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SUPPORTING HIGH GROWTH SMALL BUSINESSES

This year, the Wales Fast Growth 50 celebrates two decades of recognising the achievements of the fastest growing Welsh firms.

And during the next few weeks, we will be announcing a very special event that will be taking place in October. Needless to say, it will aim to be the biggest event of its kind in many years and will not only commemorate 20 years of the Fast Growth 50 listings in the Western Mail but the Welsh business community as a whole.

When we started back in 1998, there was very little interest in supporting indigenous businesses, never mind those firms that grow quickly.

Fast forward to today and it would seem that politicians, policymakers and private companies have finally realised the significance and importance of this small group of firms to local, regional and national economies.

Some of this increased interest has been supported by the work of companies such as Octopus, which has recently published its third High Growth Small Business Report and which, yet again demonstrates the impact of fast growing firms to the UK economy.

According to their study, high growth small businesses (HGSBs) - which are defined as those with more than 20% annual average growth over a three-year period and an annual turnover of between £1 million and £20 million - make up less than 1 per cent of UK companies but accounted for 3 per cent of total UK jobs in 2016 i.e. they created n average of 3,000 new jobs every week (or around 20 per cent of all jobs).

In terms of Gross Value Added (GVA) i.e. economic output, whilst HGSBs accounted for 3.6 per cent of the UK’s GVA, they generated over 22 per cent of the growth in GVA between 2015 and 2016.

As we have seen with the Wales fast Growth 50, HGSBs are not restricted to a number of sectors but are to be found in all industries. The largest single sector is construction, with 15 per cent of UK HGSBs, followed closely by the wholesale/retail trade (14 per cent of all UK HGSBs.

It is also worth noting that fewer than one in ten of HGSBs are to be found in technology-intensive sectors which again begs the question why there is so much emphasis on overly supporting such firms to the detriment of those that create wealth and employment in less ‘sexy’ industries.?

Whilst it would be expected that HGSBs would be concentrated in the most prosperous parts of the UK, nearly 60 per cent are located outside London and the South East of England.

Unfortunately, these tend to be in areas such as the North West of England, the Midlands and the South West of England with the three poorest parts of the UK - Wales, Northern Ireland and the North East of England - having the lowest number of HGSBs with fewer than 1,000 in each region.

Not surprisingly, the study shows that access to skills remains a key issue for many HGSBs in expanding their businesses further with 60 per cent of those surveyed saying that finding talent/skills shortages to be an “important” or “very important” constraint on their business growth.

Indeed, 90 per cent of HGSBs state that they faced some sort of skills shortages as compared of 17 per cent of other UK firms and given this, it is not surprising that 84 per cent of HGSBs organised formal training for at least one member of staff over the past 12 months.

Ffor those policymakers who seem doing very little to address this issue, two fifths of HGSBs surveyed consider skills shortages to be the main policy area where UK Government action could make the biggest difference for their businesses.

In terms of infrastructure, one in three HGSBs considers digital infrastructure to be one of the biggest constraints on the growth of their business and again, nearly 70 per cent say that the UK Government’s approach to this issue is important or very important to their business going forward.

Therefore, this report like many others before it emphasises not only the importance of fast growing businesses to economic growth but, more relevantly, shows that increased investment in addressing skills shortages and digital infrastructure deficiencies will further help those small proportion of firms that create a significant proportion of jobs in the economy.

Certainly, after two decades of celebrating and supporting the fastest growing firms in Wales, it is clear that more can be done to ensure that these firms not only continue to expand themselves but that thousands more are given the right conditions to enable them to grow and create even more wealth and prosperity in the Welsh economy.

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