High growth startups are a big deal for the UK economy – new research

There’s a new report out on the impact of high growth small businesses on the UK economy. Last week I wrote about some new research showing that nearly all job creation in the US comes from young companies and concluded by saying it would be great to see some similar research in the UK. And now we have some already. With this publication and the upcoming Scale Up report I hope it will be very clear that high growth startups are the engine of growth for employment and the UK economy more generally.

That’s important for two reasons. Firstly we should all feel good about the work we are doing within the startup ecosystem – the work we do is the difference between growth and stagnation, and secondly it will encourage government to continue and extend their support for our work, particularly with policies to improve access to finance and the depth of the talent pool. The Startup Manifesto is a good read if you want to bone up on what government should do for startups here in the UK.

The research was conducted by Centre for Economics and Business Research and commissioned by Octopus Investments (thank you) and took the form of a survey of 400 high growth small businesses (defined as companies with £1-20m turnover and 20% growth per year over three years). There are 30,000 businesses like this in total in the UK. The key findings are that high growth small businesses:

  • generated 256,000 new jobs 2012-13, which was 68% of the total. That’s huge, particularly given that theses companies only accounted for 3.4% of the economy, and
  • accounted for 36% of the increase in GVA in 2013. GVA, or Gross Value Add, is a measure of economic output similar to GDP.

As with the American study, note that the growth comes from small high growth companies, not all small companies.

What would be interesting to see now is a breakdown of which companies within the 30,000 high growth small businesses in the UK are responsible for most of the employment growth. Just as we have learned that if growth is our objective we should focus our support on the portion of small businesses which are growing fast, it may be that we can make a further refinement to a particular industry or sector.