Key Takeaways

• Scaleups remain resilient, ambitious and looking forwards despite wider macro-economic factors affecting the business environment.

• • • 6 in 10 are concerned about the UK being a good location to do business, this has increased further since 2022 and is significantly higher than levels witnessed in 2021 (38%). It is now at its highest level since the ScaleUp Institute started monitoring.  
    • Falling back from 7 in 10 in 2022, half of the scaleup leaders responding to the survey remain apprehensive about increasing costs of doing business, including from inflation. 
    • With 4 in 10 concerned lower levels of business / consumer confidence and the ongoing legacy of Brexit.
    • Similar to last year, 6 in 10 scaleup leaders believe it is harder to grow a business now than it has been in the past. The current economic climate has made scaleup leaders more cautious about things generally in the business for 6 in 10. While 5 in 10 say it is having a bearing on the extent to which they can recruit and grow. 
    • 5 in 10 feel underserved by the business support on offer.

• Despite these headwinds, scaleups expect to grow and perceive that they are outperforming their peers

• • • 9 in 10 scaleup leaders expect growth next year, with:
      • Turnover growth is expected by 9 in 10 scaleups in the next 12 months, while 7 in 10 expect to grow by employment.
      • 1 in 5 expecting this growth to be 50% or more
    • 6 in 10 say they are out-performing their peers.
  • Scaleups are diverse – overall 39% of scaleups surveyed have a female or ethnic minority founder or CEO. 
    • 31% of the scaleups responding to the survey had a female founder, 17% have a female CEO, 26% have women on the Board and 45% have women in other senior management positions.
    • However only 8% had a founder from a BAME / Ethnic Minority background, 4% CEO, and 6% represented at Board level. 17% have individuals from BAME / Ethnic Minority backgrounds in the wider senior leadership team, with 3 in 10 stating it is important to their future growth to increase diversity in their top team.
  • Scaleups are good corporate citizens. 
    • 4 in 10 scaleups reported operating in the green economy (35%) while 30% considered themselves a social business (i.e. directly responding to social or environmental problems as an established part of their business/trading model).
    • 31% considered themselves ESG compliant (Environmental, Social and Governance).
      • When it comes to ESG compliance, half of scaleups say they are facing challenges, with 1 in 3 stating that understanding and complying with reporting requirements are barriers as well as ways in which they can measure effectiveness of their activities.
    • Overall, 6 in 10 scaleups (56%) felt they met at least one of these criteria.

• Scaleups are highly innovative. As a factor of their growth, scaleups continue to innovate, creating new products and services and are utilising new and advanced technologies to enable their activities.

• • • 9 in 10 have engaged in some form of innovation related activity: 
      • 77% of scaleups have introduced a new or significantly improved product/process/service in the last 3 years 
      • 65% have introduced significantly improved forms of organisation, structures and processes. 
      • 35% have undertaken innovative activities to meet green ambitions through reducing carbon output and energy consumption or improving environmental performance.
      • Additionally, 68% are using or planning to use R&D tax reliefs.
    • When it comes to new technologies, scaleups continue to remain at the forefront of adoption. 
      • 6 in 10 scaleups (58%) currently use some type of software to monitor their activities and/or productivity.
      • 3 in 10 use 5G and the Internet of Things and 2 in 10 are utilising Big Data. They expect to amplify their use of advanced technologies, especially Immersive Tech and Robotics. 
    • Their use of AI has doubled since 2022, with 1 in 3 scaleups leveraging this technology and significantly 7 in 10 planning to use it in the future. 
      • Many scaling business leaders see AI as a way to do things better and more quickly (7 in 10), and 6 in 10 see opportunities for business growth. For 1 in 3 though AI is making them reconsider their workforce and talent needs.
      • However 8 in 10 have concerns about the validity and accuracy of generative AI technologies as well as data security and privacy implications. And 7 in 10 are considering the wider legal and ethical implications. 
      • Importantly, 5 in 10 scaleup leaders consider that AI should be regulated by an independent global entity, such as a UN group.
  • Scaleups are collaborative, however much more can be done to meet their aspirations.  5 in 10 are currently working with partners from the education sector, large corporates and government as well as working with peers across international borders. 
    • 47% are either currently collaborating or aspire to collaborate with universities, 42% with large corporates, 40% with government and 36% with international partners. 
    • Ease of access for scaleups at a local level to funding and support for innovation and R&D remains critical for 5 in 10 (48%), with 1 in 3 also wanting the new investment zones to also facilitate this.
    • 4 in 10 feel it is important to their business to access Horizon Europe, so it is welcome news that the UK has agreed to associate to the programme through a bespoke new agreement with the EU. 

• Relationship management is increasingly demanded by scaleups. They also value being ‘put on the map’.

• • 73% of scaleups would like a single point of contact to act as a relationship manager for them when dealing with the government and other public  sector support.
  • 68% believe it would be helpful to be ‘kitemarked’ as a scaleup.  
  • 6 in 10 are happy to be identified on a public record and that their scaleup status should be shared, with a similar proportion stating this should be on an opt-in basis.

The Top Challenges

1. Access to markets – both at home and abroad – for the fourth year running this continues to be the most critical challenge that our scaleup leaders are grappling with. 

• 64% state that it is one of their top 3 challenges significantly ahead of other barriers in 2023

• 8 in 10 scaleups primarily sell to other businesses or government (B2B), with large corporates representing their largest client base, while one in five are selling directly to consumers (B2C). 

Once again B2B scaleups are looking to boost sales to and collaboration rates with the government and large corporates, however persistent barriers remain. Action and concerted effort is needed now to resolve these issues. They want to double the rate at which they are selling to and working with government and 4 in 10 want to sell more to corporates.  The complexity of procurement processes, as well as the time it takes to win a contract are common challenges, alongside being able to find out about suitable opportunities to bid for. To help overcome these, 7 in 10 scaleup leaders are seeking a clear line of sight to key decision makers and effective account management, 5 in 10 also want opportunities to showcase their products and services and 6 in 10 want more ‘meet the buyer’ style curated events. 

For B2C scaleups the key barriers to their ongoing growth are the costs associated with advertising, brand awareness, and competition from larger incumbents. To make it easier to sell their goods and services, 55% of scaleups want the most support to create compelling content and 53% want to monitor their campaigns. A similar percentage are also eager to develop the brand and improve their social media profile. The other types of support they want to improve their sales are an improved ability to understand their key markets and improved access to trade shows.

Scaleups are highly international, as leading exporters they are trading all over the world and are hungry to do more. 

• 5 in 10 currently export

• 7 in 10 are seeking to engage in (more) international trade in 2024

The EU and North America are key markets for UK scaleups, however they are also looking towards emerging markets as they seek to export their goods and services in the future, with half (46%) focusing on other markets, like the Middle East, Australasia and Asia.  

While concerns about macroeconomic challenges have fallen back in 2023, scaling business leaders are increasingly concerned about their limited access to customers overseas and continue to find it difficult to engage local support and partners within their target markets. They want more curated introductions to overseas buyers and direct support from the Trade Department, with a relationship management structure. Tailored trade missions for scaleups and bespoke information on target markets and opportunities are also in demand. 

1. Access to Talent continues to be a key barrier to growth for scaleups. As significant employers, hungry for talent they are constantly exploring new ways they can recruit, retain and train their staff.

• 58% rank talent access in their top 3 challenges, just behind access to markets. 

• But 1 in 3 (29%) consider it to be their single greatest barrier on par with market access (28%).

With 7 in 10 looking to grow their workforce in 2024, the ‘war for talent’ continues to dial up. They employ graduates, post-graduates and school leavers, and 7 in 10 continue to offer valuable opportunities via apprenticeships, internships and work experience. However, they are keen to do more, and see greater collaboration with educational institutions along with more flexibility in how the apprenticeship levy can be spent as key to this. 3 in 10 lack knowledge about how the apprenticeship levy works though. 

Beyond just apprenticeships and work placements they are also seeking to work more with the education system to ensure that the next generation possess the right mix of skills and attributes –  people management, critical thinking and resilience & flexibility are still much in demand. Scaleups want young people to gain a better understanding of the opportunities that exist in businesses like theirs through careers advice and employer encounters as well as the inclusion of entrepreneurial education in courses. Additionally on curriculum, with the government seeking to roll out Maths to students up to the age of 18, scaleup leaders believe the extra teaching time should focus on the practical application of maths in modern technologies, including how it is used for modelling, advanced coding and tech like AI. They also feel students would benefit with greater understanding of how business funding, investment and venture capital works. 

Many scaleups are experiencing skills gaps throughout their workforce, with tech and digital skills as well as engineering, sales and marketing highly sought after – often for individuals with a blend of complementary skillsets. They are providing training and development opportunities for all of their staff and 1 in 5 are offering returnships to bring older workers with valuable skills back into the workforce. Retaining talent remains a challenge, with many scaleups looking to improve salaries and benefits as well as providing greater flexibility in working hours and location.

Access to international talent is also critical, 4 in 10 employ people from the EU with 3 in 10 employing individuals from further afield. While the vast majority of their employees are UK based, due to their international nature as leading exporters 1 in 5 have at least 1 employee located overseas. While only 1 in 10 are using or planning to use the Scaleup Visa, a challenge exists with 7 in 10 lacking sufficient knowledge about this new visa. 

1. Access to finance and growth capital has dialled back as a challenge since it peaked during the pandemic, however it remains the third largest barrier to ongoing growth overall. 

• While 38% rank access to growth capital among their top 3 challenges; it is ranked as the biggest challenge by 1 in 5. 

• Scaleups continue to be far more likely to use external finance than their SME peers: 78% of scaleups use external funding as part of their growth strategy.

• Despite the broad range of forms of external finance used, half of scaleups do not feel they have the right amount of funding in place for their current growth ambitions. 

There are increasing concerns among scaleup leaders around the availability of capital, with many more perceiving that the majority of funding resides in London and the South East. In 2023, 59% of scaleups feel like this is the case, higher than the levels seen in 2021 and 2022.  

Of those using external finance, 3 in 10 are using equity or plan to use it in the near future – with VCs and Angels continuing to be identified as the key sources of equity provision. The majority of scaleups plan to invest funds raised in changes to products and services (58%) or R&D (57%), suggesting they are highly innovative. While 54% of them plan to use the funds for capital expenditure as they look to achieve their growth ambitions. 

Scaleups were asked about their confidence in the range of activities taking place to unlock pension funds and institutional monies into the UK growth economy – whilst supportive of overall efforts to do this, only 1 in 5 (20%) scaleups said they are confident that such activities will see extra funds coming in from UK investors into businesses like theirs. 

In terms of the support towards improving access to potential investors, 6 in 10 want Relationship managers in local investment zones (63%), “Meet the investor’ type events (63%) and Better access to finance mentors and peers (58%). 

Scaleups actively utilise the various tax schemes provided by the government such as the R&D reliefs (used by almost half of scaleups surveyed), capital allowance (used by 3 in 10) and enterprise investment schemes (used by 1 in 10). 8 in 10 have used at least one of these schemes. However, scaleups want commitment from Government that they will continue and see scope for the improvement of these schemes, such as expanding the range of things they can claim for, increasing the value of allowances and simplifying the process of making a claim. 

1. Infrastructure. Access to a flexible space to grow and facilities that support collaboration, innovation and R&D remains a key concern for scaleup leaders. 

• 32% rank access to infrastructure and R&D facilities among their top 3 challenges.

A significant number of scaleups (40%) who have received investment are planning to use it to expand their facilities.  While 5 in 10 scaleup leaders want support to access R&D and innovation funding with 1 in 3 also wanting the new investment zones to also facilitate access to support from local educational institutions. To support ongoing innovation and collaboration 4 in 10 feel it is important to their business to access Horizon Europe. 

1. Building leadership capacity through local support continues to be seen as a challenge for some and has increased in importance since 2022.  

• 32% say building the capability and leadership capacity of their top teams is one of their top 3 challenges, on par with access to infrastructure.

Developing skills of the current senior team (75%) remains the top factor that scaleup leaders feel will aid their growth. Scaleup leaders are also keen to improve leadership skills throughout their businesses with 57% stating the importance of building capacity of those who are in middle management roles. Perhaps reflecting the ongoing challenges around access to markets, scaleup leaders consider sales and business development skills (65%) as well as brand building, marketing and communications (47%), and Strategy development (40%) as key areas to develop the skills of their leadership teams.

6 in 10 scaleups have a Board or similar governance structure in place and a further 15% have plans to establish one in the future. They are eager to augment their boards and top teams with those who have experience of growing a business (45%) and Non Executive Directors (36%). Half would like to promote internally from the pool of leaders already in the business.