High Growth Small Businesses: the engine of the UK economy
This article was published in the New Statesman.
When Octopus published the first High Growth Small Business Report in 2014, our goal was to draw attention to a powerful but undervalued engine of the UK economy: Britain’s high growth small businesses (HGSBs). Often overlooked, these businesses make up less than 1% of UK companies, but they create one in every three new jobs.
Working with the Centre for Economics and Business Research (Cebr), our 2014 and 2015 reports showed that HGSBs have the power to dramatically improve the communities that embrace them. In particular, the 2015 report showed that HGSBs have a disproportionately positive impact on weaker-performing economies. In other words, higher numbers of HGSBs lead to more economically prosperous communities. With around three out of every five HGSBs located outside of London and the South East, HGSBs have the potential to rebalance our economy, breathe new life into the UK’s regional towns and cities and help address the North-South divide.
But to realise the full potential of HGSBs, we need more of them. We need to encourage more people to set up more HGSBs right across the country, creating jobs and opportunities for our regional towns and cities.
So what really makes a great place to locate and grow a HGSB? To find out, we asked them. Just as transport, schools and outdoor spaces might be important when deciding where to live, HGSBs also share common needs: finance, talent and connectivity. We then used this information to build a league table highlighting the most HGSB friendly locations in the UK and the common needs are the three pillars that form our league table and underpin a town or city’s performance as a business hub.
It may be no surprise that London tops the table. London is not just a domestic hub but a global centre of commerce, providing excellent transport links, a wealth of skills as a talent magnet and demonstrable economic strength. But London is not the only UK capital to be recognised for its HGSB-friendly characteristics. Both Edinburgh and Cardiff make it into the top five in our league table – flying the flags for their respective nations and scoring well in the connectivity and transport infrastructure pillar. Northern cities are well represented in the top half of the Connectivity and Infrastructure pillar, with Liverpool, Manchester, Leeds and Sheffield all in the top ten. Factored into the economic performance pillar is job creation forecasts. Northern cities perform well here too, with Liverpool, Manchester and Sheffield all in the top ten and Leeds just outside.
The great news is that the league table shows that HGSB friendly locations – or ‘urban hubs’ – are spread right across the country. From Belfast to Bristol, untapped opportunity is everywhere.
Of course, choosing where to start a business isn’t a purely clinical decision – there are many other factors, like quality of life and proximity to family, to think about. But for entrepreneurs who have the flexibility to choose the location of their businesses, our league table could help to inform their decisions. Equally, those looking to champion their local town or city as a great place for HGSBs will be able to understand where they are doing brilliantly (and celebrate this) and take action in those areas where they can improve.
Starting a HGSB takes determination, ambition and talent – and it’s essential we give the people who start these businesses every chance to thrive. We want every community to be a great place to start a small business. Our 2015 report made the case for doing more to support HGSBs, and it called on the Government to do more to encourage 25% more HGSBs in every region by 2020. With the right framework and support, HGSBs can bring economic prosperity and optimism to every part of the UK.
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