Scottish firms creating jobs but struggling to scale

Scotland leads the UK with fast-growing firms creating new jobs, but time taken to reach £1 million turnover is slower than elsewhere

Scotland’s small to medium sized enterprises (SMEs) are creating jobs faster than almost every other part of the UK – but many are struggling to scale up quickly, according to new research.
The findings have been revealed by the Enterprise Research Centre in its annual UK Local Growth Dashboard. ERC, a consortium of leading university business schools, is the leading UK research authority on the drivers behind private sector firm growth.
The Dashboard shows that 13.2% of Scots firms grew staff numbers by 20% or more per year over three years (2012-15), compared to a UK-wide average of 12.3%. In total, Scottish companies created just over 46,000 net new private sector jobs in 2014-15 alone.
But when it comes to reaching the milestone of £1m turnover, Scottish firms fall behind. Of start-ups in 2012 with first-year revenues of less than £500,000, just 1% of Scottish companies hit their first million by 2015, compared to 1.8% for the UK as a whole – and as high as 4.4% of firms in Belfast.
For those firms taking the next step, growing from £1-£2m to £3m-plus turnover in three years, it’s a more complex story – with North East Scotland, centred on Aberdeen, having the highest rate in the whole of the UK in the 2012-15 period at 11.5% of firms in that bracket.
Meanwhile, when it comes to start-ups, Scotland’s rate of 33.3 new firms per 10,000 people in 2015 was ahead of Wales (30.1) and Northern Ireland (20.6), but below England’s rate of 48.6 (UK average = 45.7).
The Dashboard provides the most comprehensive picture of growth among small to medium sized enterprises (SMEs), which make up 99% of all UK firms. Its key findings were unveiled at ERC’s third annual State of Small Business Britainconference held at The Shard in London. This year’s conference focused on the importance of boosting inclusive growth and productivity nationwide in the wake of the Brexit vote.
Professor Mark Hart, deputy director of ERC, said: “What we see in the Growth Dashboard is that firm growth and job creation is spread right across the UK and is not limited to a few cities or regions.
“Nor is it restricted to certain types of ‘fashionable’ high-growth firms – there’s a complex growth pipeline of companies in every corner of the country that have different support needs based on their individual ambitions.
“This is incredibly important to understand if we’re going to create an industrial strategy that capitalises on the strengths we already have without over-focusing on star firms, or regions labelled as ‘powerhouses’.
“While the Brexit vote has created uncertainty for SMEs, our research shows that the most innovative firms find ways to grow despite shocks to the economy – chiefly by focusing on their productivity and looking to export markets to provide new opportunities.
“That’s not to say everything will be plain sailing, though. In particular, we need to ensure a business-friendly approach to skilled migration because we know that many firms struggle to plug skills gaps in specialised sectors like engineering.
“The Growth Dashboard shows us that we have broad-based growth across the UK. The challenge now is for the government to make the terms of our disengagement and future relationship with the EU clear so that entrepreneurs have a stable framework for further expansion.”
% of firms with 20%+ annual average growth over 2012-15 (local units, UK-owned, 1-249 employees)
TOP 5 LOCAL ECONOMIC AREAS
BOTTOM 5 LOCAL ECONOMIC AREAS
Highlands and Islands =
13.6%
Belfast
9.6%
West and South Northern Ireland =
13.6%
Cumbria
10.4%
South West Scotland
13.5%
Cheshire and Warrington
10.6%
Eastern Scotland =
12.9%
Outer Belfast
11.3%
London =
12.9%
Humber
11.3%
fast-growth
Number of UK-owned firm births per 10,000 population 2015
TOP 5 LOCAL ECONOMIC AREAS
BOTTOM 5 LOCAL ECONOMIC AREAS
London
87.3
Outer Belfast
16.9
Solent
60.9
East of Northern Ireland
18.0
Thames Valley Berkshire
60.4
North of Northern Ireland
18.9
Hertfordshire
59.8
Dumfries and Galloway
21.4
Buckinghamshire Thames Valley
58.9
Isle of Anglesey
23.7
number-of-uk-owned
Three-year survival rate of UK-owned firms born in 2012 (and surviving to 2015)
TOP 5 LOCAL ECONOMIC AREAS
BOTTOM 5 LOCAL ECONOMIC AREAS
North East Scotland
64.1
Greater Lincolnshire
47.9
Cumbria
61.7
Liverpool City Region
51.9
Oxfordshire
59.1
Black Country
52.1
Enterprise M3 =
58.4
Greater Manchester =
52.2
Gloucestershire =
58.4
West Wales
52.2
3-year-survival
UK-owned firms born in 2012 and surviving to 2015 that grow to £1m+ turnover in 2015 and had a turnover less than £500k in 2012
TOP 5 LOCAL ECONOMIC AREAS
BOTTOM 5 LOCAL ECONOMIC AREAS
Belfast
4.4%
Gloucestershire
0.8%
East of Northern Ireland
4.0%
South West Scotland =
1.0%
West and South of Northern Ireland
3.8%
East Scotland =
1.0%
Greater Cambridge & Greater Peterborough
2.5%
Worcestershire =
1.1%
London =
2.3%
Cumbria =
1.1%
Sheffield City Region =
2.3%
West Wales =
1.1%
uk-owned-firms
Survivor firms (born <2012) with £1-2m turnover in 2012 scaling to £3m+ in 2015
TOP 5 LOCAL ECONOMIC AREAS
BOTTOM 5 LOCAL ECONOMIC AREAS
North East Scotland
11.5%
East and North of Northern Ireland
3.0%
Thames Valley Berkshire
9.1%
Cumbria
3.3%
London
8.2%
The Marches
3.5%
Derby, Derbyshire, Nottingham and Nottinghamshire
7.3%
Highlands and Islands
4.1%
Lancashire
7.0%
Heart of the South West
4.4%
survivor-frms
Net jobs creation rate in local units 2014-15 and absolute numbers of jobs created
TOP 5 LOCAL ECONOMIC AREAS
LEP
Net job creation rate
Absolute net job numbers
Coventry and Warwickshire
7.5%
23,432
Cheshire and Warrington
5.2%
18,981
West and South of Northern Ireland
4.1%
3,280
Cornwall and Isles of Scilly =
4.0%
6,045
London =
4.0%
165,540
 
BOTTOM 5 LOCAL ECONOMIC AREAS
LEP
Net job creation rate
Absolute net job numbers
Outer Belfast
-1.2%
-834
East Northern Ireland
-0.8%
-629
Tees Valley
-0.1%
-157
North Northern Ireland
0.2%
105
York, North Yorkshire and East Riding
0.5%
1,884
 
net-job-creation-ratio
% of all firms with 10+ employees recording 20%+ growth in employment every year over three years, 2012-15)
TOP 5 LOCAL ECONOMIC AREAS
BOTTOM 5 LOCAL ECONOMIC AREAS
London
9.5%
Black Country
5.2%
Liverpool City Region
8.5%
Humber
6.0%
Cheshire & Warrington =
8.4%
Greater Lincolnshire
6.1%
West of England =
8.4%
The Marches =
6.3%
Coast to Capital
8.3%
Oxfordshire =
6.3%
high-growth-firms
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Hannah Hamilton, who is a former Fife College student, is a reporter and assistant content editor for Scotland B2B, specialising in B2B news and features. She can be contacted via editorial@scotlandb2b-eastcoast.co.uk