Scaleups are backbone of the UK’s economy

This week is running a series of articles in partnership with Freeths solicitors focussing on scaleup businesses.

There are several key stages in the lifespan of a business which will have a major impact on its long-term health and stability.

The early years of any businesses tend to be all about survival with the vast majority struggling to stay afloat.

But any successful business will reach a stage where it needs to start thinking about the need to expand its resources, systems and staffing to cope with the next stage of its development.

Traditionally businesses that have at least 10 employees and average annualised growth of 20 per cent or more a year over the last three years fit into the category.

Momentum is everything and any business which fails to move forward is storing up trouble for the future.

According to figures from the Office of National Statistics the total number of scaleups in the UK currently stands at around 36,510 businesses.

These businesses are growing their turnover or employee numbers by more than 20% a year, an increase of 3.7% since 2016.

There are now 35% more scaleups in the UK than there were in 2013.

The top five Local Enterprise Partnerships for growth in turnover scaleups were Buckinghamshire Thames Valley, Thames Valley Berkshire, York, North Yorkshire and East Riding, Cheshire and Warrington and London.

The top five LEPs for growth in employment scaleups were Oxfordshire, Swindon and Wiltshire, Greater Cambridge and Greater Peterborough, Northern Ireland and Hertfordshire,

According to The Scaleup Institute companies which grown their turnover or employment by more than 20% annually over a three-year period can be defined as scaleups.

These businesses 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.

All Local Enterprise Partnerships (LEPs) and devolved regions are experiencing a growth rate of greater than 1 additional scaleup per 100,000 of population.

“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.

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.

“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.

“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.”