The number of high-growth, scaling businesses in the UK increased to a record 36,510 – a 3.7% increase over the previous year – according to the ScaleUp Institute. The figures are drawn from the most recent ONS data, covering 2017. This means that the economy added 1,300 companies going through a period of rapid growth.
The national number of scaleup companies, who are defined as those which have grown their turnover or employment by more than 20% annually over a three-year period, has increased by more than one-third over the past five years. There are 35% more scaleups than in 2013, compared to GDP growth over the same period of just 9%.
Scaleups generate more than £1.3trn in combined turnover. This is up 34% on 2016, and compares to a turnover of £1.9trn by all SMEs combined. They employ approximately 3.4m people across all sectors and areas of the UK economy.
Importantly, the growth in the number of scaleups has taken place across the country. All Local Enterprise Partnerships (LEPs) and devolved nations are experiencing a growth rate of greater than 1 additional scaleup per 100,000 of population. The three local areas which have seen the highest scaleup growth relative to their population between 2014-2017 are Oxfordshire; York, North Yorkshire and East Riding; and Thames Valley Berkshire.
“Scaleups are the engine drivers of local economies,” said Irene Graham, CEO of the ScaleUp Institute. “They are twice as innovative as large firms, employ twice as many apprentices, are twice as likely to be operating in international markets, and, significantly, they create high quality jobs. On average, scaleups are 42% more productive than their peers.
“Their aspirations remain high. According to our recent Scaleup Survey, eight out of ten expect to scale again in 2019, generating £1.5bn more in turnover and creating an extra 7,000 jobs.”
Irene Graham added: “It is is encouraging that scaleup numbers are increasing across the UK but it is equally important to note that the rate of growth has slowed from its average annualised rate of 9.3% between 2013 and 2016. The increase in scaleup numbers is driven by having more businesses scaling in turnover, whilst the numbers of those scaling by employment or by both factors has seen a slight decline.
“As this constitutes the first full year of data since the EU referendum of 2016 we will watch closely to see how the decision to leave the EU has affected scaleup confidence, their ability to scale and the ecosystem’s ability to evolve to meet the needs of scaling businesses.”
She said that “large disparities” in scaleup numbers persist at a regional level – the fastest growing regions grow their number of scaleups almost five times faster than the slowest.
“Scaleups continue to face major challenges on five fronts: gaps in talent and skills, access to markets at home and overseas, opportunities to develop leadership, a need for more funding and a lack of flexible infrastructure,” she concluded. “This latest data reinforces the need for continued concerted efforts at a local, regional and national level to address scaling challenges so we are able to meet the Brexit headwinds ahead and achieve sustainable scaleup growth.
Note to editors
The ScaleUp Insight Report
2019 [https://www.scaleupinstitute.org.uk/reports/the-scaleup-landscape/] provides insights on scaleups at a national, regional and local level using the latest 2017 ONS data, which is based on extracts from the Interdepartmental Business Register (IDBR)
Scaleup businesses are defined as companies who have increased their turnover and/or employee numbers annually by more than 20 per cent over a three-year period. Nationally, the latest 2017 data from ONS shows that there are 36,510 of these businesses.
10 Actions for addressing the UK scaleup challenge
- A verification process with Government should be created to allow for local and national stakeholders to verify the ‘Scaleup status’ of a business, building on the recent work of the ScaleUp Institute with Government. This should tap into datasets that combine ONS, Companies House and HMRC data points to enable stakeholders to fast track solutions to scaleup leaders. If necessary, legislation should be passed to introduce such an enquiry capability.
- A ‘Scaleup Visa’ should be made available in communities where there are 100+ scaleup companies to enable scaleup leaders, across all sectors, to recruit the staff they need to increase their capacity to grow. The Government should make the international skills needs of scaling businesses a priority. Local authorities, education establishments, advisory and finance companies should be able to be sponsors of such.
- Funding for local communities should continue to be tied to the effective deployment of initiatives that close the scaleup gap as well as the results and impacts that they have on the number of scaleup businesses in their area. Every local Industrial Strategy should have a scaleup pillar, including a markets access strategy and a scaleup cluster map based on currently available datasets.
- All local communities should appoint a Scaleup Champion and develop a relationship management structure for scaleup businesses.
- The outcomes of the Productivity Review, Shared Prosperity Fund and Comprehensive Spending Review should ensure that funding for impactful business support (whether it be mentors, leadership or networks) has a significant focus and segmentation towards our scaleup businesses, which are generators of wealth, exports and productivity to the UK economy. These Reviews should collectively ensure no gap in scaleup support provision is allowed to arise in light of the UK’s changing relationship with the EU.
- Central Government when implementing its Export Strategy should allocate a significant portion of resources to scaleups, including supporting dedicated trade missions for scaleups. All local areas should be encouraged to set up a local exchange programme for scaling businesses, such as that developed by the Mayoral ‘Go to Grow’ campaign in London.
- Public bodies should use the inaugural Visible Scaleup Public Procurement Index to further improve their understanding and reporting on the procurement involving UK scaleups, including scaling businesses not yet visible at Companies House. All public bodies should improve the way opportunities are promoted to scaleup companies by significantly raising the visibility of procurement champions and ensuring their roles have objectives and measurements. The Government should continue the evolution of Contracts Finder to become a smart platform and continue to develop more scaleup specific ‘meet the buyer’ events working with local areas and build on the current work underway as regards sandbox environments.
- Large companies should report on the level of collaboration and procurement they source from scaleup companies. Any procurement contracts with Government should require an increase in the amount of business undertaken with scaleups as part of the contracting process which should be monitored.
- The Department for Education, Local Enterprise Partnerships and the Careers & Enterprise Company should use their convening and promotional power to ensure that students at schools, colleges and universities come into contact with business leaders and that APIs to the National Pupils database and the destinations database (with suitable protections) are made available so that the impact of these interventions can be measured. The public, private and education sector should continue to work together to close the gap on provision of high-quality flexible scaleup leadership programmes, including mentoring, peer networks and matchmaking of non-executive directors who have scaled businesses before. Better connections should also continue to be made between national programmes and local ecosystem leaders. The Small Business Charter, and other such mechanisms, should integrate an assessment of ‘scaleup engagement’ into their performance analysis.
- Government and industry should ensure progress is made closing the finance gap for scaleup by continuing the work to implement the Patient Capital Review. Growth finance should be included as core curriculum in all local scaleup leadership programmes, enabling them to seek out and secure the most appropriate funding at each stage of their company’s growth. The status of current EU sources of funding needs to be monitored, and replaced as appropriate.
About the Scale Up Institute. The ScaleUp Institute is a private sector led, not-for-profit organisation focused on collaborating with policy makers, corporates, finance players, educators and Government at a local and national level.
Our mission is to help the UK to become the best place in the world to grow a business as well as start one, and enable our existing high growth businesses to ‘scale up’ even further.
The Institute was founded in 2015 to help the UK improve its record in scaling companies which lags behind its major competitors after evidence showed that a one per cent boost to the UK scaleup population would boost the economy by hundreds of billions. The 2018 ScaleUp Review is available here:
This article was originally posted by ScaleupInstitute.