GROWTH COMPANIES BAROMETER: 2013

April 2013

Higher levels of growth among UK SMEs recorded by Business Growth Fund’s latest Growth Companies Barometer

Despite challenging macro-economic conditions, there are currently 4,353 mid-sized SMEs demonstrating high levels of growth across the UK, according to the latest Experian research commissioned by BGF. This is an uplift of almost 10% compared to this point last year.

These 4,353 UK companies have each demonstrated aggregate growth of at least 33 per cent in the last three years. These companies make up 17% of the overall population of 24,955 UK companies with a turnover of £2.5m - £100m.

Of the high growth companies identified, those with turnovers of between £2.5m - £10m continue to perform most strongly. 51% of the high growth segment, or 2,202 companies, had turnovers of less than £10m.

Since this Barometer was published last year, the picture is one of overall growth increase, albeit at a gentle level. It continues to show that fast growing companies can be found in a diverse range of industries and across all regions of the UK.

The BGF Growth Companies Barometer shows a higher incidence of high growth companies in almost all regions of the UK, notably Yorkshire and the West Midlands.

Similarly, almost all industry sectors showed some increase in the proportion of their high growth small and medium sized companies. Business services companies continue to be the best represented among the high growth segment, with 1,095 companies making up 25% of the group. 20% of the high growth segment, equating to 859 companies, is represented by Manufacturing; and Retail occupies 11%, with 478 high growth companies identified.

Stephen Welton, CEO of BGF, commented on the data:

“This data is encouraging. It shows that despite all the wider challenges posed by the macro-economic climate there has been more, and ever increasing, SME growth in the UK. Good businesses are prospering across almost all regions of the UK and diverse industry sectors.

“However, for real economic recovery, we need these growth figures to be higher and more broadly based. We need to see heightened levels of ambition and investment among business owners.

“One of the first questions that I ask an entrepreneur is whether they have really accomplished all that that they hoped for when they started their business? What could a robust, properly financed business plan achieve over the next three, five or ten years? Could the business double its workforce or treble turnover? Could it expand out of its home region through organic or acquisitive growth and develop a national or international footprint? Could it develop its supply chain, launch new products and increase exports to new overseas markets?

“Growth comes in many different forms and so does the means to fund it. For many businesses equity finance is an option that should be seriously considered. Working capital should be funded by debt, longer-term investment by capital or equity. We need more well capitalised businesses actively planning for long-term success.

“Not enough growth capital is currently being channeled into UK SMEs. Considering the possible universe of good businesses seeking finance to support growth, this is a missed opportunity.

“This is something that we at BGF are seeking to tackle with up to £2.5bn of growth capital available for small and medium sized businesses with ambition to invest.

“But we also need fundamental cultural change. Aspiration and ambition is critical to growth. We should make no apology for it, and we need to create a culture where it is applauded and supported.

“Finding effective ways to work with the major banks, as well as alternative lenders, is going to be a crucial factor in driving economic recovery.”

Key findings of the BGF Growth Companies Barometer include:

Since 2000, the population of UK companies with a turnover of between £2.5m and £100m has consistently been around 23,000-25,000.

  • This population is skewed to London and the South East with 8,518 and 4,177 companies respectively residing in this region. Wales and the North East of England show the lowest number of companies with this level of turnover.
  • Since 2000, there has been a gradual shift in the sectors that these companies operate in, moving away from Manufacturing towards Business Services. The highest proportion of companies in the BGF Barometer come from the Business Services sector (5,755), followed by Manufacturing (4,832) and Retail (2,812).
  • Of this population, 4,353 UK companies have demonstrated “high growth”, which equates to an aggregate growth of at least 33 per cent in the last three years. This is 17.4% of the overall sample of SMEs.
    • In line with economic conditions, this number has decreased from 6,559 three years ago.
    • However this number has increased from 3,945 last year.
  • Of the high growth companies identified, those with turnovers of between £2.5m - £10m performed most strongly. 51% of the high growth segment (2,202companies) had turnovers of less than £10m.

 

Table 1

Turnover Total Population High Growth Firms Incidence of HG Firms
£2.5m - £5m 6,033 1,082 17.9%
£5m - £10m 6,382 1,120 17.5%
£10m - £20m 5,497 937 17.0%
£20m - £50m 4,864 842 17.3%
£50m - £100m 2,179 372 17.1%

There is a spread of high growth companies across the UK. The highest level is in London where 1,619 companies are based, 37% of the high growth segment. Outside London and the South East, it is East Anglia that accommodates the highest proportion of high growth companies.

Table 2:

Region Total Population High Growth Firms Incidence of HG Firms
Scotland 1,361 224 16.5%
North East 505 80 15.8%
North West 1,894 320 16.9%
Yorkshire & Humberside 1,508 269 17.8%
East Midlands 1,249 194 15.5%
West Midlands 1,614 249 15.4%
Wales 509 85 16.7%
East Anglia 2,158 358 16.6%
South East 4,177 711 17.0%
London 8,518 1,619 19.0%
South West 1,462 244 16.7%

Business services companies are best represented among the high growth segment, with 1,095 companies making up 25% of the group. 20% of the high growth segment (859companies) is represented by Manufacturing; and Retail occupies 11% with 478 high growth companies identified.

Table 3:

Turnover Total Population High Growth Firms Incidence of HG Firms
Agriculture 285 65 22.8%
Manufacturing 4,832 859 17.8%
Construction 1,698 176 10.4%
Wholesale 2,216 426 19.2%
Retail 2,812 478 17.0%
Transport 1,814 320 17.6%
Business Services 5,755 1,095 19.0%
Finance 2,129 426 20.0%
Property 1,356 136 10.0%
Consumer Services 1,129 180 15.9%
Public Services 929 192 20.7%

Methodology

This research was undertaken by Experian, the global information services company. It was completed in March 2013 and is based on the company accounts filed to year-end 2011.

  • The population of firms with £2.5M-£100M turnover is taken for eight 3-year periods: from 2000/03 to 2007/10
  • Foreign companies and those filing consolidated accounts are excluded
  • Companies with unknown turnover figures in any years are also excluded
  • Companies considered to be “high growth” are those with >33% increase in turnover over the 3 year period, and whose turnover has increased year on year for a minimum of 2 out of the 3 years
  • The population is further broken down into several variables, namely: Turnover Size (in first year); Employment Size (in first year); Industry Sector; Age of company (as of first year); Region

 

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