Since 1999, I have been championing the cause of the small number of firms that grow quickly and make a disproportionate impact on prosperity and job-creation in the economy.
After launching the first ever Wales Fast Growth 50, there has slowly been an increased interest in high growth (or scale-up) firms as various research studies continue to confirm their significant contribution to the UK economy.
One of those which continues to highlight the importance of such firms is the annual review by the Scaleup Institute, which defines high-growth (scaleup) firms as those growing their employment numbers or turnover by more than 20% a year over a period of three years with at least 10 employees at the start of the period.
According to their latest report published last month, there were 33,445 scaleups in the UK in 2019, which is an increase of 24% on 2013 (as against a growth in GDP of 12% over the same period).
More importantly, they employed 3.2 million people and generated a total turnover of £1.1 trillion for the UK economy. In other words, whilst scaleup firms make up less than 0.6% of the SME population, they represent 50% of the total SME turnover output.
The study also shows that scaleups are more productive than other firms with an average turnover of £338,000 per employee, are more innovative with three out of four introducing or improving a product or service in the last three years, and are export-oriented with 60% involved in international trade.
And for those who still think that growth and technology are exclusive to each other and continue to focus on a cluster approach, it is worth noting that the majority of high growth firms, as we have seen for the Wales Fast Growth 50 every year, are in sectors that are not tech-related.
Scaleups are also diverse (with four in ten having at least one female director), are good corporate citizens with a focus on being either a social or green business and provide higher levels of apprenticeships to support young people into employment.
Finally, and most importantly for the economy, a recent survey undertaken as part of the report shows that 90% of scaleups plan to grow again in 2022 despite the challenges of Covid, trading relationships with Europe and climate change.
However, there are various obstacles faced by scale-ups despite their rapid expansion in recent years with access to market remaining a vital or most important factor in the future growth of firms. In fact, they want to do more business with corporates, universities and government with 4 in 10 aspiring to sell to corporates and 3 in 10 to government whilst only 4 in 10 have collaborated with universities and research institutions. In addition, whilst 57% of scaleups currently export, more are looking to trade internationally in 2022 especially in North America, Australasia, the Middle East, China, India and other parts of Asia.
Another key issue is that of future skills with a third of scaleups rating access to talent as their main priority for the business. However, it is worth noting that scaleups are also focused on helping new entrants to the workforce and ensuring they have the right mix of skills and attributes needed by the business. This presents a real opportunity for universities to link up with growth businesses in their region especially as over 40% of scaleup leaders are seeking to undertake more employer encounters with students.
There is also room for business schools to do more to help growth firms given the clear demand for strategic and business development skills to support future growth and a commitment to training the leadership team.
And what of Wales? Whilst the number of scaleup firms is above the UK average and there seems to be a strong pipeline for the future, this seems to be despite public or private support rather than because of it. In fact, the report shows that, compared to the rest of the UK, there few programmes in Wales that specifically focus on supporting growing companies.
For example, whilst 48 initiatives were identified by the report as being in place to help scaleups in the Midlands, there were only four such interventions in Wales - the lowest level in the UK - and one of these was the Development Bank of Wales which only offers limited funding to such businesses.
Given this lack of focus and the development of other scaleup ecosystems across the UK, surely the time has come to bring together the key stakeholders in this field and establish “Scale-Up Wales” as a vehicle for boosting the performance of high growth firms across the economy.
Indeed, if you can have a Scaleup Northeast, Scale Up Lancashire, Scaleup Berkshire and a Scotland Can Do Scale, then there is no reason why it couldn’t be done here either at a national level or, through the four city deals which have done very little with the scale-up sector since they were initiated.
For once, rather than trying to do the same as every other economy in backing the same clusters, it would refreshing to see Welsh policymakers actually supporting those firms that create wealth and employment in their local communities regardless of the sectors in which they are based.