GET Consultants looks at the prospects for High Growth Small Businesses (HGSBs) and what might happen at Brexit point, barriers for growth for HGSBs, and what these businesses can do to offset risks to their future survival.
There’s a commonly held maxim that only one in five small businesses set up in Britain will survive five years, but the truth is a lot more complicated than that. It really does depend on how big you are already, what sector you’re operating in, where in the UK you are doing business and the plans you have to survive, transform and grow.
High Growth Small Businesses (HGSBs)
Octopus has produced three HGSB reports over the last few years, highlighting the importance of these businesses to the UK economy. HGSBs have more than 20% annual average growth over a three-year period and an annual turnover of between £1 million and £20 million. Whilst they make up less than 4% of the UK’s total GVA (Gross Value Added), HGSBs made a far more significant contribution, accounting for 22% of Britain’s overall growth between 2005 and 2006.
HGSB contribution to the UK economy:
- They see value in training, with 84% funding training for at least one member of staff over the last 12 months
- Only 1% of UK businesses, yet account for 3% of UK total jobs in 2016 (22,074 out of 5.6 million companies)
- HGSBs created an average of just over 3,030 new jobs every week, around 20% of the jobs created in the UK
- 74% of HGSBs surveyed feel confident in their economic prospects over the next year versus last year
What will Brexit mean for HGSBs?
There is a constant battle for a share of consumer revenue and profit from HGSB companies that deliver products and services, with the evolution of new technology changing the business landscape ever faster. Whilst business finance, trade deals, skilled labour and resources are the fighting ground of European and global politicians, they are also the lifeblood of most businesses which require access to all of these to grow and transform for future success.
The biggest challenge post Brexit is likely to be a skills shortage. Almost two thirds of HGSBs surveyed by Octopus consider finding talent and skills shortages to be an important or very important constraint on their business growth.
41% of HGSBs surveyed also consider skills shortages to be the policy area where UK Government action could make the biggest difference for their businesses. 90% of HGSBs say that they face some form of skills shortages. This is even more remarkable when placed in the context of the UK average of just 17% of companies that say they have a skills gaps or skill shortages vacancies. This means that, whatever deal the government delivers for the UK outside of the EU, sufficient skills and resources for continued growth will be paramount.
Barriers to growth – the need for change in business thinking
The 2016 Coast to Capital report, on businesses in the triangle from Chichester to Newhaven to Croydon, identified specific barriers that are concerning for the scale-up and growth of UK medium sized businesses in key sectors.
The reasons for business growth limitations fall into broad categories of three ‘C’s
- Customers – both online and offline sales and marketing to create new local UK and overseas buyers
- Capacity – Room to grow including factories, office space, warehousing and overseas premises
- Cash – easy access to the type of finance at affordable interest rates to ensure growth when it is required
Based on the 2018 Octopus report one in three of HGSB companies there are also growth barriers outside of Brexit, customers, capacity and finance, issues that are specifically related to infrastructure of a range of types.
- One in three HGSBs considers digital infrastructure to be a primary constraint on their business growth
- 53% of HGSBs in London say poor transport links with other regions is a hindrance to their business and something that the Government could do more to alleviate.
- 69% of HGSBs consider the UK Government’s Digital Communications infrastructure programme (as described in the Industrial Strategy Green Paper) to be “important” or “very important” to their business.
Every medium sized business needs a strategy for growth. Simply subsisting is no longer an option – just look at what is happening to the UK high street as consumers move to even more online purchasing.
Every business owner owes their staff the time and energy and focus to work out how they can best grow, thrive and survive. And that means sometimes getting out of the day-to-day office environment and regular comfort zone and confronting some of the toughest challenges that face British business – future skills, effective use of technology, new customers and finance.
GET Consultants is holding a series of Scale Up Labs to help High Growth Small Businesses to transform and grow and avoid some of the pitfalls and barriers to long term and efficient growth. Click for details