Explore the ScaleUp Annual Review 2020

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Small High Growth Businesses – the scaling pipeline

Leveraging new data is important to increase our understanding of the UK’s economy, as such in 2020, the Institute undertook analysis on those businesses that are not yet at scaleup growth rates but are growing either or both turnover and employment at rates just outside the 20% threshold at 15-19.99% annually. This substantial group constitutes part of our scaling pipeline.  

In 2018 there were 16,890 scaling businesses, employing 1.9m people with a combined turnover of £592bn. 

This new piece of research empowers us with better insights on the attributes of our pipeline and how this complements the scaleup ecosystem.  A comparison of the absolute numbers of businesses in our scaling pipeline against scaleups reveals that although the number in the pipeline is half that of scaleups, proportionately, the pipeline appears to be strongest in companies measured by employment growth. Indicating that the scaleup pipeline may constitute an important source of future job creation. 


As with scaleups, businesses within the scaling pipeline in the UK are found across all sectors of the economy. The distribution is broadly comparable when viewed proportionally, however there are some notable differences: 

  • There are significantly more pipeline businesses operating in the manufacturing and wholesale/retail sectors than scaleups.
  • But proportionately fewer pipeline businesses in health/social work, administration and support services, and finance/insurance.

Regional distribution of the scaling pipeline  

In most areas and regions, the spread of pipeline scaleups is consistent with the spread of scaleups. Only in London are there many more scaleups in comparison with the pipeline. In Northern Ireland, East Midlands, South West and East of England the pipeline of scaleups is greater relative to the number of scaleups.

When viewing the total numbers of scaling businesses and scaleups at the LEP and Devolved Nation level, we see similar trends between scaleups and those in the pipeline: 

  • London, Scotland, South East, Leeds City Region and Greater Manchester have the greatest numbers of scaling businesses. London, Scotland and the South East are also the three regions with the highest number of scaleups.
  • The areas with the fewest businesses in their scaling pipeline were Tees Valley, Cumbria, Worcestershire and The Marches. 
  • The top and bottom ten areas in the number of pipeline scaleups were mirrored by the top ten and bottom ten areas for scaleups.

When viewing the density of scaling businesses per 100k population, the following trends are revealed:

  • There is strikingly little difference between the places which have a strong scaling pipeline and high number of scaleups – nine of the top ten areas in pipeline scaling density were also in the top ten for scaleup density.
  • Nine of the bottom ten areas in pipeline scaling density were also in the bottom ten for scaleup density.

Furthermore, there are significant differences when comparing the areas with the highest density and those with the greatest number of scaling businesses:

  • 2 of the top 10 areas in scaling pipeline density were also in the top 10 for absolute number of pipeline scaling businesses – London and Enterprise M3 (outlined in orange on the table above).
  • Tees Valley was the only area in the bottom 10 in scaling pipeline density and also in the bottom 10 in terms of total pipeline scaling businesses.


Since 2014, the ScaleUp Institute has consistently identified access to skills, markets, local leadership, finance and infrastructure as the key barriers to scaleup growth3. This has been reinforced by a growing body of literature on scaleups.4,5 There are many potential drivers of growth; however, there is currently insufficient research available assessing the regional economic drivers of scaleup growth. In a report for the OECD, Audretsch and David said that “the geographical dimension [of high-growth firms] have been largely overlooked.”6

To better understand the factors that drive scaleup growth, in collaboration with Arup, we interviewed a sample of scaleup leaders across the UK, carried out a detailed review of recent academic literature and conducted an in-depth statistical analysis of growth factors.

We sought to answer the following question:

“What, if any, place-based drivers of scaleup growth can be identified in the UK?” 

We gathered both qualitative and quantitative evidence. This mixed methods approach allowed us to dig deeper into local drivers of growth than before.

Qualitative Analysis

In collaboration with Arup, we conducted semi-structured in-depth interviews across a range of local areas from high performing to developing growth paths (Oxford, West of England; Thames Valley Berkshire; North East, Leeds City Region, Scotland, Cornwall & the Isles of Scilly, Greater Manchester). Local leaders consistently identified these areas as key drivers of scaleup growth:

  • Knowledge sharing – where individuals, businesses and institutions build informal networks which enable knowledge, skills and experience to be spread more widely.
    • Active network of peers.
    • Strong local supply chains with links between small and large firms
    • Access to qualified non-executive board members
  • Active University Engagement
    • Providing relevant training
    • Research collaboration
    • Interaction between scaleups and graduates
  • Local Ambitions 
    • A strong sense of local identity and ambition
    • Support and goodwill from the wider group of local stakeholders

Quantitative Analysis

Informed by this evidence and insight, we identified a number of potential factors linked to scaleup growth, as measured by the average increase in scaleup density between 2013-2018. We used data from the Census, ONS and Beauhurst, at a local authority district (LAD) level. Regression analysis allowed us to isolate the effects of specific factors. We used spatially lagged variables to control for spillover effects from neighbouring areas. We also controlled for GVA and GVA growth.

From this analysis, we found three main factors driving scaleup growth – equity finance, skills and sectoral clustering. A number of other factors saw no clear relationship with scaleup growth – SME lending rates, proportion of large firms, start-up density and start-up survival rate. We used spatially lagged variables for each factor which account for the effects from neighbouring areas. We also accounted for the starting GVA of the area and GVA growth. The effects remained robust even after controlling for these factors.


Factor Description Relationship with scaleup density growth 2013-2018
Skills Proportion of 16-24 year olds with Level 4+ qualifications. This comes from the most recent Census data (2011) and provides an appropriate lag between the time that young people acquire skills and when they enter the workforce. Positive
Sectoral Clustering Proportion of companies from the most concentrated sector in a given LAD, obtained using ONS IDBR data. Positive up to a saturation level
Equity Visible SME equity funding per 100k population in 2013-2014, providing an appropriate period of time for funded SMEs to become scaleups. This data was obtained from Beauhurst’s high growth company database. Positive
Lending SME bank lending per 100k population in 2013-2014, providing an appropriate period of time for funded SMEs to become scaleups. This was obtained using UK Finance data. No clear relationship
Large Firms Proportion of firms with 250+ employees in a given LAD. This was obtained using ONS IDBR data. No clear relationship
Start-up density Start-ups per 100k population in 2012. This time lag is necessary to give start-ups a suitable amount of time to become scaleups. This was obtained using ONS IDBR data. No clear relationship
Start-up survival rate Proportion of start-ups from 2012 surviving after 5 years. This was obtained using ONS IDBR data. No clear relationship
Public Transport Time to get to key services using public transport (England only data), obtained using Gov.uk data. No clear relationship


High skills are associated with faster scaleup growth

We assessed skills by looking at the proportion of 16 to 24 year olds in a given area with Level 4+ qualifications, indicating post-secondary education or training.7 Higher skills are associated with an increase in scaleup growth, even after controlling for other factors. High population density on its own did not produce high levels of scaleup growth, unless it was accompanied by high levels of skills.

Local leaders should focus on building skills in their area. Businesses should focus on finding skilled individuals who can transfer ideas and generate innovation.

The graph above shows a positive correlation between the percentage of young people who are highly skilled and scaleup density growth 2013-18. Each dot represents a local authority (outliers excluded) with the line of best fit sloping upwards.

Sectoral clustering and hubs are associated with faster scaleup growth

Evidence from the academic literature suggests that clustering allows firms to share resources and transfer knowledge.8,9

Using ONS data, we examined sectoral clustering by looking at the proportion of firms accounted for in the largest industry in a given local area.10 Having a good cluster and proportion of businesses from a given industry does support increased scaleup growth.

However,  the analysis also shows if it becomes over concentrated in any one industry, then the growth effects are diminished as areas become reliant on that industry. Local areas should exploit their sector strengths, but make sure that diversity of sectors remains.

Equity funding is a driver of scaleup growth, while debt is not

In assessing the effect of equity financing on scaleups, we looked at the amount raised by SMEs through equity investments per 100,000 people in Visible Scaleups using the Beauhurst database.11 These are companies which meet the 20%+ growth threshold and file full accounts at Companies House. Areas with access to larger amounts of equity finance tend to have faster growth in the number of scaleups, even after controlling for other variables. Higher levels of lending, in contrast, showing no clear relationship with scaleup growth.

This highlights the importance of equity for building scaling businesses. There is a gap in the ability of companies outside of London and the South East in getting access to equity finance. Closing this will be vital to increasing scaleup growth across the country.

Previous Scaleup indicators from a national and local perspective
Next Visible Scaleup Groups