Innovation Drives UK Super Companies

Small Business News

Just six% of UK businesses hold the key to job creation and wider prosperity, according to two reports released today by NESTA (National Endowment for Science, Technology and the Arts).

Together, the reports represent the most ambitious mapping exercise of business growth in the UK, mapping the UK’s high-growth firms1 over almost a decade. The analysis reveals that just 11,500, or 6% of UK businesses with 10 or more employees are classed as ‘high-growth’ companies. This small number of businesses has generated around half, or 54%, of new jobs (1.3 million out of 2.4 million new jobs created by all existing businesses with 10 or more employees in the last three years).

The reports also reveal that these ‘super companies’ thrive across the country. The North West, Scotland and the East of England each host a high share of high growth firms, closely followed by the south West, Yorkshire and Humberside and the West Midlands. Almost a third of high-growth firms are located in Greater London and the South East.

The UK also shows a healthy balance of high-growth firms across sectors, not only in high-tech industries. All major UK sectors contained between four and ten percent of high-growth firms. However, the balance between different sectors does appear to reflect trends in the economy in the period: the sectors with the highest proportion of high-growth firms were financial services (over nine%) and real estate and business services (around 8%), while the lowest share was found in manufacturing (3 to 4%).

Commenting on the research, Jonathan Kestenbaum, NESTA’s Chief Executive says:

"These high-growth firms are packing a real punch as powerful generators of employment and revenue for the economy. This has important ramifications for policymakers who must shift their focus towards understanding how to maximise these critical businesses."

The reports also found that:

• The UK had one of the largest shares of high-growth firms among OECD countries in 2002-2005. The UK is ahead of the US in terms of proportion of growth firms in a variety of sectors, in particular financial services, but not in manufacturing.
• Innovation drives growth: A common trait amongst high-growth firms is innovation. High-growth firms are disproportionately innovative, and it is this innovation which appears to cause their growth.
• It’s not just about start-ups: Although young firms are more likely to be high-growth, the majority of high-growth firms (70%) are at least five years old. Still, young high-growth firms are responsible for a fifth of the jobs created by high-growth firms.

The mapping exercise has paved the way for NESTA’s next tranche of work which will analyse the levers of innovation and growth, focussing on what tools are at the government’s disposal to encourage innovative growth.

For further information visit Nesta to read their reports Measuring Business Growth (PDF) and The Vital 6% (PDF)