Small Business: BEIS Committee Closes Inquiry into Scale-Up Companies

If an inquiry on this subject is held in the future, the Committee may refer to evidence already gathered as part of this inquiry.

For more information, please contact Emma Cameron in our Corporate Law team on 01923 919 305.

Monday 3 April 2017

Government's Inquiry Identifies Barriers to Small Business Growth

The government has launched an inquiry investigating the question of how to help UK start-ups and potential high-growth small businesses to become 'scale-ups'.

This inquiry will look at how potential high-growth small businesses throughout the UK can be better identified and encouraged to grow.

What Is a Scale-Up?

The term 'scale-up' refers to a small group of rapidly expanding companies which account for an above-average proportion of the UK's economic growth. They are usually defined as being enterprises with average annualised growth in employees (or in turnover) greater than 20% a year over a three-year period, and with 10 or more employees at the beginning of the observation period.

The UK's Position

The UK lags behind other countries in the extent to which our companies scale-up, with research suggesting that many of our companies have stagnant growth despite their best aspirations. The Industrial Strategy Green Paper highlights OECD research which found that while the UK ranks third for start-ups, it ranks only 13th for the number of businesses that scale up successfully.

Research has shown that fewer than 3% of start-ups both survive for a decade and enjoy a single year of high growth. By one estimate, if expanding small businesses were boosted by just 1%, they could generate 238,000 new jobs within 3 years and an extra £38bn for the economy.

The 2014 Coutu report identified several barriers to companies scaling-up, including accessing skilled talent, developing leadership capable of managing rapid growth and financing scale-ups. The Committee's inquiry explores the impact of the Coutu report, the effectiveness of the government's proposed measures and solutions, and how potential scale-ups can be better identified and encouraged to grow to create greater economic activity and employment.

Next Steps

The government's Business, Energy and Industrial Strategy Committee is seeking evidence on the following points:

• How effective have recent government measures been in supporting scale-ups in the UK? What has been the impact of the Coutu review in overcoming barriers to scale-ups, particularly relating to accessing skilled talent, developing leadership and financing scale-ups?
  
  
• What more needs to be done to improve management and business skills necessary to support scale-ups? What are the barriers here?
  
  
• How accessible and joined-up is business support, for example between LEPs, Growth Hubs, the banks and others?
  
  
• What data should be collected and made available to better identify potential scale-ups, including businesses led by women?
  
  
• What steps should the government take, if any, to improve and incentivise the provision of patient capital? What distribution mechanisms are in place to ensure that businesses throughout the UK can access this capital?
  
  
• Are there other regulatory or economic interventions that the government should make to achieve the objective of increasing the number of successful and high-growth businesses in the private sector?

The Committee is inviting written submissions on these issues by 3 May 2017.

Comment

It is reassuring to see that the government is taking note of the importance of start-ups and scale-ups to the UK economy and is looking to find ways to support these businesses.

For more information, please contact Emma Cameron in our Corporate law team on 01923 919 305.