‘Scale-ups’ could add £38bn to economy within three years

Independent report finds proportion of fast-growing small firms lagging behind US counterparts

Rapidly expanding ‘scale-up’ companies represent a significant driving force in the UK economy, which could add £38bn to the economy within three years if properly encouraged, according to a new report.

The Scale-Up Report on UK Economic Growth, an independent study published by entrepreneur and investor Sherry Coutu CBE, argued that the government should put more effort into supporting fast-growth companies, rather than just companies at the seed or start-up stage.

Defining ‘scale-ups’ as companies with more than 10 employees and year-on-year growth of 20% or more over three years, the report argued that boosting this sector by just 1% could create 238,000 new jobs and add £38bn to the UK economy within three years.

It found that despite widespread “ambition and ability” in the leaders of these companies, the UK still lagged behind the US and other major economies in its scale-up population.

Coutu’s report said that in the long term, closing this ‘scale-up gap’ could add a potential £225bn and 150,000 net jobs by 2034.

Whilst the government has made start-ups a priority area of policy through initiatives such as Tech City and SEIS, this report suggests more could be done to help businesses in their next stage of growth.

The report made six specific recommendations for governments, universities, corporates and the media to help support scale-ups. These were:

  1. Targeting, supporting, promoting and reporting on scale-up gap closure: The report argued for a greater focus on scale-ups and specific targets for growth monitored by the government.
  2. Closing the skills gap: The report found the “number one problem” that scale-ups faced was a lack of access to quality talent, which needed to be addressed if they were to grow.
  3. Developing scale-up leadership: A lack of capacity and experience in the senior leadership team was cited as the second most important barrier to scale-up growth; the report urged greater training and support for senior people in these organisations.
  4. Increasing customer sales at home and abroad: The report urged the removal of “barriers” to trade, both domestically and internationally.
  5. Financing scale-ups: The report found many scale-ups were approaching US and Asian investors for finance due to its easier availability in those markets; whilst access to foreign finance should provide growth in the short-term, the report argued it will “dampen” the UK economy over a 20 year timeframe.
  6. Accessing infrastructure: Whilst the report said improving access to physical infrastructure (premises) was important in the short-term, in the long term it was “not of that great economic importance”.

Sherry Coutu CBE, author of the report, said: “It is in our national economic interest to help local scale-up companies to overcome their challenges. This report investigates the potential boost to the UK economy if we could enable as many small companies to grow large by the implementation of support mechanisms as has been achieved in 20 other countries.

“The UK needs a more evidence-based debate on where growth comes from and the impact that growth-enhancing investments can have over time. Like many other investors, I make sure that I have a portfolio of short-, medium- and long-term investments. Similarly, as a country we need to consider the impact of the UK’s portfolio of growth-enhancing policies and initiatives — both public and private.”

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