Expert commentary by Irene Graham, CEO, The Scaleup Institute
Recognising and celebrating growth and the achievements of scaleups is more important this year than ever before, so this year’s 1000 Companies to Inspire Britain fulfils a vital role in 2020.
Our research has shown that scaleups contribute £1trn to the UK economy and account for half the turnover generated by all UK small and medium-sized enterprises per year. They employ 3.5m people and are 54% more productive than other businesses. They are twice as likely to operate in international markets. Even through the COVID-19 period, they are still investing in R&D and job creation. Many are doubling down on innovation, looking at new ways of working and the skills to enable these changes.
Our recent analysis of the latest ONS data from 2018 showed the first drop in the number of scaleups since 2013 – a decline of 7.8% to 33,860 – but it is also important to remember that real progress has been made over the past five years. The number of scaleups today is 25% higher than it was in 2013. That compares favourably with gross domestic product growth, which was just 11% over the same period.
However, this underscores how we must redouble our efforts to foster more scaleups and enable these resilient companies to overcome persistent barriers to growth.
These barriers are well known: gaps in talent and skills; access to markets both at home and overseas; opportunities to develop leadership capacity; a need to access finance, notably patient capital; and a lack of flexible infrastructure. Another critical challenge is that large disparities in scaleup numbers persist at a regional level so levelling up across the UK must be a priority.
These challenges, which existed pre-COVID-19, have been exacerbated. For example, as shown in The Future of Growth Capital report issued this year by the ScaleUp Institute, Innovate Finance and Deloitte, the long-term growth capital gap – the difference between demand for and supply of growth capital – is calculated as standing near to £15bn each year. The pre-existing structural gap has effectively been doubled by COVID-19, placing greater pressure on regional and sector disparities.
We have the ingredients to overcome this finance gap – as well as to address access to talent, new markets or leadership capacity – but it will require even greater collaboration across public and private sectors to expand or realign our current efforts.
There is a need for the UK to be even more focused on regionally empowered models, which can operate at scale, with regional clusters and heightened connectivity, in order to provide support to local scaleups in fast and impactful ways. This will help every scaleup across every region and sector.