In the past few years, commentators have increasingly talked about the importance of SMEs to the UK economy, while many government initiatives have been introduced to provide an environment that encourages growth. But do all SMEs share the same characteristics and can we still treat them as one homogenous grouping? This report addresses those issues. By reassessing these businesses and their impact on the economy, it updates our understanding.
The analysis shows that within the broad SME category, there are a small number of businesses that are growing faster than others. It is these companies that are responsible for a disproportionately large contribution to the growth of the London, and therefore UK, economy and the report points to the key drivers of their success.
We understand the type of environment and support needed to help sustain companies’ growth. From flexible leases and services to fostering networking communities, we try to play our part as London’s leading provider of business premises to new and growing companies in exciting business sectors, many of which are present in this book. The report’s findings endorse our efforts, but it also takes our understanding to an even deeper level, and, for the first time, gives a voice to a group of firms that have much in common and are pulling away from the pack.
Recognising that there are specific circumstances that help these 1,000 companies be successful is an important step. But it is only the beginning. Sharing this understanding more broadly will be vital in ensuring that they, and others like them in future, are provided with the supportive environment they need to sustain their growth.
During the past few decades, the term SME has referred to an ever-broader group of businesses. The report’s conclusions, combined with our own first-hand knowledge, suggest that it is time to identify and celebrate a discrete grouping of new and growing companies (NGCs) that share the same characteristics and energy as SMEs. The companies and their dynamic leaders listed in this book are having a significant impact on the UK’s employment creation and economic growth. By shining a light on them we hope to provide stimulation for policymakers to bring a specific focus to bear on these high-growth companies.
Flexible leasing terms on office premises are essential for small, fast-growing companies
Historically, all SMEs in the UK were believed to display the same characteristics and have, consequently, been treated equally in terms of the support provided to them. From premises and IT to marketing and finance, they have been viewed as one homogenous group. But instinctively, we have begun to question that assumption, based on the evolving profile of our dynamic customer base.
While in recent years almost all private sector growth has come from SMEs, much of it is actually being generated by a very small number of businesses. A study by Nesta, the independent charity that provides investments and grants to small businesses, suggests that only six per cent of SMEs actually grow at all. Meanwhile, a report from Goldman Sachs found that between 2007 and 2010, just one per cent of small companies were responsible for 23 per cent of new employment growth.
These new and growing companies (NGCs) are clearly the real drivers of growth. We work closely with these companies every day and recognise their distinct profiles.
What, then, do these businesses need that sets them apart from others? In our experience, one of the most important issues for them is flexibility. That means flexibility in terms of the space that they lease and the time for which they lease it. These businesses are growing quickly and they need to be able to respond to changes in demand. They need to be able to be nimble – there’s little point in taking out a lease that commits a business to a set amount of space for the next five years if it doesn’t know how many people it will be employing in five months’ time.
Alongside flexibility, another key requirement for many of these businesses is high-quality connectivity. Regardless of whether their businesses are entirely digital or whether they provide physical products, almost all companies can now be described as digitally dependent. As a result, an internet package that ensures high-speed connectivity and matches the flexible terms of the lease is seen as a vital part of a business’s operations.
So, NGCs need flexible premises and robust connectivity. But they also thrive on fast-moving ideas and collaborations that come from networking with other similarly energetic enterprises. Working within clusters of like-minded people is empowering and we see many of our customers in our local business centres developing shared business opportunities and creating new avenues for growth. By designing our buildings with this collaboration and networking in mind, we have created open spaces for social engagement and we are rolling out our Club Workspace format to capture the growing co-working market.
We also host a rolling programme of business networking events, which provide peer-to-peer learning and business development opportunities. Co-working space, cafés and networking events feature heavily in all of our centres and buildings. Our centre hosts help here, too – making sure that businesses are able to make the most of the environment in which they work, facilitating relationships and networking opportunities that open up avenues for trade.
Shopitize, one of the businesses at Club Workspace in London Bridge, is an excellent example of how this arrangement works. Co-Founder Alexey Andriyanenko explains: "We were a little less than a year old when we moved into Club Workspace. We had outgrown the borrowed conference room at one of our advisors, and were looking for a space that would give us flexibility to collaborate as we grew.
"Club Workspace was a great place for entrepreneurs with big ideas to start. It provided us with the flexibility that we needed at the early stage of our development. We also met many people who have helped us grow, several of whom have since become part of our team. We grew from a full-time team of four to an extended team of more than eight."
Shopitize’s Co-Founder Irina Pafomova adds: "Although we have graduated from Club Workspace, we have not moved far away. We currently have our own office space in the Leathermarket, which is part of Workspace Group; therefore, we still maintain a very close relationship with our network at Club Workspace."
Businesses such as Shopitize show how NGCs that take advantage of our co-working space can grow into a more permanent base, taking advantage of our flexible arrangements. Just as no business can thrive without access to finance, skilled staff or the right markets, so it cannot prosper without the right premises.
But in today’s world, this is about more than just physical space. It is about providing an environment that is supportive, flexible and truly adaptive to the fast-growing businesses that are so important to the economic growth of London and the wider UK.
A pioneer of the online personalised greeting cards market, Moonpig has enjoyed rapid growth since it was founded in 1999. The company, which sells cards for every occasion, is riding the crest of an industry wave as consumer demand continues to rise. In 2012, British people spent more than £1.38 billion on greeting cards, while online sales accounted for 4.5 per cent of the sector.
With Moonpig expecting online sales to rise in the coming years, the company is confident of claiming more market share. It also expects more demand for its products, ranging from flowers and plants to cakes, chocolates and personalised gifts.
Iain Martin, Moonpig’s Managing Director, says that having the right people on board in a period of uncertainty for the UK economy has contributed to the company’s growth. "Having a great workforce behind you has never been as critical. We pride ourselves on having a great company culture based on creativity and fun, but Moonpig also has a hard-working office environment."
Region: Greater London
In the next five years, IT infrastructure provider Trams Ltd hopes to have grown significantly and expanded the workforce – not bad for a company in an industry blighted by the economic downturn.
Since 2008, businesses in the sector have struggled to control their operational costs and maintain a steady course. But Trams Ltd has continued to expand in tough times, which it attributes to strong customer relationships and strategic ties with key manufacturers such as Apple, Adobe and Quantum.
Buying competitors has also helped, according to Warren Peel, Trams Ltd’s Managing Director. "By absorbing and reshaping companies like Rapid Group and Cancom UK, we have grown our own business significantly in the past five years," he says. In that time, the company has cut its operational costs and invested in training and marketing.
For Warren, the shift towards mobile IT solutions that can be accessed using tablets is creating both big challenges and opportunities. "While businesses are buying fewer desktop PCs, they now need mobile device management, big data and cloud-based storage solutions, and rock solid security," he says. "We have become adaptable to these needs and are seeing exciting new opportunities every day."
Region: Greater London
Sector: Computer Hardware