• UK has over 27,280 businesses classed as scaleups
  • Watford, Winchester and Camden feature in top ten scaleup locations
  • Newcastle, Ipswich and Lewisham have lowest densities of scaling businesses
  • UK banks and government must do more to support scaling enterprises says Cynergy Bank

Monday 18 January 2021 - Watford, Winchester, and Camden feature in the top ten locations for scaling businesses in the UK, while Newcastle, Ipswich and Lewisham have the lowest densities of scaleups relative to their populations.

That’s according to a new analysis published today by Cynergy Bank. The findings come as the bank’s chief executive, Nick Fahy, warns that the UK’s emphasis on start-ups and micro businesses means that scaleups are not getting the support they need. A scaleup is defined as a business that has enjoyed three consecutive years of at least 20% growth in either turnover or employee numbers, or both[1].

“The UK comes third in the OECD’s startup index but ranks just thirteenth when it comes to scaleups,” said Nick Fahy. “And yet, scaleups make a disproportionate contribution to the UK economy.”

According to BEIS[2], there were 5.85m SMEs in the UK in in 2019, generating £2.17 trillion in turnover. That’s an average of £371,000 each. By contrast, the Scaleup Institute calculates that scaleups turnover £29.5 million on average[3].

Hot spots and cold spots

Research[4] suggests that when businesses in the same sector cluster together, the proportion of scaleups increases. This is likely to be a result of access to specialist skills and the benefits of knowledge sharing. However, the analysis also shows that over concentration in any one sector has a diminishing effect. Local leaders should exploit their area’s sector strengths, but make sure they maintain a diversity of sectors.

Higher skills are associated with an increase in scaleup growth, even after controlling for other factors. High population density on its own does not lead to higher levels of scaleup growth.

Companies outside of London and the South East find it harder to access equity finance, suggesting that banking and finance will be critical to the levelling up agenda as the UK seeks to ‘grow back better’.

Other factors which play a role in determining local scaleup success include active university engagement (such as research collaboration and placements), and local ambition in the form of support and goodwill for a wide group of local stakeholders.

The number one sector for scaleups is property and construction. Other high performing sectors include civil engineering, waste management, food & drink, recruitment, machinery, and building materials. Technology companies represent about 6 per cent of all UK scaleups[5].

Scaleups key to recovery 

Ambitious scaleup enterprises will be vital for growth and job creation as the UK emerges from the pandemic. These businesses are small in number, but they are the real drivers of economic prosperity. “The UK does a good job of supporting entrepreneurs and fostering startups,” said Nick Fahy, “but what we need now is a concerted plan to support businesses as they enter the high growth phase.

“Scaleups fall between the cracks of the traditional banking models,” said Nick Fahy. “They’re too complex for the faceless retail division, too small for the mid-corporate relationship model, and they cannot have a meaningful relationship with digital banks which are app-based and serve the micro and smaller business community.”

Last month Cynergy Bank announced a partnership with Google Cloud and Wipro that will allow it to offer the face-to-face relationships so valued by scaleups coupled with market leading digital technology that will free up time by automating more standard banking services.

“We firmly believe there is a human + digital middle ground for SME banking,” said Nick Fahy; “one that isn’t the faceless retail banks; nor the purely app-based solutions. Technology should not replace human relationships. Rather, investment in technology should be used to deliver exceptional service via human beings.”

 

Interest rates
Scaleup hotspots - United Kingdom Population Scaleups, based on turnover Population per Scaleup Rank

United Kingdom

66,796,800 27,285

2,448

 

City of London

7,700 705 10 1

Westminster

255,324 1,065 239 2
Camden 262,200 460

570

3
Hackney 279,665 275 1,016 4

Hammersmith and Fulham

185,426 180 1,030 5

Maidstone

113,137 80 1,414 6
Winchester 124,295 85 1,462 7

Guildford

147,889 95 1,556 8

Watford

90,301 55 1,641 9

Windsor and Maidenhead

150,906 90 1,676 10

Oxford

154,600 90 1,717 11

Cambridge

129,000 75 1,720 12

Harrogate

160,533 90 1,783 13

Bristol

467,099 255 1,831 14

Manchester

553,230 300 1,844 15

Edinburgh

524,930 270 1,944 16

Belfast

333,871 170 1,963 17

Source: Cynergy Bank analysis of ONS Business Demography data, 2018 and ONS 2019 population statistics

 

Interest rates
Scaleup cold spots - United Kingdom Population Scaleups, based on turnover Population per Scaleup Rank

United Kingdom

66,796,800

27,285

2,448

 
Bromley

334,536

90

3,717

141

Croydon

385,346

100

3,853

142

Middlesbrough

138,400

35

3,954

143
Enfield

338,201

85

3,978

144

Swansea

338,201

60

4,103

145
Bexley

247,258

60

4,120

146
Rugby

107,194

25

4,287

147
Havering

257,810

60

4,296

148
Redbridge

303,858

70

4,340

149
Luton

218,045

50

4,360

150

Coventry

371,521

85

4,370

151
Greenwich

286,186

60

4,796

152
Haringey

270,624

55

4,920

153

Waltham Forest

276,700

55

5,030

154

Newcastle upon Tyne

809,000

125

6,472

155

Lewisham

303,536

30

10,117

156
Ipswich

632,000

50

12,640

157

Source: Cynergy Bank analysis of ONS Business Demography data, 2018 and ONS 2019 population statistics

 

[1] Based on the OECD definition of ‘high growth’ business; applies only to businesses with ten employees or more at the beginning of the period

[2] Business Population Estimates 2019

[3] The Scaleup Institute defines a scaleup as a business that has enjoyed three consecutive years of 20% plus employee growth or turnover growth. By that definition there were 33,860 scaleups in the UK in 2018, the latest year for which data is available. Looking purely at turnover, the number reduces to 27,280.

[4] Scaleup Institute, Scaleup Insights. August 2020

[5] Scaleup Index, 2017

 

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