As the Fast Growth 50 initiative has shown in Wales for the last 25 years, a small number of high growth businesses make a disproportionate impact on wealth and job creation every year.
The wider impact of such ‘scaleup’ businesses - which grow at more than 20% per annum - is demonstrated by the latest report from the Scaleup Institute which was published earlier this month.
Despite the Covid pandemic, the data presented in the report showed that there were 33,955 scale-ups in the UK generating £1.2 trillion to the economy and employing 3 million people, mainly in higher quality jobs than for the average business.
Incredibly, these firms generate 50% of the turnover of all small to medium-sized enterprises (SMEs) despite employing less than 0.6% of the SME population, a finding which reinforces the findings of other studies of this phenomenon over the last fifty years.
Given that there seems to be a general perception that high growth firms are associated with technology sectors, the report shows yet again that such businesses are to be found in all parts of the economy, with the majority being in non-technology sectors.
In fact, more than 50% of the overall turnover of scale-up firms in the UK is generated by sectors namely arts and creative industries, business administration and support services, construction, information and communications technology, professional scientific and technical services, and wholesale industries.
They are more productive than other firms, generating an average of £373,000 turnover per employee with the wholesale and retail scale-ups outperforming other businesses in their sector by 200%.
The study also shows that half of all scale-ups are involved in international trade in a range of markets across the world.
And despite being in a range of sectors, scaleups are more innovative, with eight in ten having introduced or improved a product, service, or process in the last three years.
As a result, it is not surprising to find that grants to scaleups from Innovate UK have reached £318m which, in turn, have leveraged a further £4.5 billion of private sector money, demonstrating the massive potential of high growth businesses in developing the knowledge-based sectors of the future.
Scaleups are also diverse with 40% having at least one female director and half describe themselves as being a social business, operating in the green economy or meeting environmental, social, and governance (ESG) goals. Three quarters are also offering opportunities to young people through work experience, internships, or apprenticeships (with the latter at twice the rate of your typical firm).
Therefore, scaleups are not only generating jobs and prosperity but are also better businesses. Given the UK Government’s continued commitment to levelling up, the question is whether high growth firms are to be found across the UK?
The answer is yes although if we examine the overall distribution of scaleup firms per 100,000 population between 2013 and 2020, they are more concentrated in the more prosperous areas of the UK including London, Thames Valley, Oxfordshire, and Cambridge.
In contrast, Wales, and the Northeast of England, two of the poorest parts in the UK, have the lowest proportion of high growth firms. Further examination of the data for the three devolved nations of the UK also indicates a has been a slowdown in scaleup growth across the board.
For example, whilst the overall UK average increased by 8.5 scaleups per 100k population between 2013- 2020, Wales experienced only a slight increase of 7.9 scaleups per 100k population.
In contrast, Scotland increased by 9.4 scaleups per 100k population and Northern Ireland by 15 scaleups per 100k population).
Therefore, this important report from the Scaleup Institute demonstrates the incredible impact that high growth firms have on employment and economic growth and again dispels some of the myths around where high growth firms are to be found in the economy.