NEW YORK--(BUSINESS WIRE)--Mid-market enterprises (MMEs)1 in the US are a major contributor to US economic prosperity but have only just scratched the surface of growth potential, according to a newly released HSBC report.
HSBC Commercial Banking, in conjunction with Oxford Economics, explored the views of 1,400 MME senior executives in 14 countries – including the US – in addition to in-depth economic analysis.
The findings reveal that despite the heady uplift provided by US MMEs to economic growth, only a mere seven percent (7%) of their revenue comes from international business activity.
“Mid-size firms are the backbone of our economy, making significant contributions to growth and employment. HSBC has long been serving clients domestically and abroad in this pivotal space,” said Martin Richards, Head of Corporate Banking for HSBC USA.
Richards emphasized: “It’s clear there is a substantial amount of untapped potential for US mid-market companies to enter the global marketplace. By considering international strategies and increasing their cross-border activity, MMEs will have access to a larger customer base, which in turn will positively impact revenues.”
Domestic and international expansion on the horizon for MMEs, but not without challenge. HSBC geared up to support
In comparison to global respondents, the study reveals that US MME decision-makers think revenue growth will be the most important driver of financial performance, for both existing (33% vs. 29%) and new (23% vs. 18%) domestic markets. The business leaders cite collaborating with external partners (50% vs. 44%) and financing will be priorities for them (41% vs. 35%).
MMEs in the US are also slightly less confident in their local economy (65% vs. 69%) and identified skill shortages (59% vs. 50%) as one of the biggest threats they are currently facing.
“These figures signify that the appetite to enter new markets and partnerships already exists, it’s just a matter of finding the best approach to magnify their footprint,” said Richards.
Richards continued: “As one of the largest international banks, HSBC offers clients warm support at every port. We are a one-stop-shop, which makes us uniquely positioned to deliver comprehensive banking solutions and sector expertise across geographies: from structuring cross-currency financing transactions, to providing access to broader institutional markets, to acting as their primary operating bank. This sweet spot is reflective of why we’re further sharpening our strategy and are strengthening our middle-market franchise.”
HSBC’s middle-market strategy is driven by sector-based, banker-led initiatives aligned with key industry areas of focus. These seasoned banking leaders are subject matter experts in their respective fields, tasked with identifying trends and opportunities and developing customized strategies tailored to meet clients’ individual needs both domestically and internationally. The technology and venture capital, professional services, apparel and food and beverage segments will play a significant role given their high levels of activity.
Commenting on the growth agenda, Richards said: “More than ever, MMEs are seeking global partnerships with sector-specialists in markets that they’ve identified for expansion. That’s why we’re doubling down on our sector-driven strategy in both established hubs, like San Francisco and New York, and those that are continuing to incubate growth.”
Other key findings include:
- US MMEs rely on imports for approximately 14 percent (14%) of their supply chain purchases. While Canada and Mexico are important trading partners, the second-largest source of imports is China.
- US decision makers think that investing in innovation (63% vs. 58%) is a top priority. This correlates closely with the belief that they are more likely to be first to market with new innovations (40% vs. 34%) and be a disruptor (39 % vs. 28%).
Download the full report here.
Notes to editors
The objective of HSBC and Oxford Economics’ 2017 ‘Entrepreneurial heartland of MMEs’ research is to estimate the direct contribution of MMEs in 14 countries, their openness to trade as well as their wider contribution through supply chain and consumption ‘multiplier’ effects.
The research covers the following 14 countries: Australia, Canada, China, France, Germany, Hong Kong, India, Indonesia, Mexico, Saudi Arabia, Singapore, the UAE, the UK and the US.
In this report, MMEs are defined as companies with between 200 and 2,000 employees. All sectors are covered with the exception of public administration, education and health, which are more vulnerable to policy-related factors and are therefore more difficult to compare across countries.
- MMEs’ direct contribution to their local economy is measured according to their Gross Value Added (GVA) contribution to a country’s Gross Domestic Product (GDP), and to the sales (turnover) and employment they support.
- MME’s openness to trade is measured using OECD data on imports and exports, assuming that MMEs have a similar propensity to import and export as other firms in their country and sector.
- MMEs’ contribution through supply chain and consumption ‘multiplier’ effects is estimated using detailed ‘input-output’ tables from the OECD and national statistical offices. The consumption impact reflects the economic activity supported when employees in MMEs and in their supply chains spend their wages on other firms’ products and services.
In addition to the economic research, HSBC and Oxford Economics have conducted a qualitative survey – via phone – of senior executives at 1,400 MMEs (100 per country), between July and August 2017. Using a standard questionnaire, the survey aimed at exploring their views on external opportunities and threats, strengths and weaknesses, strategic priorities over the next three years and priorities for investment.
HSBC Commercial Banking
For over 150 years we have been where the growth is, connecting customers to opportunities. Today, HSBC Commercial Banking serves more than two million businesses across the world, ranging from small enterprises focused primarily on their home markets through to corporates operating across borders. Whether it is working capital, term loans, trade finance or payments and cash management solutions, we provide the tools and expertise that businesses need to thrive. As the cornerstone of the HSBC Group, we give businesses access to a geographic network covering more than 90% of global trade and capital flows. For more information visit: http://www.hsbc.com/about-hsbc/structure-and-network/commercial-banking
HSBC Bank USA, National Association (HSBC Bank USA, N.A.), with total assets of US$191.9bn as of 30 June 2017 (US GAAP), serves customers through retail banking and wealth management, commercial banking, private banking, asset management, and global banking and markets segments. It operates 229 bank branches throughout the United States. There are 146 in New York as well as branches in: California; Connecticut; Delaware; Washington, D.C.; Florida; Maryland; New Jersey; Pennsylvania; Virginia; and Washington. HSBC Bank USA, N.A. is the principal subsidiary of HSBC USA Inc., a wholly-owned subsidiary of HSBC North America Holdings Inc. HSBC Bank USA, N.A. is a Member of the FDIC.
HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 3,900 offices in 67 countries and territories in Europe, Asia, North and Latin America, and the Middle East and North Africa. With assets of US$2,492bn at 30 June 2017, HSBC is one of the world’s largest banking and financial services organizations.
The information contain herein is intended for general market commentary. It should not be regarded as investment research for purposes of the rules of the SEC, or any other relevant regulatory body. Further, the information and any views contained herein may differ from that contain in HSBC Research Reports subject to FINRA Rule 2241.
1 For the purpose of this study, mid-markets enterprises are defined as those with between 200 and 2,000 employees.