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Addressing 'scale-up gap' can help drive UK economic growth, says entrepreneur

Out-Law News | 17 Nov 2014 | 1:08 pm | 2 min. read

The UK government and local authorities must take action to support fast-growing businesses to address the "scale-up gap" that exists in the country, a leading entrepreneur and investor has said.

Sherry Coutu said that fast-growing businesses can suffer from "growing pains", such as a lack of skills in the job market to fill posts, a shortage of "leadership capability" to drive growth, problems with expanding into international markets as well as gaining access to finance. These issues prevent UK 'scale-ups' from developing into businesses of truly global scale. 

Supporting 'scale up' businesses could deliver economic benefits for the UK, Coutu said in her government-commissioned paper, 'The scale-up report on UK economic growth' (138-page / 200MB PDF). 

Scale-up businesses are different from start-ups. They are businesses that grow their turnover or number of employees by more than 20% on average each year over a three year period, where they start the period with more than 10 employees. 

"The UK economy may be growing faster than any other G8 nation, but recent data show that we lag behind the US and other leading economies in the extent to which our companies scale," Coutu said. "This is the 'scale-up gap'. Our promising companies struggle to grow domestically and expand internationally and are taken over by larger – often foreign – firms at a significant discount to their potential. This is a major issue because scale-up companies are crucial to national competitive advantage in that they drive economic growth, job creation, and productivity in the longer term," she said. 

"A boost of just 1% to our scale-up population should drive an additional 238,000 jobs and £38 billion to GVA (gross value added) within three years," Coutu said. "In the medium-term, assuming we address the skills-gap, we stand to benefit by £96 billion per annum and in the long-run, if we close the scale-up gap, then we stand to gain 150,000 net jobs and £225 billion additional GVA by 2034." 

Coutu made 12 recommendations to the government, local authorities and industry on what they can do to help scale-ups realise their potential. 

She said that "the most important thing government can do to help them grow" is to publish data on scale-up businesses. 

"The UK government has released data on these companies in a useable format via Companies House for years, but there is a significant delay of 12 to 18 months," Coutu said. "Releasing information to the ecosystem earlier, as occurs in Denmark, would allow for accurate and timely targeting… This data-driven evidence-based approach avoids 'picking winners' or supporting companies with particular characteristics which are not relevant to their growth rates, such as being 'small' or 'young' or 'large' companies." 

Coutu recommended that a new UK minister responsible for scale-ups should be appointed and given responsibility for reversing the scale-up gap by 2025. She said public funding for entrepreneurs also needs to be better targeted to ensure that scale-up companies get the support they need. 

Coutu said that business and council leaders must do more to promote fast-growth businesses in their area as offering career development opportunities to adults in their area and that scale-up businesses should be represented on more UK international trade missions. 

She said that a new "scale-up Visa" should be established to enable the top scale-up companies in the UK to "recruit staff from overseas within two weeks of applying". Those foreign workers "help expand the distribution of local scale-up companies existing products to foreign markets and help local scale-ups introduce new products and services", Coutu said. 

"Effective learning programmes … aimed at leadership development of scale-ups" should also be made available across the country, the entrepreneur said. 

Coutu said that central and local government bodies should also look to buy more goods and services from scale-up companies. 

"A far higher proportion of UK government procurement should be with scale-up firms, in terms of both the number and value of contracts, given that these companies have the greatest potential to deliver economic outcomes," Coutu said. "Most microbusinesses lack the potential to achieve significant scale, so targeting is especially important if one is to achieve value for taxpayers' money."