CBI director general John Cridland urged UK policymakers to create a favourable environment for MSBs to "export, innovate and generate growth" by making new sources of funding available.
"Medium-sized businesses are truly a forgotten army, and now is the time to unlock their potential," said Cridland. "We should be championing, nurturing and encouraging our medium-sized firms so that more of them grow and create jobs.
"For too long these companies, which could inject tens of billions of pounds into our economy, have fallen under the radar of policymakers.
"To achieve extra growth, medium-sized firms must have access to new kinds of finance. This means opening UK bond markets to medium-sized businesses, encouraging use of venture capital, and making it easier for large companies to invest in medium ones, possibly in their supply chains."
The CBI has published its analysis of MSB sector - defined as companies with a turnover between £10m to £100m - in a document titled Future Champions, which was compiled with the help of management consulting firm McKinsey & Company.
The report calls on the government to work with the financial services industry to enable more businesses to issue bonds and use new financial products based on MSB bonds to attract investors.
The CBI said that the Government could then kick-start demand through credit easing, using public money to back these bonds. It also called for MSBs to be given access to a broader range of capital release equity, such as the existing Business Growth Fund.
It suggested reinstating a Corporate Venturing Incentive to encourage large firms to invest in medium ones, and making equity investments tax deductible so that they are on a par with debt investments.
The CBI added that Entrepreneurs' Relief should also be restructured to incentivise longer-term investments, with the threshold for qualifying for the relief brought to below the current 5%, while the scope of the R&D tax credit should be widened to include all aspects of design to help encourage even more innovation amongst MSBs.
The full report can be viewed here.
