Why middle-sized is beautiful

The news emerged yesterday that the successful publisher Quercus is now up for sale because, according to co-founder Mark Smith, “the publishing industry seems to be polarising around very big and very small companies. It’s difficult for companies of our size.”

The immediate cause of all this is the anti-competitive thumbs up to mega-mergers, like Penguin Random House. And of course to the disappearance of most of the middle-sized bookshops.

I don’t think, when I helped launch the Clone Town Britain campaign ten years ago, that we expected the great clear out of middle-sized retail chains. Nobody really predicted the euthanasia of the clones.

You can see why now. The semi-monopolies like Amazon are riding high. The small, local bookshops have a kind of quirky personality and authenticity of their own – but why go to Waterstone’s?

So much for the middle-sized retailers, and the middle-sized banks were snapped up more than a century ago, in the UK. In fact, the middle sections of the economy are everywhere being hollowed out. The banks don’t like them and they lack the clout of the big or the personality of the small.  It makes the UK economy vulnerable.

I was thinking about this because of a fascinating item on the PM programme on Wednesday (here, 36 mins in), about a conference hosted in Staffordshire by JCB about the German Mittelstand sector – the family-owned middle-sized companies, which underpin the success and stability of the German economy.

Judging by the item on PM, they also underpin the stability of German society. They have few shareholders, since they remain in family hands, but the employ four out of five of all German apprentices.

But the real clincher is that the Mittelstand sector is completely dependent on the German co-operative banking sector. Only 20 per cent of them bank with private banks. The rest rely on co-operative banks or the locally run Sparkassen.

So if you want to see why the German economy is more stable than ours, you need look no further than this. We have no Sparkassen. We have no co-operative banks – in fact, co-operative banks are not legal in the UK (the Co-op Bank was owned by a co-op, but wasn’t a co-op itself).

It is the existence of this banking sector that explains why they have a Mittelstand and we don’t.

How might we develop this crucial sector in the UK, without waiting decades in the usual British way?  Well, we have a plan and you can read it here.

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