Business management

Scale-up businesses: five priorities for future success

Britain’s fastest growing and most innovative enterprises are playing a vital role in helping the UK economy recover from Covid-19. We look at the challenges they face and their best opportunities for growth.

Scale-ups are defined by the OECD (Organisation for Economic Co-operation and Development) as enterprises with an annual growth rate for turnover or staffing levels of at least 20% over a three-year period.

The most recent analysis carried out by the ScaleUp Institute indicates there are well over 30,000 scale-ups in Britain, an increase of at least 24% on 2013 levels. Irene Graham OBE, CEO of the institute, says: “Scale-ups are the powerhouse of the UK economy. Our research has shown that scale-ups contribute £1.1trn to the UK economy and account for half the turnover generated by all UK SMEs. They employ 3.2 million people and are 51% more productive than other businesses.”

Leaders in their fields

Graham points out that even during the pandemic and the economic downturn of 2020, scale-ups have continued to invest in innovation, new product development and job creation.

The ScaleUp Institute’s 2020 ScaleUp Index found that scale-ups are significantly more productive than their peers, with the average annual turnover per employee standing at almost £338,000. They are also more likely to be involved in international trade, and are keen to broaden their horizons despite issues such as Brexit.

Meanwhile, they have a greater tendency to innovate, with around 75% of scale-ups saying they have improved or developed a product, service or process within the past three years. And the employment opportunities they create are typically of a higher quality – offering greater levels of job satisfaction, for example.

Driving economic growth

Crucially for the UK economy, scale-ups are set to play a vital role in helping Britain return to growth in the wake of the pandemic. Around 80% of scale-ups expect to grow in 2021 despite the current turbulent trading environment, with half of these firms confident of expanding by at least 20% this year.

At the same time, recent NatWest research suggests, the right support for the wider SME community could be crucial in driving prosperity in the coming months. The bank’s report ‘A springboard to recovery’, says that a revitalised small and medium-sized business sector has the potential to deliver up to £140bn in gross value added (GVA) to the UK economy over the course of the current decade – provided the right external assistance is in place to help them boost productivity. In addition to productivity, NatWest found, guidance is needed in areas such as diversity of leadership and sustainability.

Priorities and challenges for scale-ups

Graham says there are five key areas that management teams in scale-up businesses should focus on in order to maximise their potential and deliver growth and jobs.

1. Seizing international opportunities

“Scale-ups are firmly in the vanguard of the UK’s trade ambitions,” Graham points out.

“Many are already exporting and plan to go into new markets. Of those who currently don’t export, six in 10 plan to go global in 2021. The EU remains their largest market but an increasing number are looking to other markets in North America, Australasia, India, China and the Middle East.”

Scale-up leaders are seeing some improvements in the skills gap but we must keep a relentless focus on strengthening the UK’s talent pipeline.

Irene Graham OBE
CEO, ScaleUp Institute

She adds that there is significant demand from this group of businesses for greater levels of support from the government, for example in organising trade missions or introductions to new trading partners.

“For scale-ups with international growth ambitions, there are programmes such as the Mayor of London’s International Business Programme and the Global Scaleup programme run by the Growth Company in Greater Manchester,” Graham says. “These programmes, and others that have been endorsed by the ScaleUp Institute, such as Silicon Valley Comes to the UK (SVC2UK), have pivoted their offering in 2020, turning much of their support and networking digital.”

2. Overcoming skills issues

In recent years, a shortage of skills across many parts of the economy has been a major obstacle to the UK improving its productivity levels. Among scale-ups, however, steps are being taken to close the skills gap, Graham explains.

“Scale-ups are twice as likely to be providers of apprenticeships, internships and work experience than other businesses,” she says. “They are clear that they want to provide more opportunities for our emerging generation in such activities.

“Talent and skills remain key priorities for scale-ups and they will continue to look for the best domestic and international talent. Scale-up leaders are seeing some improvements in the skills gap but we must keep a relentless focus on strengthening the UK’s talent pipeline.”

3. Putting the right funding in place

According to the ScaleUp Institute, scale-ups are much more likely to use external finance than their SME peers, with 84% using such funding to support growth. But Graham points out that around 40% of scale-ups think they don’t have access to the right funding for their needs. Perceptions of regional disparities also persist, with 40% of scale-ups continuing to feel that the majority of growth funding resides in London and the South East. Among other recommendations, including a need for increased and localised VC (venture capital) and angel investor activity, the ScaleUp Institute says that growth finance should be included as a core element of all local scale-up leadership programmes. “This will enable businesses to seek out and secure the most appropriate funding at each stage of their company’s growth,” Graham says.

4. Developing the leadership team

“Scale-ups continue to identify the importance of building leadership capacity,” Graham explains. “The value of strong peer-to-peer networks and the ability to find high-quality mentors and non-executive directors is well recognised.”

The ScaleUp Institute has found that businesses that can establish links with providers of expert support – such as entrepreneurs who have their own experience of scaling – can help them flourish. “Peer networks are consistently cited by scale-ups as a key source of support, with five in 10 stating that easier access to a network of peers is vital or very important for their future growth. Furthermore, in terms of public-sector support, scale-ups cite support from Innovate UK as most vital.”

The ScaleUp Institute is currently working with Innovate UK to launch a national peer-to-peer learning initiative. In the meantime, the organisation has endorsed a series of leadership programmes across the country – for more details, see here.

5. Getting the right support

The ScaleUp Institute has developed a number of recommendations designed to ensure that scale-ups receive the external support that will enable them to realise their true potential.

Among these proposals, the institute says that the government’s forthcoming National Data Strategy should enable local and national agencies to share data with HMRC in order to facilitate better access to state-backed support programmes.

‘Scaleup Visas’ should be made available in areas with a high concentration of scale-up businesses in order to make it easier for these enterprises to recruit the skilled workers they need to drive growth.

And local scale-up hubs should be developed and promoted by local ‘scaleup champions’ in order to increase scale-up density in all parts of the UK.

Seeking further support

The ScaleUp Institute has a host of resources for businesses looking for support and leadership programmes.

Meanwhile, NatWest’s own Accelerator programme can also provide excellent peer-to-peer guidance and networking opportunities at centres around the UK. The programme is currently open for applications and focuses on high-growth businesses (with a minimum £100,000 annual turnover), as well as firms operating in sectors such as climate, fintech and purpose-led enterprises.

To register your interest in the NatWest Accelerator and apply for a place, click here. Or for more information, please contact Josh Winfield, regional ecosystem manager for NatWest Enterprise, at joshua.winfield@natwest.com.

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