11.07.2019A boost to mid-sized business is a boost for the Australian economy | Grant Thornton

Representing less than 1% of Australian businesses, mid-sized business (annual sales revenue of $50m to $500m) is the forgotten child – to the extent that there is no real data on the size or impact of this segment on the Australian economy. Grant Thornton’s report on the contribution of mid-sized business to Australia highlights how initiatives and strategies geared to support and grow this segment could have a tangible impact on the Australian economy in just five years.

An analysis in partnership with Professor Neville Norman, Economist at the University of Melbourne and Cambridge University, reveals that this small proportion of business punches well above its weight in terms of sales revenue and share of company tax.

Professor Norman’s exercise included a simulation for the impact a 10% boost would have on a “typical” $100m mid-sized business. We have the following corporate and economic effects over the five year period in the exercise:

Sales revenue up by 10%

Profits up by $15m or 20%

Company tax payments increase of $5.3m or 25%

Cash-flow of the revenue-boosted company by $35m or 35%

“The positive news is that mid-sized business are more adept at taking advantage on new market opportunities – having the scale to invest more into their business without issues around legacy. With more incentives and investment – an achievable and one-off 10% in revenue growth in one year has exponential potential for both the company and the broader economy,” Greg Keith, Chief Executive Officer of Grant Thornton Australia says.

Of course, the way to achieve this 10% growth will be different depending on your industry, and how it is funded. For instance, the Education sector could have a major impact on the Australian economy. A simple 6% increase of women in the workforce could contribute an additional $25b to Australia’s GDP (Grattan Institute, 2014). The Real Estate and Construction sector is relied upon heavily by the States for tax revenue. In Australia, the proportion of tax revenue from property as a percentage of GDP was 10.8% in 2016 – considerably more than the OECD average of 5.7%. This impacts not only the buyers but the developers, who have to factor in various taxes and regulatory costs into a price the market will accept.

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