Shaping policy to foster UK scaleups

The UK scaleup ecosystem is starting to evolve. Across 2019 we have seen public and private sector programmes beginning to have measurable impact, and the priorities of scaleup businesses are themselves shifting in response to those policy programmes in place.

It is now ever more important to continue the impetus to close the scaleup gap. We must align, leverage, and connect up what is working so that we ensure the scaleup ecosystem matures in a sustainable way. At the same time we must continue to progress the effective use of data to facilitate this process across all levels of Government, and with the private sector.

This is not about new initiatives, it is about better use and alignment between existing programmes with proven impact.

At a five year point from the original 2014 scaleup report, it is a good time to reflect upon how policy has evolved in the public private and education sector across that period to address the scaleup gap and also think forward to the next decade. In 2014, the term ‘scaleups’ was not well recognised and the consideration of how policymakers in all sectors could effectively segment towards our scaling companies was not top of mind. While it was irrefutable at that time that there was an impetus towards entrepreneurship and starting companies – placing us third in the world – there was not the same robust focus on building policies for scaleups and growth.

The 2014 report gave clear guidance toward practical steps that could be taken to address our scaleup challenge, grounded in evidence and international exemplars.

In 2015 with the birth of the ScaleUp Institute – founded by the private sector to work with all stakeholders – a community came together with a mission to embrace and tackle this critical UK scaleup challenge, and a clear purpose to mobilise to ensure that the UK becomes a scaling nation, leading the world.

In 2016 we delivered our first active training to Local Areas across the UK – with the resulting programmes shown to have now helped upwards of 2,500 businesses. We now remain engaged directly in supporting the design of programmes based on our assessment of good practice, as we advance the national scaleup action plan.

Awareness of the challenges faced by scaleup businesses has increased markedly across this period. It is very positive to see that following the 2017 objectivisation of Local Enterprise Partnerships to include scaleups as part of their strategic economic plans, this is flowing through to Local Industrial Strategies. As these are adopted across England, continuing to recognise the importance of scaleup businesses, and developing programmes to meet their needs, remains key.

However, despite ongoing progress and a growing number of scaleups over this period, any severe economic shocks to the global economy will likely impact the UK’s scaleup population over the short term. Global uncertainty is at a significant level. The current, challenging, trade relationship between the US and China and ongoing questions about the UKs future relationship with the European Union dominate headlines and are top of mind for many businesses.

Despite maintaining an optimistic view of their own growth, as highlighted in Chapter 1, 64% of scaleups surveyed see Brexit as having a negative impact on their business. In July 2019 the Office for Budget Responsibility emphasised the risk of the UK entering recession in a ‘no-deal’ Brexit scenario, predicting a year-long contraction of 2%, rising unemployment and an increase in annual borrowing of £30bn. Recent data suggests that despite a contraction in August, marginally stronger growth in Q3 means that the UK will avoid a recession in 2019¹, but significant uncertainty remains and this is impacting business confidence².

A maturing scaleup ecosystem must remain robust and agile in the face of such uncertainty. It is our duty as a nation to be prepared for all eventualities and limit long term impacts. This must involve maintaining and leveraging existing programmes, and continuing to drive the development of new programmes to meet the needs of scaling and scaleup businesses where gaps remain.

We have many of the tools and institutions to ensure this but coordination, renewed focus, and the alignment of wider policy toward growth in a way that makes sense for scaleups themselves is necessary if efforts are to be fully realised.

To forge a clear path forward, maintain scaleup confidence, and make the most of the growth opportunities that the UK has domestically and on the international stage, we must:

• Continue to unlock data – particularly Government data – as part of a coherent National Data Strategy which ensures that data is able to be used to champion UK wide growth;
• Build upon the successful work underway – particularly at a local and devolved nation level – to get to know the business populations and their needs, and effectively segment these groups so that the right programmes can be aligned towards scaleups through active account management;
• As a priority – Government policy objectives and incentives need to be aligned towards scaleups to ensure they are each pulling in the same direction making the best use of our national resources.

Each of these steps are entirely within the control of the UK Government to deliver. Throughout this chapter we reflect upon current developments and the steps necessary to achieve meaningful policy advancement for scaleup businesses in relation to the core scaleup challenges of Talent, Market Access, Leadership, Finance and Infrastructure.

As we assess the next steps on this journey, it is clear that:

• Talent remains key for scaleups: There are now a number of programmes, including the CEC and Founders4Schools looking to improve the level of business engagement and work experience for students. However, there is a broader talent challenge for business, and it is vital to ensure we build both a robust UK skills pipeline, and enable scaleup businesses to access the talent they need internationally in a timely manner.

• Market access is now an urgent issue to resolve for scaleup businesses. As well as enabling scaleup businesses to access markets abroad, it is also vital for scaleup businesses to be able to access the right customers here in the UK. This means the development of better, more connected support programmes for scaleup firms, and simplified procedures so that they can collaborate and sell to corporates, and access Government Procurement contracts more consistently.

• Leadership is a foundational element of scaleup growth. There are now more Leadership programmes for scaleup businesses than there have ever been, including at a local level. However, there is still more to be done. Scaleup businesses continue to recognise Leadership capacity development as fundamental, but with 1 in 3 programmes currently funded through ERDF it is important for there to be a stable suite of ongoing initiatives able to meet this demand as we enter the next decade.

• The need to ensure that scaleups can finance their growth continues. The launch of British Patient Capital and wider British Business Bank programmes including the Finance Hub, and Regional Network are positive steps, as are the efforts of the wider finance community to lean in to support scaleup businesses. However, scaleups still perceive regional imbalances and there is still work to do to boost knowledge of scaleup finance options amongst businesses, financiers and wider intermediaries or advisers.

• The right Infrastructure with linked programmes can be a game changer. Scaleup businesses will always need space in which to grow. As more and more scaleup focused programmes are developed to meet the scaleup challenge that the UK faces – the role of Hubs is becoming ever clearer. Creating a physical location, where scaleups can have easy access to flexible office / lab space, and programmes linked to wider challenges is having real impact. As greater numbers of these are developed, it is important to build upon what works and ensure that programmes with impact and players with proven understanding of what is needed for scaleups are leveraged up to ensure that quality is maintained.

Given our driving focus as an organisation, we are pleased data is starting to be used more effectively, including in the private sector. Government has made particular efforts to look at more creative ways to use data to find and target business support. However, pilots are not enough, and data that has been unlocked must feed into active policy development.

Through our wider case study work, and our mapping of the UK scaleup ecosystem, we have increasing amounts of evidence that a determined focus upon scaleups is beginning to bite, and that the challenges faced by growing businesses have shifted as a result of a better equipped UK ecosystem. It is vital that a focus upon growth is not lost.

Businesses are recognising the institutions and programmes in place to help them to grow, and scaleups remain confident despite perceiving significant challenges.

Uncertainty, both national and global, must not cause us to deviate from this path towards becoming the best place in the world to grow a business.

PUBLIC POLICY MILESTONES

The ScaleUp Institute will continue its mission to maintain focus on our ambitious scaling businesses. Three key principles will remain, guiding our input into and evaluation of policy interventions:

• Data and building upon what works: All interventions should be data driven and measurable. Continued funding to initiatives should only occur where impact can be evidenced.
• Segmentation: Businesses are not homogeneous – scaling business must be treated as a separate segment with bespoke solutions.
• Client centric and local: Scaleups value locally delivered solutions – even when a programme is national. In a growing company, time is a scarce commodity and community level engagement is essential, alongside active relationship management.

These principles should be used as a foundation for efforts to overcome the challenges which scaleups have continually identified to their growth. We will continue to champion them.