This 2022 Scaleup Review is published as the global economy has entered a sustained period of instability and turbulence.

The world today faces an unprecedented set of challenges. We are still managing and adjusting to the effects of the Covid pandemic that has disrupted lives and supply chains, to the ongoing effects of climate change, and to conflict that has led to even greater global tension and pressure on resources and costs. It is against this maelstrom of world events that we take stock of the UK scaleup economy as we head into 2023. 

When we set out on our scaleup mission with the establishment of the ScaleUp Institute in 2015, we wanted to make sure the public, private and education sectors recognised the scaleup segment of our UK business community as being crucial to the UK economy and our future sustainability. 

In these challenging times our scaleup economy is increasingly vital to current and future UK prosperity.

In 2022 we have made further progress on that journey. Critical initiatives such as the scaleup visa have been implemented but more than ever as we head into uncertain and austere times, we need an ecosystem that continues to collaborate and engage to support our scaling enterprises – our most ambitious, innovative businesses – who have the power to keep generating much-needed economic growth and high-skilled jobs. 

Scaleup businesses are the proven engine of the UK economy. 

The most up-to-date ONS figures show the scaleup economy across the UK managed to sustain itself and even grow slightly in 2020 despite the impact of Covid. At the end of 2020, there were 33,955 scaleups – an increase of 26% since the ScaleUp Institute started to assess the landscape in 2015. These ambitious scaling businesses remain the UK growth stars, generating £1.2trn to the UK economy. They are also major employers, employing over 3 million people. They represent 50% of the total SME turnover output despite making up less than 0.6% of the SME population and just 13% of the UK’s 250,000 businesses with 10 to 250 employees. Of equal importance is the fact that we are maintaining a robust pipeline of high potential scaling businesses – those growing between 15% to 20% – which now comprises 16,700 companies contributing £410bn annually to the UK economy.

Encouragingly, in our new ScaleUp Index we have seen a 13% increase in ‘visible’ scaleups – those breaking through the £10m turnover level or with assets of more than £5.1m. That means there are 8,457 visible scaleups with 336 listed on AIM and a 30% rise in female founded scaleups. Among these visible scaleups, 58% scaled more than twice and 31% scaled three times or more. 

The ScaleUp Index also consistently reinforces the importance of the core Government Agencies of Innovate UK and the Development Banks. Grants to scaleups by Innovate UK of £318m, which have leveraged £4.5bn of private sector money – a 14x multiplier – highlight the ‘kitemark’ effect that it has in crowding in private sector backers to scaling businesses. The British Business Bank has backed 79 investment firms, 62 of which have invested in one or more visible scaleups since 2011.

These are all positive signs but we cannot afford to ignore a concerning slowdown in the pace of scaleup growth looming in the background and international dynamics. 

The overall number of scaleups remains slightly down from the high of 35,510 in 2017. Only 19 local areas across the UK are sustaining scaleup growth rates of greater than 1 per 100,000 of population in successive years – down from 23 in 2019. However, when the number of scaleups is combined with the pipeline of scaling businesses this moves to 31 areas who are sustaining scaleup growth rates of greater than 1 per 100,000 of population. This reinforces the need to convert high potential pipeline ‘scalers’ to full-blown scaleups. Notable scaleup clusters outside of London include Leeds, Buckinghamshire, Birmingham, Bristol, Cardiff, Glasgow and Edinburgh; but stubborn regional disparities continue such as in Black Country, Coventry & Warwickshire, Leicester and Leicestershire, and Tees Valley. 

We cannot be complacent: we need to continue to double down and keep the pace and focus on our scaleup initiatives. We need to share knowledge, build clusters and leverage what works across communities. We need to continue to break down silos and build scaleup identities. We must increase the engagement of UK funds with UK scaleups. We must nurture our scaling pipeline to break through into scaleups and our scaleups to break through into becoming global leaders. 

As we head into 2023, the confidence of our scaleup leaders is fragile but they remain going for Growth. 

The 2022 ScaleUp Institute’s survey covers 338 scaleups from across all sectors and geographies of the UK generating some £2.5bn in revenues and employing over 12,400 individuals. These scaleup leaders represent a group of business leaders who are diverse, highly innovative, international, productive, and with a strong social focus. More than 50% say they are either a social business, operate in the green economy or are ESG compliant. Nine out of ten have been involved in innovative activities in the last three years and eight out ten have introduced a new or improved product, service or process in the same period. The majority continue to adopt new technologies and ways of working with four in ten expecting to use AI, big data, and the Internet of Things in the future. 

However, not unexpectedly, scaleup CEOs voiced their critical concerns about macro-economic factors impacting their growth; seven in ten are concerned about increasing costs; five in ten worry about the energy crisis, the legacy of Brexit, supply chain delays and geopolitical uncertainty.

Most concerning is a decline in their belief that the UK is a good place to scale a business. This critical indicator is at its lowest ever ebb: six in ten scaleup CEOs now say it is harder to grow a business in the UK now than in the past – up from four in ten in 2021. Half the respondents – up from 38% in 2021 – worry about whether the UK will be a good location for a business in a few years’ time. 

Yet despite all of these concerns and headwinds, the overwhelming majority – nine in 10 – still expect to grow in 2023: eight in ten expect to grow in turnover and seven in ten expect to increase their workforce, with one in five expecting to grow more than 50%. 

This is testament to the resilience, focus and ambitious mindset of our scaleup leaders.

This resilience emphasises the fact that all of us in the scaleup ecosystem – both private and public sector, from larger companies to financiers, from academics to local authorities – must redouble our efforts to remove the barriers and friction to scaling and make their growth trajectory much easier. 

Nurturing and retaining these innovative, export-led companies in the UK and enabling their scaleup development is vital in the current economic context. These businesses are central to our local communities, future job opportunities and the levelling up agenda across the UK.

Scaleup CEOs are clear that significant pain points and barriers to scale further remain in Access to Markets, whether trying to sell into the domestic private or public sectors or expanding internationally; three quarters of our scaleup CEOs see this as their most significant challenge and a rising issue. It is followed closely by Access to Talent and then Access to Growth Capital. Easier Access to R&D including the surrounding infrastructure such as Innovate UK remains pivotal to the support that scaleups want from the public sector and this needs to be even easier to access. Leadership development also remains a priority for a significant proportion of scaleups but overall there is a sense that advances in scaleup initiatives are tackling this challenge.

Scaleup CEOs continue to view local hubs as a key enabler of their ability to access the raft of national resources that the public and private sector have to offer. They are clear that enterprise agencies and growth hubs have value. They also want further improvement in engagement from financiers, advisors and universities. The majority want to be known and relationship managed: seven in ten would like a single point of contact to act as a relationship manager for them and the majority want data that they supply to the Government to be used to identify them to fast-track them through to appropriate public and private sector resources.

When we probe further we observe that the international and innovation focus of our scaleups – traits that are predictors of scaleup growth – continues at pace. The majority of scaleups export and want to export further. They are looking globally – to Australasia, the Middle East, China and India – but still need much better help to find overseas partners and customers and the talent to support their international drive. They want the private and public sector to provide more tailored scaleup trade missions; better introductions to overseas buyers; and dedicated relationship management, with end to end support that is better joined up.

Scaleups want to triple their ability to sell into the public sector and double their collaboration with Government; three in ten want to enhance their ability to work with corporates. However, there is still too much friction in the system with complex and protracted processes which are difficult to navigate, and a lack of clarity about opportunities available to bid on. They are very clear on how we can do better; these are simple solutions, including account management  and meet the buyer events, which we should act on. 

From a talent perspective, scaleups remain significant employees of both international and homegrown talent. They welcome the introduction of the scaleup visa and they also want to help foster our domestic talent. They are leaders in opening doors to young people; 74% offer opportunities to young people – twice the rate of other firms. They want to have more opportunities to fund apprenticeships and to join up better with the education system. Resoundingly, they want more employee encounters and better careers advice with businesses like theirs, including enhanced funding for apprenticeships/work placements and more teaching of entrepreneurship, alongside the better progression of digital technology and social skills training. 

As high adopters of new technology – not surprisingly, when we assess some of the key roles they are now seeking to fill – a good range of their requirements are in digital and engineering skill sets. But equally, there is a critical need for sales and business development, marketing and brand expertise, particularly in their leadership teams. In their future hires they are predominantly seeking people with resilience and flexibility alongside excellent capabilities in decision making and emotional intelligence. They believe hybrid working is here to stay and are focused on team development as well as recognising their need to evolve their talent and board plans. Four in ten want more help in accessing non-executive director networks.

Turning to growth capital, scaleups remain much heavier users of finance – across its multitude of forms – than their SME counterparts. VCs and Angels are key sources of equity provision, highlighting the importance of these asset classes in the escalator of finance to enable scaleup success. However, 5 in 10 remain of the view that they do not have sufficient capital to meet their current growth trajectory, and a similar number still perceive much of the funding resides in London and the South-East; the work that is currently being done to address regional disparities remains absolutely necessary and requires continued focus.

In recent weeks there has been much discussion about tax. From the scaleup CEO’s point of view the taxation system in the UK is a key plank to enable the scaling up of their ventures: EIS, SEIS, R&D tax reliefs, and Capital Allowances have all played important roles in supporting their investment opportunities. These need to remain in place – and be consistent – to ensure we encourage, and give confidence, to our scaleups to invest and grow in the future. How we raise awareness of these schemes and make them – particularly for R&D – as broad and as easy to access as possible is a key task from our scaleup leaders. 

In the eight years the ScaleUp Institute has been on its mission our scaleup CEOs have been consistent on their needs. Today, their signals are loud and clear: despite the turbulent conditions ahead they are pushing ahead on growth, innovation and internationalisation but we have still not done enough as an ecosystem to remove their barriers to scale .

Removing these barriers to further growth should be a Primary Directive for the private and public sectors at both local and national levels. We need to continue the focus on scaleup initiatives encouraging local clusters, getting skilled talent and capital into the regions and building scaleup identity, as our research into the Drivers of Local Growth highlights. We cannot afford to leave any area behind.

The policy agenda we set out when the ScaleUp Institute was established in 2015 remains as powerfully relevant today: the public, private and education sectors must continue to recognise the scaleup segment of our UK business community as distinctive and work with these innovators with global aspirations to support their further growth.

Whilst there is much still to be done, we have made significant progress. Not least, the term ‘scaleup’ is now widely understood both here and internationally, and public and private sector players are recognising the significant contribution scaling businesses are making to the UK economy. We have seen clear impact from segmenting services for businesses in to the categories of ‘startup,’ ‘scaleup,’ and ‘stay ahead’, and we are pleased that this is being more widely adopted by Government and the private sector.

In the past 12 months we have welcomed movement on a number of our scaleup recommendations, including: 

• The Scaleup Visa is now in place, and we will continue our work with the Government to make sure it develops and delivers to scaleups’ evolving needs. 
• The Government Export, Digital and Innovation strategies are implementing and enhancing their focus on scaleups and high potential scaling firms. 
• More work has been undertaken on closing the growth capital gap – crucially the movements being undertaken to unlock institutional capital with the planned regulatory reforms that would provide the option for defined contribution schemes to remove performance-based fees from the pensions regulatory charge cap, alongside the Solvency II and Listings Reviews, coupled with the expansion of the British Business Bank and the development of the Long-term Investment for Technology & Science fund (LIFTS). All these move forward several long-term recommendations of the ScaleUp Institute. 
• The expansion of existing initiatives such as the British Business Bank Regional Angel Programme and Regional Funds is welcome as we ensure a robust continuum of finance at every level as well as sector-specific initiatives such as the Fintech Strategy, Create Growth Programme and Life Sciences Taskforce. Alongside the commitment to Innovate UK as a key interlocutor between the private sector and innovative scaleup economy, including development of three new Innovation Accelerators in Glasgow, West Midlands and Greater Manchester.
• The Levelling Up White Paper should have a significant role in ensuring the right ingredients for scaleup growth exist across the country by building up local skills, finance, and clusters: the white paper includes the expansion of Institutes of Technology and the establishment of a new National Academy. It must build out on what is working and not let proven local initiatives fail because of the retrenchment of European funding. 
• Proposals to reform procurement offer opportunities which will improve transparency and improve access to public contracts for scaleups are welcome – but currently insufficient. It is crucial that public procurement policy is better used to support R&D-focused firms, such as those already engaging with government-sponsored ‘sandbox’ initiatives or wider innovation activity.

Private sector actors are also continuing to develop targeted scaleup interventions including the development and expansion of national high growth teams; hubs; skills and finance initiatives, with emphasis on diversity and net-zero. A range of universities and business schools continue their focus on high potential scaling firms. We now have 65 case studies of exemplar practice either endorsed or as ‘ones to watch’ with many expanding and new ones joining endorsed status such as Stevenage Bioscience Catalyst, Scaleup Scotland, Aston Programme for Small Business Growth, Lazaridis Scale-Up Program and Innovate UK EDGE scaleup programme. Financiers continue to prove their scaleup credentials such as Archangels, Cambridge Angels, Newable Ventures (London Business Angels) and Development Bank of Wales and many initiatives continue to be embedded locally such as ScaleUp North East – although there is concern over future sustainable funding given 1 in 10 have been ERDF backed. 

Whilst a more scaleup supportive ecosystem is developing – much of which follows on from the ScaleUp Institute’s nationwide education delivered through our Driving Economic Growth through Scaleup Ecosystems course – we cannot afford for it to go backwards given the headwinds and funding challenges ahead. 

In the current economic climate, the ecosystem is under great pressure as it is called on to deal with competing priorities. If the UK is to compete successfully with competitor economies, it is vital that we maintain a clear focus on enabling scaleup businesses to grow and flourish.

As we head into 2023 the scaleup challenges ahead remain clear and consistent, and we’ve identified clear priorities to match them.

AS AN ECOSYSTEM WE MUST: 

• Continue to use the data available including HMRC data sets (tax and National Insurance data) to allow better engagement with the scaleup community and fast-tracking of relevant solutions to scaleup leaders including in the implementation of the ScaleUp Visa process. Data use also should be expanded to include focused messaging on exports, innovation and finance as well as be evolved to include private sector support. We also want to see progress on identifying how government datasets can be shared more effectively across departments; if necessary this should include legislative change. In 2022 we will continue our work with Government and HMRC in this area.
• Crack the Markets Access issue. Too much is still fragmented, unclear, clunky, complex and uncoordinated. There are simple things we can do to correct that, such as being more organised and developing scaleup relationship managers and high growth teams, meet the buyer events  and scaleup ‘desks’ situated within overseas embassies/innovation agencies and banks. We can use data much better to pinpoint our scaling firms and connect them swiftly to relevant resources. We can be more like our US counterparts in leveraging public procurement and R&D investment into innovative scaleup firms by using the Government spending power at local and national level as anchor clients and being more effective in the deployment of the SBRI. We can ensure corporates who want to do more with scaleups learn from their peers that do it well. 
• Progress our talent pipeline by working more collaboratively with our education system, improving alignment with scaleup needs and connections with scaleup leaders through internships, work placements, apprenticeships and job opportunities. These connections can be fostered through expansion of existing platforms and impactful initiatives such as those endorsed by the ScaleUp Institute which include Founders4Schools and Careers Enterprise Company, as we seek to bring more entrepreneurship to schools. 
• Continue to focus on digital and tech skills shortages. There is good work being undertaken in this area but we must see the ‘siloed’ actions being more collaborative. The Digital Skills Council has a key role to play here alongside private sector initiatives such as FutureDotNow and the existing initiatives endorsed by the ScaleUp Institute including Google Digital Garage and Barclays Life Skills.
• Maintain the momentum to close the leadership needs of our scaleup businesses; peer to peer groups and mentoring remain important and need to continue, as well as the development of greater connections to non-executive directors who can add value to a scaleup’s board. In 2023 the ScaleUp Institute will work with the collective ecosystem to develop a Non-Executive Director hub in a private sector collaboration which will bring together leading players.
• Implement at pace the concerted effort being made by the Government and regulators to alleviate regulatory barriers to institutional investment to our scaleup economy. This is imperative as we witness the current slowdown and tightening of scaleup investment – with only 12% investment in equities in 2018 versus 73% in 1999 – and ongoing regional, diversity and sectoral disparities. 
• Enable and ensure the private sector works together closer than ever to step up and provide new solutions and collaborations to foster larger pools of growth capital. Initiatives such as the Capital Markets Industry Taskforce led by the London Stock Exchange Group has a vital role here, along with the continued work of the Bank of England on the productive finance and net-zero agenda.
• Consider the permanency of the British Business Bank and Innovate UK to the UK economy. Now is the time to drive certainty into the ecosystem and give confidence to investment by giving greater permanent status to these institutions for the long term, mirroring international counterparts. They both have a proven and critical positive impact in fostering our larger scaleups. 
• Ensure consistency of tax initiatives to boost confidence to invest; maintain and promote existing initiatives to close the growth capital knowledge gap and connectivity asymmetries. This is work that the ScaleUp Institute will continue to do with the British Business Bank and finance partners.
• Strengthen our ecosystem structure that supports growth, particularly developing locally situated clusters and hubs. From work we have assessed in Denmark and our own quantitative analysis of local growth drivers, the ScaleUp Institute has seen the evidence of how these can make a real difference to enabling scaleups. 
• Leverage and expand the clusters and hubs that are working well and other initiatives which we have endorsed that are having impact. The ScaleUp Institute has a range of exemplars and endorsed case studies such as ScaleUp North East, ScaleUp Scotland, Alderley Park; Babraham Research Campus and Stevenage Bioscience Catalyst that can be fostered, replicated and leveraged. 
• Take the opportunity in the new investment zones to foster greater investor and scaleup connectivity. In rolling these out we must be joined up and crowding in, not duplicating or bifurcating.
• Ensure no gaps in scaleup solutions emerge from the ending of European funding. In 2023 the UK must ensure the continued funding of those initiatives that work well and have impact, as well as resolving our engagement in Horizon Europe or finding a suitable alternative through UKRI and Innovate UK. UKRI should use its convening power to leverage ever greater connectivity between academics and scaleups. 

Continuing to develop a robust and agile ecosystem that is flexible enough to support scaleup growth remains vital. The building up of local, regional and national tailored, segmented and relationship-managed scaleup solutions is essential if we are to deliver to our full scaleup potential.

The ScaleUp Institute will continue to play its part in fostering this. In 2022 we have been pleased to engage in a number of initiatives that take our ecosystem in this direction, including the launch of the scaleup visa. Together with Innovate UK EDGE in 2022 we expanded the peer-to-peer regional groups for scaling businesses to now include the Innovate UK Loan portfolio with further expansion planned in 2023. The networks have been described as “akin to therapy sessions” where leaders can share issues and concerns as well as “refresh” from stepping away from the business with scaleup leaders reporting that the sessions help them make decisions faster, build up their confidence in their decision-making as well as their leadership capacity and people management skills. We have continued to work with the British Business Bank organising in-person masterclasses around the regions on raising scaleup capital. More than 700 delegates have attended 12 roundtables and 12 education sessions since we began this programme in 2021. In September 2022 we worked with our partner BGF to bring scaleup leaders together from across the UK for a series of ScaleUp Week sessions, which sought to unlock potential, accelerate growth and deliver impact.

Our role in raising awareness of the impact of scaleups and sharing the evidence remains a clear priority. In 2022 we launched several Indexes which spotlighted and celebrated scaleups in the creative, green economy, and fintech sectors, as well as female founded and Northern-based scaleup businesses, alongside Family Owned ones. We continue to provide evidence on key policy issues affecting scaleups, both at home and abroad, contributing to Government consultations, and initiatives such as the Life Sciences Scaleup Taskforce, Fintech Strategy Review, and programmes such as the Create Growth Programme which is expanding to new territories, including the further roll-out of our Invest in Creative Toolkit which has now engaged over 270 investors. We have also published papers such as the Levelling Up Through Digital, Computing and Technology Skills document which highlights three critical priorities for resolving the UK digital skills gap and supported our scaleups in their international drive with collaborations in Canada, Europe, the Nordics and Singapore. 

In 2023 the ScaleUp Institute will continue to be a ScaleUp Academy and Observatory for the ecosystem. In the first quarter, with Innovate UK, we will bring together our innovation and economic development leaders in further workshops to share ways to evolve the local innovation and scaleup ecosystem including learnings and good practice from around the UK and internationally.

We will turn our attention to making access to NEDs easier, working with the collective ecosystem to develop a Non-Executive Director hub in a public/private sector collaboration that will bring together leading players. We will also continue our drive with the British Business Bank and finance colleagues at BGF, finnCap, Silicon Valley Bank, Scaleup Capital, the London Stock Exchange and partners from the wider banking sector to close the scaleup finance gap and information asymmetries on growth capital. 

Our 2022 review findings send a clear message that we must not let our determined focus on scaleups slip. The economy needs these ambitious businesses to flourish and the ecosystem must redouble its efforts to support them. We have travelled far on the scaleup journey; now is not the time to put on the brakes. 

IN SUMMARY

The world economy is facing huge challenges. Having just emerged from the pandemic, we are confronted by challenges to supply chains brought on by geopolitical conflict and tension. As we focus on rebuilding and growing it is imperative that we support ambitious, scaling businesses to benefit from their innovation and ambition. Action remains imperative as many of our international competitors are seeing the opportunities of a scaleup economy. Confidence is very fragile with optimism on the UK being a future good place to scale at an all time low. We still have not done enough as an ecosystem to remove their barriers to growth.

As we lay out our policy imperatives for 2023, we must focus on maintaining the momentum:

• Leverage and build on what works to create, at scale, long term sustainable interventions, deployed at local level
• Champion the case of our scaleups and growth sectors, aligning the right people and making available the best funding resources
• Build clusters and hubs – at a local level – connecting our scaleup communities to the talent, finance and markets that they need to propel their growth 
• Build a robust continuum of finance and joined-up scaleup solutions across markets, talent and growth capital.
• Segment our business population, identifying scaleups at a local level and ensuring that programmes are tailored for their needs, building upon the distinction of ‘start up’, ‘scaleup’, and ‘stay ahead.’
• Develop cluster maps, relationship management and high growth teams to support scaleup growth 

If we are to see ambitious companies growing across sectors, geographies and boundaries – and by doing so advance our international competitiveness – we must act collectively and champion the cause of our scaleups, engage with them to support their routes to markets, innovation and talent, and ensure all our resources are aligned to their needs and enable their Scaling Beyond Frontiers.

Engage : Act Now.

The Scaleup Institute has developed a 10-point plan for scaleup growth. It is practical and focused and will be one we continue to work with the private and public sector on delivering.

Priming the UK’s Engine of Growth: 2022 Recommendations