Do 5% of SMEs create 65% of UK employment?

A tiny fraction of the UK's small business community accounts for two thirds of all private sector employment, a new report revealed today.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
The Breakthrough Growth Champions Report, compiled by credit ratings service, Experian, and commissioned by Santander, surveyed a whopping 165,000 businesses, all turning over between £0.5m and £10m. Of these, 4.5% are the biggest movers and shakers in the UK economy, ‘effecting disproportionate change’ according to the report lingo.

These firms, dubbed ‘Growth Champions’, have also proved the most resilient in the recession, creating about 173,000 jobs between 2007 and 2010, while other similarly sized businesses shed more than 400,000. This makes them by far the biggest job creators in the private sector, accounting for some two-thirds of UK employment.

This fast-growth gang share a few common characteristics but, interestingly, these are neither cultural, industry-specific, nor geographical. It’s all about age and experience: growth champions are typically run by younger entrepreneurs; their owners often have a history of entrepreneurial success; and respondents showed the highest levels of ambition, team-work and the most proactive approach to cashflow management. Most also had an international bent, which has helped to insulate them from the recession at home.

These stars of enterprise were found across a variety of sectors, with the biggest hitters in social work (14.7%), complementary medicine, including laser eye surgery and acupuncture (11.%), and the architectural and engineering industries (7.%). Quite the mix.

They were dotted pretty evenly across the UK too: 5.3% in the North West, 5.2% in Yorkshire, Scotland, the North East, and the South West. London boasts around 4.8% with the rest of the South East on 4.2%. The fewest fast-growers were to be found in Northern Ireland, which holds 3.7% of these Growth Champions.

Unlike most rankings of fast-growth businesses, the numbers were crunched across a five-year stretch, measuring long-term growth. During this time, only a handful of the ‘Growth Champions’ achieved consistent expansion. Most had more chaotic growth trajectories with significant growth spurts followed by years of stability or even slight decline. Heartening news for firms experiencing a recessionary blip right now.

Using these swathes of data, Experian also claims to be able to spot ‘Future Stars’. It reckons that there are currently 3,430 UK businesses, (2.5% of UK firms turning over £0.5m - £10m) that are particularly well placed to pull in big revenues and generate employment growth over the next few years.

So, if you’re a young entrepreneur running an architectural practice in Norwich, why, you could be a ‘Growth Champion’ of tomorrow. Yipikaye recession.

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