Magazine article Financial Management (UK)

A Word from the President: The SME Sector Is an Economic Powerhouse in Many Countries'

Magazine article Financial Management (UK)

A Word from the President: The SME Sector Is an Economic Powerhouse in Many Countries'

Article excerpt

The German nation is well known for its prudent outlook on a number of fronts--social, environmental and, above all, commercial--and this approach seems to be paying dividends. Could it be a coincidence that Germany has maintained its position as the dominant economy in Europe throughout the downturn?

In response, the German government gives much of the credit for the nation's stability to its small and medium-sized enterprises (SMEs). The Federal Ministry of Economics and Technology attributes the success of these firms--known collectively as the Mittelstand--to a number of factors. Most are family-run businesses and have long-term strategies that rely on sound financing models. High equity ratios and a cautious approach to expansion have enabled these companies to undertake medium-and long-term investments, even in difficult times. They are underpinned by strong state support in areas such as R&D investment, skills provision, foreign trade and financing.

This model offers huge potential. The SME sector is an economic powerhouse in many countries, providing significant input in terms of employment and productivity. I believe that, given the right support from governments at state level and finance professionals at local level, SMEs hold the key to a global economic recovery.

I recently attended a conference of CIMA members in practice. It was a buoyant event that made it clear to me just how dynamic many of these members' SME clients are. One senior delegate told me that smaller businesses are producing a different breed of leader: today's managing directors are younger (the average age of the MDs on his client list is 40) and they have come through the downturn tougher and, crucially, wanting more bang for their buck when it comes to getting support from finance professionals.

This represents an ideal opportunity for chartered global management accountants (CGMAs) to open up their toolkits and get to work. …

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