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Hidden champions, missed opportunities: Mid-caps’ crucial roles in Europe’s economic transition

Economic governance / EXTERNAL PUBLICATION
Georg Riekeles , Philipp Lausberg , Laurent Maurin , Julie Delanote , Huyen Tran

Date: 26/01/2024
This report, created in collaboration with the European Investment Bank (EIB), zooms in on mid-caps as part of an EPC Task-Force Project set up in 2022 dedicated to this category of firms. Wedged between Europe’s SME sector and the biggest companies, mid-caps are particularly dynamic and innovative but are often overlooked by policymakers and researchers, partly due to a lack of a clear definition of this type of enterprise in statistical databases.

An analysis is provided of mid-caps’ performance, investment activities, financing needs, and the challenges they face linked to the triple green, digital and economic security transitions. Overall, the report fills a gap in data availability and policy focus. The research work was conducted using the EIB Group Survey on Investment and Investment Finance (EIBIS), the bank’s unique information source providing details on the investment and financing decisions of 12,000 European small businesses (SMEs), mid-caps and very large (XL) firms on an annual basis.

The report highlights that mid-caps are often “hidden growth champions” and key drivers for Europe’s economy. Compared to SMEs and larger companies, mid-caps excel at investment, skill development and labour productivity and they play a vital role in the EU’s economic transitions. However, mid-caps fall short of their potential, as they receive less public support and encounter larger difficulties in access to finance than other types of companies. As a result, mid-caps experience a particularly pronounced investment gap, which hints at larger structural issues in the EU economy, such as the widely known scale-up problem.

From this analysis, the report concludes with the following policy recommendations:
  1. EU regulation needs to be more sensitive to business size.
  2. Access to finance for mid-caps must be improved.
  3. A well-functioning single market must be guaranteed.

This Report was first published by the European Investment Bank on 10 January 2024. 

Read the full paper here.
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