High Growth Firms could hold the key to Scotland’s economic success

A major new research project funded by Scottish Enterprise has highlighted that increasing the number of fast growing companies in Scotland could have a transformational impact on Scotland’s economy.

The research found that there were 825 high growth firms in Scotland between April 2006 and April 2009, a figure broadly in line with other similar sized economies. Although they make up just 4% of the business population in Scotland, the research highlights the disproportionate contribution they make to economic growth, collectively employing almost half a million people.

With these companies accounting for around half of all new private sector employment, Scottish Enterprise believes that increasing the number of high growth firms could result in substantial numbers of jobs for Scotland.

The research also highlighted some key findings around the characteristics of a high growth firm, which could help enterprise agencies offer more tailored support in the future to help turn those companies with potential into the large scale companies of the future.

It found that they:

  • are a highly diverse range of companies and can be found in a wide range of industries, although most were not operating in ‘high technology’ sectors;

  • vary in terms of their origins, size and age but the majority are knowledge-intensive, highly innovative and customer focused, with business models based around long-term relationships with customers;

  • tend to have more international operations with an extended overseas presence than other companies; &

  • are usually concentrated around Scotland’s cities, including Glasgow, Edinburgh, Dundee and Aberdeen

Professor Colin Mason of Strathclyde University’s Hunter Centre for Entrepreneurship said: “The most remarkable feature of our study of Scottish high growth firms is their enormous variety. The obvious conclusion for policy markers is not to pre-judge the sources of high growth firms within the economy, and that eligibility criteria for business support should be kept open as possible.”

The research also highlighted the clear role for government to nourish and support high growth firms at an early stage of their growth. While the majority of the companies had received support from the Scottish Government or Scottish Enterprise in the past, only 20% were currently ‘account managed’ by Scottish Enterprise, reflecting that early investment was crucial in helping them get to a stage where they no longer needed public sector support.

Ross Brown of Scottish Enterprise added: “While there are some clear challenges in helping companies achieve the scale required of a high growth firm, the research underlines the scale of the opportunity and the importance of nurturing those companies that can develop into the big players of the future.

“While not all of the companies we work with will develop into a high growth firm, if we are to have the biggest impact on Scotland's economy, we need to focus our efforts on those companies that have the ability and appetite to grow.

“The findings also reinforce our continuing focus on supporting opportunities for company growth, regardless of where these opportunities lie. We will be looking at these findings in more detail to see how we can further tailor our support for customers.”

Notes to editors

The study used the OECD definition of high growth: “enterprises with average annualised growth in employees or turnover greater than 20 percent per annum, over a three year period, and with more than 10 employees in the beginning of the observation period, should be considered as high growth enterprises”.

Examples of well known Scottish high growth firms include the following: Aggreko, Craneware, Optos, Wood MacKenzie, BiP Solutions and Hydrasun.

The full research report can be viewed at: http://www.scottish-enterprise.com/News/2010/11/High-growth-firms-could-be-key-to-economic-success.aspx

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