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The vital 6 per cent: UK ‘Super Companies’ identified for the first time

12/10/2009

"These high-growth firms are packing a real punch as powerful generators of employment and revenue for the economy. This has important ramifications for policymakers who must shift their focus towards understanding how to maximise these critical businesses."

Just six per cent of UK businesses hold the key to job creation and wider prosperity, according to two reports released today by NESTA (National Endowment for Science, Technology and the Arts).

Together, the reports represent the most ambitious mapping exercise of business growth in the UK, mapping the UK's high-growth firms1 over almost a decade. The analysis reveals that just 11,500, or six per cent of UK businesses with 10 or more employees are classed as 'high-growth' companies. This small number of businesses has generated around half, or 54 per cent, of new jobs (1.3 million out of 2.4 million new jobs created by all existing businesses with 10 or more employees in the last three years)2.

The reports also reveal that these 'super companies' thrive across the country. The North West, Scotland and the East of England each host a high share of high growth firms, closely followed by the south West, Yorkshire and Humberside and the West Midlands. Almost a third of high-growth firms are located in Greater London and the South East.

The UK also shows a healthy balance of high-growth firms across sectors, not only in high-tech industries. All major UK sectors contained between four and ten percent of high-growth firms. However, the balance between different sectors does appear to reflect trends in the economy in the period: the sectors with the highest proportion of high-growth firms were financial services (over nine per cent) and real estate and business services (around eight per cent), while the lowest share was found in manufacturing (three to four per cent).

Commenting on the research, Jonathan Kestenbaum, NESTA's Chief Executive says: "These high-growth firms are packing a real punch as powerful generators of employment and revenue for the economy. This has important ramifications for policymakers who must shift their focus towards understanding how to maximise these critical businesses."

The reports also found that:

  • The UK had one of the largest shares of high-growth firms among OECD countries in 2002-2005. The UK is ahead of the US in terms of proportion of growth firms in a variety of sectors, in particular financial services, but not in manufacturing.
  • Innovation drives growth: A common trait amongst high-growth firms is innovation. High-growth firms are disproportionately innovative, and it is this innovation which appears to cause their growth.
  • It's not just about start-ups: Although young firms are more likely to be high-growth, the majority of high-growth firms (70%) are at least five years old. Still, young high-growth firms are responsible for a fifth of the jobs created by high-growth firms.

The mapping exercise has paved the way for NESTA's next tranche of work which will analyse the levers of innovation and growth, focussing on what tools are at the government's disposal to encourage innovative growth.

Notes to editor:

For further information please contact Catherine Anderson on 020 7438 2609. Alternatively, please call Rachel Grant on 07891 249 190

About NESTA

NESTA is the largest independent endowment in the UK. Its mission is to support innovation to drive economic recovery and solve some of the UK's major social challenges. NESTA is a world leader in its field and is in a unique position to support and promote innovation through a blend of practical programmes, policy and research and investment in early-stage companies.

About the Report

This press release summarises the findings of two new pieces of research commissioned by NESTA:

  • Measuring Business Growth: High-growth firms and their contribution to employment in the UK. Written  by a team from Aston University, the Economic Research Institute of Northern Ireland and the University of Strathclyde. The authors of the report are: Michael Anyadike-Danes, Karen Bonner, Mark Hart and Colin Mason
  •  Business Growth and Innovation: The wider impact of rapidly-growing firms in UK cityregions. Written by a team from the National Institute of Economic and Social Research. The authors of the report are Geoff Mason, Kate Bishop and Catherine Robinson.

1The OECD definition is those companies with 10 or more employees which experience employment growth averaging 20% or more per year over a three year period.

2Moreover, this 6% of high-growth firms accounts for 49.5% of all the new jobs created by existing businesses in the UK (including those jobs created by microenterprises - businesses with fewer than 10 employees) over the six years considered in this study, or 43% in the past three years