The search for the fastest growing Welsh firms was launched last week in the Western Mail.
The Wales Fast Growth 50 recognises those group of high growth businesses that make a disproportionate contribution to jobs and wealth creation in the Welsh economy. Since the project was established twenty-three years ago, the 652 firms that have appeared in the Western Mail are estimated to have created 44,000 jobs and to generate £25 billion of additional turnover.
With various research studies showing that a small number of high growth firms -which are defined as those that are growing by more than 20% per annum - disproportionately create jobs and wealth all over the World, such businesses continue to be of interest in driving forward economic prosperity.
A recent report from the Scale Up Institute found that whilst there were 1250 Welsh scale up firms, Wales had the lowest proportion of such businesses relative to the rest of the business population.
In addressing this deficit, it proposed three key factors that will allow Welsh scaleups to grow namely access to UK and international markets (71%), access to talent (56%) and access to finance (56%). Interestingly, access to infrastructure which seems to be the focus of policymakers and business representative organisations was rated as important by only four out of ten growth firms.
In terms of the source of support required by such firms, the most important were access to non-executive directors (66%), mentors (50%) and peer-to-peer networks (41%). Whilst only 28% perceived universities as a key source of support, six in ten wanted to collaborate more with the research facilities of higher education institutions in Wales.
With regard to government resources, only 1 in 4 required better access to general support such as the Welsh Government’s Business Wales service. In contrast, 59% wanted to be able to get support from Innovate UK, the UK Government’s innovation body. Given that only 2.6% of Innovate UK funding has gone to Welsh organisations during the period 2004-21, this suggest that far more needs to be done by the UK Government in ensuring that those Welsh firms with the most potential for growth are given access to this support.
In terms of access to growth capital, whilst half of scaleup firms in Wales were using or planning to use equity finance, 4 in 10 perceived they had insufficient capital to
meet their growth ambitions. Indeed, the study suggests that there was a funding gap for high growth Welsh firms of around £200 million which begs the question of why such businesses, which have the greatest potential for creating jobs, are not getting the funding they need to do so from high street banks.
Whilst the Development Bank of Wales remained the biggest individual investor into scaleups, only ten such firms were supported by the Welsh Government owned funder which suggests a more targeted approach is needed to support the financial requirements of growing Welsh firms.
It is therefore clear that more could be done to support scale up firms in Wales and this could be achieved in three ways.
First of all, greater knowledge sharing between the firms and the creation of peer-to-peer networks could help to facilitate this as this column suggested last month. This is probably the easiest thing to achieve in the short term and would have the quickest impact on businesses.
Secondly, Welsh universities need to engage with growing firms in a range of ways including supporting their training needs, ensuring greater access to their research facilities and creating links between graduates and scaleup businesses, potentially through more replacements and internships into such ventures. Creating better links between growth firms and higher education could be a real boost over the long term to the Welsh economy as these are the type of businesses that could be the perfect vehicles for commercialising academic knowledge into the marketplace.
Finally, and perhaps most important of all, there needs to be greater co-operation between key actors to help growth firms and the creation of what is essentially a scaleup ecosystem which ensures the appropriate support is developed and delivered. For example, the creation of a scaleup hub in each of the four regions of Wales could be a positive step forward in ensuring greater focus on these businesses.
So yes, there remains a challenge to develop more scale-up firms in Wales and to ensure that they can create greater wealth and prosperity across all communities in the nation.
Certainly, the Wales Fast Growth 50 firms show us every year that we have scale-up businesses that are as good, if not better, than their peers in any part of the UK. What we need to do now is to encourage more of them at a time when Wales needs entrepreneurship, innovation and growth more than ever.