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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America's cities can't police their way out of this crisis

Police deployed tear gas during anti-racism demonstrations in Los Angeles over the weekend. (Mario Tama/Getty Images)

As protesters took to the streets across the United States over the weekend to express their anger at police killings of unarmed black Americans, it was hard to miss the hypocrisy coming from local authorities – including the otherwise progressive, left-leaning officials who are in power in most major American cities. 

Many US mayors and their police chiefs had issued public statements over the past week that seemed – only briefly, as it turned out – to signal a meaningful shift in the extent to which the Black Lives Matters movement is being taken seriously by those who are in a position to enact reforms. 

The sheer depravity of the most recent high-profile killing had left little room for equivocation. George Floyd, 46, died last Monday under the knee of white Minneapolis police officer Derek Chauvin, while three additional officers helped to hold Floyd down, doing nothing to aid him as he begged for them to stop and eventually lost consciousness. The officers had been attempting to arrest Floyd on suspicion of having used a counterfeit $20 bill at a deli. All four have since been fired, and Chauvin was arrested Friday on charges of third-degree murder and second-degree manslaughter. 

“The lack of compassion, use of excessive force, or going beyond the scope of the law, doesn’t just tarnish our badge—it tears at the very fabric of race relations in this country,” Los Angeles Police Chief Michel Moore told the Washington Post in response to the Floyd case. Meanwhile Moore’s boss, Los Angeles Mayor Eric Garcetti, on Friday claimed that he understood why his city, which is no stranger to police brutality, was protesting. “We absolutely need as a nation, certainly as a city, to voice our outrage, it’s our patriotic duty to not only stand up for George Floyd but for everybody who has been killed unnecessarily, who’s been murdered for the structural racism that we have in our country,” Garcetti said. 

Normally, US police chiefs and mayors tend to ask citizens to withhold judgment on these types of cases until full investigations can be completed. But a 10-minute video recording of Floyd’s killing had made what happened plain. Police chiefs across the country – and even the nation’s largest police union, which is notorious for defending officer abuses – similarly condemned the actions of the Minneapolis officers, in a rare show of moral clarity that, combined with the arrest of Chauvin, offered at least a glimmer of hope that this time things might be different. 

As the events of the weekend have since shown, that glimmer was all too fleeting. 

In city after city over the past three days, US mayors and their police chiefs made a series of the same decisions – starting with the deployment of large, heavily armed riot units – that ultimately escalated violent confrontations between officers and protesters. Images widely shared on social media Saturday and Sunday nights made it clear that members of law enforcement were often initiating the worst of the violence, and appeared to treat protesters as enemy combatants, rather than citizens they were sworn to protect. 


In New York City, two police SUVs were seen plowing into a crowd of protesters, while elsewhere an officer was recorded pulling down a young protester’s coronavirus mask in order to pepper spray his face

In Louisville, the city where Breonna Taylor, a 26-year-old black woman was fatally shot by police on 13 March, state police in riot gear were captured confiscating and destroying protesters’ supplies

In Minneapolis, forces opened fire with nonlethal rounds on residential streets, much to the shock of homeowners standing on their own front porches. 

Images of police pushing or shoving peaceful protesters were almost too numerous to count, including, in Salt Lake City, an elderly man with a cane

In many places, police also targeted journalists who were covering the protests, firing at clearly identifiable media crews with rubber bullets, injuring and even arresting reporters

Some protesters did commit acts of vandalism and looting, and the leaders of cities where that happened generally responded in the same ways. 

First, they blamed “outside agitators” for the worst protester behaviour, a claim that harkens all the way back to the civil rights era and for which the evidence is murky at best

Next, they enacted sudden curfews with little to no warning, which gave law enforcement an excuse to make mass arrests, in some cases violently. 

In a pair of widely criticized moves, Garcetti of Los Angeles closed the city’s Covid-19 testing centers and suspended the entire mass transit system Saturday evening, stranding essential workers on their way home from daytime shifts. Late Sunday night in Chicago, the city’s public school system halted its free meal distribution service for low-income children, citing “the evolving nature of activity across the city”.  

Governors in at least 12 US states, in coordination with city leaders, have since called in National Guard troops to “help”. 

At this point it’s clear that the leaders of America’s cities are in desperate need of a radically different playbook to respond to these protests. A heavily armed, militarised response to long-simmering anger toward the heavily armed, militarised approach to American policing is more than ironic – it’s ineffective. Granting police officers wider latitude to make arrests via curfews also seems destined to increase the chances of precisely the tragic, racially biased outcomes to which the protesters are reacting. 

There are other options. In places such as Flint, Michigan, and Camden, New Jersey – both poor cities home to large black populations – local law enforcement officials chose to put down their weapons and march alongside protesters, rather than face off against them. In the case of Camden, that the city was able to avoid violent clashes is in no small part related to the fact that it took the drastic step of disbanding its former police department altogether several years ago, replacing it with an entirely new structure. 

America’s cities are in crisis, in more ways than one. It’s not a coincidence that the country has tipped into chaos following months of emotionally draining stay-at-home orders and job losses that now top 40 million. Low-income Americans of colour have borne a disproportionate share of the pandemic’s ravages, and public health officials are already worried about the potential for protests to become Covid-19 super-spreading events.

All of this has of course been spurred on by the US president, who in addition to calling Sunday for mayors and governors to “get tough” on protesters, has made emboldening white nationalists his signature. Notably, Trump didn’t call on officials to get tough on the heavily armed white protesters who stormed the Michigan Capitol building over coronavirus stay-at-home orders just a few weeks ago. 

US mayors and their police chiefs have publicly claimed that they do understand – agree with, even – the anger currently spilling out onto their streets. But as long as they continue to respond to that anger by deploying large numbers of armed and armored law enforcement personnel who do not actually live in the cities they serve, who appear to be more outraged by property damage and verbal insults than by the killings of black Americans at the hands of their peers, and who are enmeshed in a dangerously violent and racist policing culture that perceives itself to be the real victim, it is hard to see how this crisis will improve anytime soon. 

Sommer Mathis is the editor of CityMetric.