UK urged to back business ‘scale-ups’ rather than start-ups

Ms Coutu, a respected technology investor, argues that such businesses must be nurtured with the same care as the country’s Olympic athletes or else the UK risks falling behind in the global race for growth and productivity.

“If we are going to celebrate entrepreneurship – and I think we should, because the effect of role models is huge – can we hold up people who are currently at £100m in turnover rather than somebody who’s just pitched on Dragon’s Den?” she said.

Ms Coutu’s paper, commissioned by the Department of Business, Innovation and Skills through a partnership with academics and private sector businesses, looks at companies with annual revenue or employee growth of more than 20 per cent for at least three years, and with more than 10 employees at the start of that period.

It makes the case for urgent reforms, including fast-track visas to let scale-ups hire specialist workers within two weeks; making real-time company data publicly available so scale-ups can be identified; and reallocating 50 per cent of the public money spent on entrepreneurship towards scale-ups.

Such policies could add up to £225bn to the UK economy by 2034 and contribute a net 150,000 more jobs, according to analysis by Deloitte, the professional services firm.

Ms Coutu rejects the idea that British entrepreneurs are doomed by a lack of ambition, ability or venture capital financing.

Growing innovative companies is “not black magic”, she says but instead involves “treating” common growing pains for scale-ups using tried and tested methods from other countries.

“We’re not picking winners – we’re just identifying people who seem to be winning. It’s the customers who have been buying 20 per cent – or in some cases 50 or 100 per cent – more per year choosing to continue to do that.”

There are just under 9,000 scale-ups in the UK at the moment, three-quarters of which are outside London. Drawing on data from 20 countries, Ms Coutu argues that the government’s priorities for scale-ups should be addressing skills shortages, providing rigorous training for company leaders and using public-private sector co-operation to boost exports.

“You could think of a scale-up leader as not entirely dissimilar to an Olympic athlete – they are as rare or even more rare” - Sherry Coutu

Since small companies fail or stay still as often as they manage to grow, it makes sense to focus on the more established scale-ups as the engines of prosperity, Ms Coutu said.

The problem in the UK, she argues, is that growing companies do not get the support they need to reach a significant size, often being tempted to sell out early to US rivals.

“The analogy is sprinting for a couple years really fast but not being in the marathon,” she said.

Only 0.4 per cent of businesses reach 250 employees or more in the UK, compared with 0.7 per cent in the US.

The UK also has a greater share of businesses that are neither growing nor shrinking – and so locking up resources that could be used more productively in expanding sectors of the economy. Between 2004 and 2007, these static firms stood at 30 per cent in the UK but only 9 per cent in the US, according to the report.

Under 4 per cent of UK start-ups have 10 or more employees 10 years later – but the fastest growing 6 per cent of businesses between 2002 and 2008 created half the new UK jobs in that period, according to data from Nesta, an innovation charity.

“You could think of a scale-up leader as not entirely dissimilar to an Olympic athlete – they are as rare or even more rare,” Ms Coutu said. Consequently, Britain should apply the same methods – “put super fabulous coaches in place and hire them from everywhere”.

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