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Is Britain finally beginning to move from being a nation of start-ups to one of scale-ups? The inability of innovative new companies to move beyond start-up stage into fast-paced growth has been a consistent feature of the UK’s entrepreneurial scene, but new data suggests this might finally be changing.
The ScaleUp Institute says the number of high-growth scaling businesses in the UK reached just over 36,500 last year. These are firms that have increased the number of people they employ or their sales by more than 20 per cent a year for each of the past three years.
While the number is relatively small compared to total start-up activity – more than 500,000 businesses set up shop for the first time in the UK in 2018 – it’s almost 4 per cent higher than in the previous 12 months. And while the UK economy has expanded by just 9 per cent since 2013, the number of scale-up companies has increased 35 per cent.
For economists and policymakers, this growth is crucial. While start-ups attract all the headlines, they tend to employ tiny numbers of people and generate relatively modest sales. By contrast, scale-up businesses turned over £1.3 trillion last year, a 34 per cent increase on 2016, and now employ around 3.4 million people. Almost all the growth in private sector employment in the UK is coming from these businesses.
It’s also encouraging to see that scale-ups are relatively well spread around the UK – both geographically and across different industries. Last year’s fastest-growing areas for scale-up businesses ranged from the Thames Valley in the South of England to North Yorkshire in the North.
For many of these companies, growth becomes a virtuous circle. The ScaleUp Institute’s research suggests that eight in 10 existing scale-up businesses will retain their status in 2019, generating an additional £1.5bn of sales.
Nevertheless, it would be wrong to be complacent, with some evidence suggesting that the impressive performance in this segment of the economy may not be maintained.
“It is is encouraging that scale-up 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 per cent between 2013 and 2016,” warned Irene Graham, CEO of the ScaleUp Institute.
“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 scale-up confidence, their ability to scale and the ecosystem’s ability to evolve to meet the needs of scaling businesses.”
The ScaleUp Institute suggests businesses in the UK seeking to grow continue to face a number of difficult challenges. Gaps in talent and skills, difficulties with access to markets at home and overseas, a shortage of opportunities to develop leadership, a need for more funding and a lack of flexible infrastructure are all taking their toll.
Ms Graham called for more coordinated action to tackle these issues. “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,” she said.
April 1, 2019 at 10:59AM
Forbes – Entrepreneurs