Scale-up not start-up

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There have been a number of articles circling through the internet this week calling for more investment in SME’s and less fixation with start-ups. It seems we are a nation enthralled by the culture of entrepreneurs and their exciting, possibly ground-breaking achievements. No one wants to work for the big boss man anymore, with the majority of workers, particularly the younger generation, preferring to go it alone. Whether this is true or not is debatable. Certainly self-employment is on the rise in a big way, helping to prop up employment figures and reinforce the government’s recovery plan, irrespective of whether self-employed workers are actually making any money or not. Yet look beyond the veneer and it’s arguably no great leap of the imagination to suggest that media celebration of entrepreneurial spirit is in some way politically influenced.

It is now time to focus our efforts on the ‘scale-up’ business.

In a report published by Sherry Coutu CBE a ‘scale up’ is defined as a company with more than 10 staff with average yearly growth in employees or turnover of more than 20% over three years. The report goes on to outline a six-point plan on how support can be shifted towards ‘scale-ups’, including improved data and better analytics that can identify scale-up companies deserving support; developing the leaders of these organisations; and reducing the skills gap that prohibit growth.

It stands to reason that the UK would benefit if the government were to put more effort into supporting ‘scale-ups’ companies, rather than simply focusing on smaller start-ups. Analysis suggests an additional 238,000 jobs and £38 billion additional turnover is possible within three years of reversing the scale-up gap. It’s a huge opportunity and one that the government should explore in more detail if they are serious about invigorating the nation and pushing more UK businesses onto the international platform.

In the same week the UK government was also called upon by the EEF (the association for UK engineering and manufacturing companies) to offer more support to small and medium sized manufacturers with the intention of establishing new products and processes that will help rebalance the economy. To achieve this aim, it wants to see more funding for Innovate UK, the government agency which helps encourage technological development by British industry.

In fairness to the government, it has already overseen the creation of a network of innovation centres which bring industry and universities together to generate new ideas and business opportunities, such as cutting-edge technologies and manufacturing excellence. Yet the EEF wants to see more if UK growth is to prosper and employment rise. At present, business expenditure on R&D is at 1.1& of GDP, which is comparatively weaker than the average 1.6% and Germany’s impressive 2% of GDP.

Looking at the evidence, the calls for more investment in existing businesses is warranted. Rather than look for new opportunities for growth – such as new entrepreneurial businesses – that may take years to come to fruition, the government may be better playing to its strengths and backing SME’s with improved investment.

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