £1bn Innovation Fund, to encourage young talent, skills development, expertise, universities and research centres to link into our Mittelstand, to devise practical market-applicable solutions that deliver real growth and jobs.

The focus for these businesses must also be about delivering a “mind-to-market” approach where innovations are about servicing and meeting customer or user need, through good design, real understanding of markets worldwide and a relentless desire to be best in class.

We stand at a real moment of opportunity – with renewable energy and electric vehicles taking off in world markets, with new local energy systems, battery power and energy storage all combining with connectivity to link homes and mobility for the benefit of our communities in new, exciting and sustainable ways.

Sadly though, the lack of understanding of the asset that we have in our manufacturing businesses, across the West Midlands, has been demonstrated by both Conservative and Labour governments.

They do not understand what we are contributing and how important it is. Now is our time. We must back our Mittelstand and watch it take off, to both rebalance our economy, and deliver much needed growth which must be shared across our communities.

 Beverley Nielsen is the Liberal Democrat candidate to be mayor of the West Midlands.

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Was the decline in Liverpool’s historic population really that unusual?

A view of Liverpool from Birkenhead. Image: Getty.

It is often reported that Liverpool’s population halved after the 1930s. But is this true? Or is it a myth?

Often, it’s simply assumed that it’s true. The end. Indeed, proud Londoner Lord Adonis – a leading proponent of the Liverpool-bypassing High Speed 2 railway, current chair of the National Infrastructure Commission, and generally a very influential person – stood on the stairs in Liverpool Town Hall in 2011 and said:

“The population of Liverpool has nearly halved in the last 50 years.”

This raises two questions. Firstly, did the population of the City of Liverpool really nearly halve in the 50 year period to 2011? That’s easy to check using this University of Portsmouth website – so I did just that (even though I knew he was wrong anyway). In 2011, the population of the City of Liverpool was 466,415. Fifty years earlier, in 1961, it was 737,637, which equates to a 37 per cent drop. Oops!

In fact, the City of Liverpool’s peak population was recorded in the 1931 Census as 846,302. Its lowest subsequent figure was recorded in the 2001 Census as 439,428 – which represents a 48 per cent decline from the peak population, over a 70 year period.

Compare this to the population figures for the similarly sized City of Manchester. Its peak population also recorded in the 1931 Census as 748,729, and its lowest subsequent figure was also recorded in the 2001 Census, as 392,830. This also represents a 48 per cent decline from the peak population, over the same 70 year period.

So, as can be seen here, Liverpool is not a special case at all. Which makes me wonder why it is often singled out or portrayed as exceptional in this regard, in the media and, indeed, by some badly briefed politicians. Even London has a similar story to tell, and it is told rather well in this recent article by a Londoner, for the Museum of London. (Editor’s note: It’s one of mine.)

This leads me onto the second question: where have all those people gone: London? The Moon? Mars?

Well, it turns out that the answer is bit boring and obvious actually: after World War 2, lots of people moved to the suburbs. You know: cars, commuter trains, slum clearance, the Blitz, all that stuff. In other words, Liverpool is just like many other places: after the war, this country experienced a depopulation bonanza.


So what form did this movement to the suburbs take, as far as Liverpool was concerned? Well, people moved and were moved to the suburbs of Greater Liverpool, in what are now the outer boroughs of the city region: Halton, Knowsley, St Helens, Sefton, Wirral. Others moved further, to Cheshire West & Chester, West Lancashire, Warrington, even nearby North Wales, as previously discussed here.

In common with many cities, indeed, Liverpool City Council actually built and owned large several ‘New Town’ council estates, to which they moved tens of thousands of people to from Liverpool’s inner districts: Winsford in Cheshire West (where comedian John Bishop grew up), Runcorn in Halton (where comedian John Bishop also grew up), Skelmersdale in West Lancashire, Kirkby in Knowsley. There is nothing unique or sinister here about Liverpool (apart from comedian John Bishop). This was common practice across the country – Indeed, it was central government policy – and resulted in about 160,000 people being ‘removed’ from the Liverpool local authority area.

Many other people also moved to the nearby suburbs of Greater Liverpool to private housing – another trend reflected across the country. It’s worth acknowledging, however, that cities across the world are subject to a level of ‘churn’ in population, whereby many people move out and many people move in, over time, too.

So how did those prominent images of derelict streets in the inner-city part of the City of Liverpool local authority area come about? For that, you have to blame the last Labour government’s over-zealous ‘Housing Market Renewal Initiative’ (HMRI) disaster – and the over enthusiastic participation of the then-Lib Dem controlled city council. On the promise of ‘free’ money from central government, the latter removed hundreds of people from their homes with a view to demolishing the Victorian terraces, and building new replacements. Many of these houses, in truth, were already fully modernised, owner-occupied houses within viable and longstanding communities, as can be seen here in Voelas Street, one of the famous Welsh Streets of Liverpool:

Voelas Street before HMRI implementation. Image: WelshStreets.co.uk.

The same picture after HMRI implementation Image: WelshStreets.co.uk. 

Nonetheless: the council bought the houses and ‘tinned them up’ ready for demolition. Then the coalition Conservative/Lib Dem government, elected in 2010, pulled the plug on the scheme. 

Fast forward to 2017 and many of the condemned houses have been renovated, in a process which is still ongoing. These are over-subscribed when they come to market, suggesting that the idea was never appropriate for Liverpool on that scale. 

At any rate, it turns out that the Liverpool metropolitan population is pretty much the same as it was at its peak in 1931 (depending where the local borough boundaries are arbitrarily drawn). It just begs the question: why are well educated and supposedly clever people misrepresenting the Liverpool metropolis, in particular, in this way so often? Surely they aren’t stupid are they?


And why are some people so determined to always isolate the City of Liverpool from its hinterland, while London is always described in terms of its whole urban area? It just confuses and undermines what would otherwise often be worthwhile comparisons and discussions. Or, to put it another way: “never, ever, compare apples with larger urban zones”.

In a recent Channel 4 documentary, for example, the well-known and respected journalist Michael Burke directly compared the forecast population growths, by 2039, of the City of Liverpool single local authority area against that of the combined 33 local authority areas of Greater London: 42,722 versus 2.187,708. I mean, what bizarre point is such an inappropriate comparison even trying to make? It is like comparing the projected growth of a normal sized-person’s head with the projected growth of the whole of an obese person, over a protracted period.

Having said all that, there is an important sensible conversation to be had as to why the populations of the Greater Liverpool metropolis and others haven’t grown as fast as maybe should have been the case, whilst, in recent times, the Greater London population has been burgeoning. But constantly pitching it as some sort of rare local apocalypse helps no one.

Dave Mail has declared himself CityMetric’s Liverpool City Region correspondent. He will be updating us on the brave new world of Liverpool City Region, mostly monthly, in ‘E-mail from Liverpool City Region’ and he is on twitter @davemail2017.