Background

Scaling challenges in the North East reflect national patterns and include recruitment and retention as well as changing consumer attitudes and buying patterns. Attracting investment is another key barrier for scaleups in the region. These challenges are reflected in the support sought by leaders across the scaleup ecosystem which is focused on building resilience and confidence along with refinancing and restructuring. There is further demand for opportunities to collaborate and build supportive networks. 

The changing regional ecosystem in the North East demands a new model of support delivery. This rests on streamlined activity across local authorities, aligning support and strategy across the region with a localised investment plan, with the region’s growth hub acting as a central point offering account management and diagnostic services and allocating businesses to the suitable support.                                                        

A current focus for the hub’s partnership with the region’s academic institutions is examining the root causes of low levels of entrepreneurship across the North East. In addition, the hub is working with local universities around sector development. This includes getting the right skills pipeline in place for the region’s energy sector, spanning heat networks, mine energy and offshore wind. This is coupled with a keen focus on the automotive sector and battery development with the North East Battery Alliance being driven by Newcastle University.

ONS data for 2020 shows that there are 780 scaleups in the North East LEP: 255 are classified as scaleups due to rapid growth in their employees, 665 are classified as scaleups due to rapid growth in their turnover and 140 are scaleups that are increasing both employment and turnover simultaneously.

The ONS data reflects that across the four-year period from 2017 to 2020 the density of scaleups has decreased by -0.88 per 100,000 of population per year.

SCALEUP PROGRAMMES

The area’s flagship programme, Scaleup North East  offers specialist support designed to help the region improve its density of scaleups and help scaling companies overcome common challenges to growth. Participating scaleups define their own objectives with the support of a Scale-Up Partner who has experience of scaling their own company at a senior level.  The Scale-Up Partner helps the company to identify and implement an action plan for growth. Common areas covered by this bespoke package of one-to-one support include cashflow, skills shortages, business model development, leadership and access to markets. 

Alongside the one-to-one support offered through the programme, companies can access other forms of peer to peer support from associate partners and approved provision. As account managers, the Scale-Up Partners signpost, introduce and steer participating companies to relevant support and advice available through a network of providers which include local colleges and University of Newcastle Business School, Vistage, the British Business Bank and Barclays Eagles Labs – many of which are endorsed by the ScaleUp Institute.

The programme is also underpinned by a grant programme, offering 40% (capital or revenue) grants to help them overcome a specific barrier to scaling, such as paying for legal, HR or IP advice or external leadership coaching as well as the purchase of capital equipment or refurbishment of premises as they outgrow existing space.

Delivered by Northumbria University, Help to Grow Management gives participating businesses access to academic business expertise as well as the support of leading figures from industry and experienced entrepreneurs. It is focused on boosting performance, resilience, and long-term growth and the 12-week programme is 90% government funded. Key elements include building leadership and strategic expertise, creating a growth plan and innovation.  The programme also explores employee engagement, digital adoption and reaching into growth markets. New cohorts start in December and February. 

Supply Chain North East supports early stage and scaling businesses to identify opportunities in new and existing markets through linking them to new sector procurement and innovation opportunities and major infrastructure projects; providing one to one support on operational improvement; connecting businesses to wider ecosystem support on innovation, trade and skills; and showcasing opportunities on supplier days with large companies and industry clusters. 

IMPACT AND RESULTS

Since 2018, Scaleup North East has supported over 800 leaders to raise more than £16.5m in investment and win contracts worth £19m. 477 new jobs have been created due to the programme and 247 scaling businesses have reported a £28.99m increase in turnover. The programme has supported an average GVA uplift of approximately £77,476 per business and an average turnover uplift of £119,290 per business. 

Supply Chain North East has supported more than 800 companies, allocated £1.2m in grant funding and created 314 jobs. 

FUTURE PLANS

The landscape across the North East has changed dramatically since the pandemic and the scaleup movement that existed in 2020 is now weakened. To address this, new resources and a sharpened focus will be necessary. Investment remains a key challenge, particularly for scaleups operating outside of the tech sector. Further work is planned around sector development including green energy.  This will focus on supporting a sustainable skills pipeline. Recently launched, the Create Growth Programme will support the creative sector through a bespoke business development and growth package tailored to the specific needs of high-growth potential creative businesses, with the aim of building businesses’ management skills and understanding of different finance routes to support business growth. 

“We had been discussing the development of our new leadership team and Angelina made us aware of a range of options to consider…With the restructure of the business, our recent rebrand and the further growth of our two offices, we are expecting an exciting period ahead…Within the next 12 months we are doubling the size of the business, in both turnover and headcount. We will be replicating the skill set we have in the Northeast into the Northwest.” Adam Blenkinsop, CEO – Revolution

LONGITUDINAL ANALYSIS

According to ScaleUp Institute analysis of data received directly from ONS for years 2017-2020, the following picture emerges on the local environment.

Local Authorities located within the North East LEP have a low density of scaleups, and the trend between 2017 and 2020 reveals that few of the local authorities showed an increase in the density of scaleup businesses, and the majority showed an above median increase in scaleup density.

Scaleups by Density: Needs Improvement

The vertical axis of this matrix shows where local authorities located in this LEP stand compared to the rest of the UK: 5 of the 7 local authorities have a below median density of scaleups measured by employment growth and 5 of the 7 local authorities have a below median density of scaleups measured by turnover growth.

Scaleup Trends Over Time: Mixed

The horizontal axis of this matrix shows whether the density of scaleups has increased or decreased over time relative to the rest of the UK: 4 of the 7 local authorities are below the median in terms of improving the density of scaleups by employment in their community and 6 of the 7 local authorities are above the median for scaleups by turnover.

The ScaleUp Institute will continue to monitor this closely in the coming years to track whether local initiatives move the dial in the right direction for increasing the density of scaleups.