Report puts spotlight on cities driving economic recovery

A NEW report published today has highlighted the UK cities where small and medium enterprises (SMEs) are pursuing high-growth strategies and fuelling the nation’s economic recovery.

The Yorkshire findings include:

– Doncaster and Hull were among the 10 cities with the lowest concentration of SMEs per 10,000 population last year.  Doncaster had 196.1 SMEs, while Hull fell lower with 175.5. London was the highest with 418.4.

– 10 cities with the lowest start-up rate (business starts per 10,000 population, 2012) included Wakefield 27.9 , Barnsley 27.4 and Hull 26.8.

– 10 cities with the  lowest number of jobs created per expanding SME included York with the average employment created per SME expanding, 2010-2013 at 4.3 and Huddersfield with 4.2.

– According to the report, the proportion of ‘high-growth’ SMEs has increased. 10.9%  of SMEs in cities with 10 plus employees expanded their workforce by more than 50% between 2010 and 2013 compared to 9.7% between 2008 and 2011. However, the 10 cities with lowest proportion of SMEs expanding included Doncaster (7.3%).

– There was a high degree of churn among SMEs. While on average more than a quarter of SMEs expanded between 2010 and 2013, around a fifth of SMEs contracted. Looking at the average employment loss per SME contracting, 2010-2013, the  10 cities with lowest number of jobs loss per contracting SME included Huddersfield -3.2 and the 10 cities with highest number of jobs loss per contracting SME included Leeds -4.4 and Wakefield -4.4.

– According to the report, city-based SMEs were less likely to close between 2010 and 2013 than SMEs located outside the 64 largest cities. The 10 cities with the lowest closure rates (2010-2013 %) included Wakefield 12.8 and York 11.9.

– SMEs investing in training are likely to be more productive and adaptable. They are also likely to find it easier to retain staff, today’s report says. The 10 cities with highest proportion of SMEs that trained staff (figures show proportion of SMEs that trained staff in last 12 months, 2013) include York 79.2 but the 10 cities with lowest proportion of SMEs that trained staff include Doncaster 63.4 and Barnsley 60.8.

-SMEs with ‘high’ or ‘very high’ Product Market Strategy scores are referred to as adopting ‘high-growth’ strategies. This means firms are more likely to compete on quality rather than price, pursue innovation, offer customised good or services, and operate in competitive markets. SMEs with ‘high’ or ‘very high’ Product Market Strategy included Hull (51.6) which came ninth in the table.

The Centre for Cities’ annual Small Business Outlook, supported by global insurer Zurich, provides a health check of the performance of SMEs in cities throughout the UK.

“The disparities in small business performance amongst cities tell the story of Britain’s uneven economic recovery,” said chief executive of Centre for Cities, Alexandra Jones.

“Cities with the largest share of SMEs employing high-growth strategies have wages that are, on average, 18% higher than the bottom five cities. Firms that adopted higher growth strategies are less likely to have taken cost-cutting approaches – such as implementing redundancies – during the recession, and are now more likely to be actively recruiting and expanding their businesses in the recovery.

“By contrast, the cities hit hardest during recession had fewer firms adopting high-growth strategies, and these places continue to lag behind other parts of the country in terms of employment and productivity.

“Through their decision to prioritise growth and innovation, high-performing firms are playing an important role in the UK’s economic recovery and creating jobs in their local communities. But what is very clear from this report is that the business conditions in cities and local communities have also played an important role in driving firms’ successes,” said Jones.

Cities able to facilitate businesses’ capacity to attract and retain skilled workers, access finance, and collaborate with other firms, are more likely to be home to a larger number of high performing small organisations and start-ups.

“It is only through ensuring cities right across the UK are attractive and effective places to live, work and do business that we will encourage more small firms across the country to pursue the high-growth strategies that have delivered such positive results,” added Jones.

“To achieve this, it is absolutely critical that we afford UK cities greater control over the areas we know are fundamental to supporting business performance, such as investment in infrastructure and education and training systems.
“Doing so will not only help to reinvigorate our cities and address the particular opportunities and challenges they face, but will support a more balanced, robust and sustainable economic recovery for Britain.”

Richard Coleman, director of SME at Zurich, said: “This report shines yet more light on the huge diversity of our small business economies, up and down the land – and highlights the prime conditions that enable firms to grow and contribute to those economies more effectively. SMEs across the country should be encouraged by what is shown here as they come to more clearly understand the key drivers for their own success.”

“The differences in size, approach and ambition of Britain’s SMEs further highlight the varying types of risks that firms are facing. Changing risks require enhanced knowledge in order to survive in what is an increasingly complex environment – and I remain convinced that our army of small businesses can gain a deeper understanding of their challenges and opportunities, based on their own unique strategies, location and sectors.”

The Bondholders marketing organisation which promotes Hull and the Humber, said the Centre for Cities report shows Hull’s small businesses are “investing and innovating,” following the city’s ninth place on the table of SMEs with ‘high’ or ‘very high’ Product Market Strategy.

Peter Aarosin, chair of the Bondholders, said the Centre for Cities findings on the performance of small and medium-sized businesses in Hull was “highly encouraging”.

He said: “Hull has always had a strong tradition of independent, entrepreneurial businesses and that continues to this day. Small and medium-sized companies are the engine of the economy and this report indicates that, in Hull, such businesses are moving forward positively as the recovery takes hold.

“Indeed, it also shows the resilience of businesses in Hull, with the city having the highest proportion of SMEs expanding in recent years. Given how difficult the economic environment has been, that is a tremendous testament to how local companies have weathered the recession.

“This report is all the more encouraging as the city has yet to see the benefits of major planned and expected investments, such as by Siemens. When these investments begin to take place the ripple effect across the city and wider region will be felt by companies of all sizes, across many sectors.

“However, it’s clear that businesses in Hull are not waiting for this investment to happen. They are getting on with the job – investing and innovating to build growing businesses and provide much-needed employment opportunities.”