Britain’s scaleup hot spots revealed

Watford, Winchester, and Camden feature in the top ten locations for scaling businesses in the UK, while Newcastle, Ipswich and Lewisham have the lowest densities of scaleups relative to their populations.

That’s according to a new analysis published today by Cynergy Bank. The findings come as the bank’s chief executive, Nick Fahy, warns that the UK’s emphasis on start-ups and micro businesses means that scaleups are not getting the support they need. A scaleup is defined as a business that has enjoyed three consecutive years of at least 20% growth in either turnover or employee numbers, or both.

“The UK comes third in the OECD’s startup index but ranks just thirteenth when it comes to scaleups,” said Nick Fahy. “And yet, scaleups make a disproportionate contribution to the UK economy.”

According to BEIS, there were 5.85m SMEs in the UK in in 2019, generating £2.17 trillion in turnover. That’s an average of £371,000 each. By contrast, the Scaleup Institute calculates that scaleups turnover £29.5 million on average.

HOT SPOTS AND COLD SPOTS

High population density on its own does not lead to higher levels of scaleup growth but research suggests that when businesses in the same sector cluster together, the proportion of scaleups increases. This is likely to be a result of access to specialist skills and the benefits of knowledge sharing. However, the analysis also shows that over concentration in any one sector has a diminishing effect. Local leaders should exploit their area’s sector strengths, but make sure they maintain a diversity of sectors.

Companies outside of London and the South East find it harder to access equity finance, suggesting that banking and finance will be critical to the levelling up agenda as the UK seeks to ‘grow back better’.

Other factors that play a role in determining local scaleup success include higher skill levels, active university engagement (such as research collaboration and placements), and local ambition in the form of support and goodwill for a wide group of local stakeholders.

The number one sector for scaleups is property and construction. Other high performing sectors include civil engineering, waste management, food & drink, recruitment, machinery, and building materials. Technology companies represent about 6 per cent of all UK scaleups.

SCALEUPS KEY TO RECOVERY

Ambitious scaleup enterprises will be vital for growth and job creation as the UK emerges from the pandemic. These businesses are small in number, but they are the real drivers of economic prosperity. “The UK does a good job of supporting entrepreneurs and fostering startups,” said Nick Fahy, “but what we need now is a concerted plan to support businesses as they enter the high growth phase.

“Scaleups fall between the cracks of the traditional banking models,” said Nick Fahy. “They’re too complex for the faceless retail division, too small for the mid-corporate relationship model, and they cannot have a meaningful relationship with digital banks which are app-based and serve the micro and smaller business community.”

Last month Cynergy Bank announced a partnership with Google Cloud and Wipro that will allow it to offer the face-to-face relationships so valued by scaleups coupled with market leading digital technology that will free up time by automating more standard banking services.

“We firmly believe there is a human + digital middle ground for SME banking,” said Nick Fahy; “one that isn’t the faceless retail banks; nor the purely app-based solutions. Technology should not replace human relationships. Rather, investment in technology should be used to deliver exceptional service via human beings.”

For more information please visit the visit the Cynergy Bank website