The findings have been revealed by the Enterprise Research Centre in its annual UK Local Growth Dashboard. ERC, a consortium of leading university business schools, is the top UK research institute on the drivers behind private sector firm growth.
The Dashboard shows that firms across the Midlands created 120,345 net new jobs in 2014/15 – 17% of the UK total.
Firms in the area covered by Coventry and Warwickshire Local Enterprise Partnership (LEP) created 23,432 net new jobs in 2014-15. This was the largest number as a proportion of total jobs of any LEP, at 7.5% - beating London’s 4%.
When it comes to fast growth, Leicester and Leicestershire had the highest rate in the Midlands of firms growing their number of employees by 20% or more in each of the three years 2012-15, with 12.7% of companies achieving this.
For firms scaling up, Coventry and Warwickshire also led the Midlands with the highest proportion of companies with starting revenues of less than £500,000 that reached £1m turnover over the three-year period 2012-15, with 1.9% reaching this milestone. Greater Birmingham and Solihull was a close second with 1.8%, but both were well behind the UK leader, Belfast, where 4.4% of firms achieved this.
For firms stepping up from £1m-£2m turnover to £3m or more, the best performing Midlands region is Derbyshire and Nottinghamshire (D2N2), where 7.3% of firms in that category did so, the fourth highest proportion in the UK.
The Dashboard provides the most comprehensive picture of growth among small to medium sized enterprises (SMEs), which make up 99% of all UK firms. Its key findings will be unveiled at ERC’s third annual State of Small Business Britain conference today [Nov 30th] at The Shard in London.
This year’s conference is focused on the importance of boosting inclusive growth and productivity nationwide in the wake of the Brexit vote. Last week, Chancellor Philip Hammond highlighted the UK’s poor productivity levels, saying that UK average productivity was 30 percentage points behind the US and Germany.
Professor Mark Hart, Deputy Director of ERC and Professor of Small Business and Entrepreneurship at Aston University, said:
“What we see in the Growth Dashboard is that firm growth and job creation is spread right across the UK and is not limited to a few cities or regions.
“Nor is it restricted to certain types of ‘fashionable’ high-growth firms – there’s a complex growth pipeline of companies in every corner of the country that have different support needs based on their individual ambitions.
“This is incredibly important to understand if we’re going to create an industrial strategy that capitalises on the strengths we already have without over-focusing on star firms, or regions labelled as ‘powerhouses’.”
Addressing the UK’s productivity problem, Prof Hart added:
“In aggregate, it’s certainly the case that the UK has a productivity problem. But we are too preoccupied with average productivity. Within that overall distribution we see some real productivity stars that we refer to as ‘growth heroes’. We need to learn the lessons from these companies and share the reasons behind their success more widely. This will be a major focus of this year’s State of Small Business Britain conference.”
Commenting on the impact the vote to leave the European Union would have on SMEs, Prof Hart said:
“While the Brexit vote has created uncertainty for SMEs, our research shows that the most innovative firms find ways to grow despite shocks to the economy – chiefly by focusing on their productivity and looking to export markets to provide new opportunities.
“That’s not to say everything will be plain sailing, though. In particular, we need to ensure a business-friendly approach to skilled migration because we know that many firms struggle to plug skills gaps in specialised sectors like engineering.
“The Growth Dashboard shows us that we have broad-based growth across the UK. The challenge now is for the government to make the terms of our disengagement and future relationship with the EU clear so that entrepreneurs have a stable framework for further expansion.”
In many ways, Coventry and Warwickshire’s economic performance is a microcosm of the UK as a whole.
Its GVA per head (a measure of productivity) of £24,249 mirrors the UK average of £24,616 and its employment rate, at 73.2%, is also similar to the national figure.
But its net job creation rate stands out. Firms in the area covered by Coventry and Warwickshire Local Enterprise Partnership (LEP) created 23,432 net new jobs in 2014-15. This was the largest number as a proportion of total jobs of any LEP, at 7.5% - beating London’s 6.5%.
Coventry and Warwickshire has a strong heritage in automotive manufacturing represented today by firms like Jaguar Land Rover (based in Whitley, Coventry) and Aston Martin (based in Gaydon, Warwickshire), as well as a sizeable supply chain of smaller firms. Manufacturing employment, at 11.4%, remains above the UK average of 8.5%. Nevertheless, recent years have seen diversification, with more business services firms – including financial, legal and tech companies – springing up.
For Martin Yardley, chief executive of Coventry and Warwickshire LEP, his area’s success at creating fertile ground for businesses rests on streamlining the planning system and making targeted investments in skills to drive productivity growth.
“What the LEP has been better at than anybody thought has been getting the voices and thoughts of business in front of the local authorities,” he says. The LEP has been instrumental in welding the six local authorities together to agree shared housing and employment land allocations.
The LEP is also getting the area moving in a more literal sense: Mr Yardley cites the LEP’s investment of £15m in transport infrastructure improvements as instrumental to Jaguar Land Rover bringing forward a £300m investment in its sites.
The LEP’s main practical support for SMEs is delivered through its Growth Hub, established in 2014. This has created a single point of contact for businesses to engage with local government, grant providers and banks and has already helped create 2,400 jobs and secured £65m in private sector investment.
And on the skills front, Mr Yardley points to the LEP’s £700,000 of funding towards pre-application development for the WMG Academy for Young Engineers, a new technical college in Coventry for 14-18 year-olds providing an education based around in-demand workplace skills.
Rob Mannion’s company, RNF Digital Innovation, exemplifies some of the economic changes in Coventry and Warwickshire. Based in what has been dubbed ‘Silicon Spa’ (Leamington Spa), the firm launched in 2009 and has since specialised in developing mobile apps for businesses.
“We’ve been riding the crest of a wave ever since,” says Rob, who took part in the Goldman Sachs 10,000 Small Businesses business mentoring scheme in 2012. “It’s an extremely fast moving sector.”
The firm has grown explosively over the last few years and is predicting turnover of £1m this year, up from £465,000 just two years ago. This year alone, RNF has taken on five new staff members taking the total to 13.
Many of RNF’s big name clients – including Bridgestone Tyres and Calor Gas - are based literally a stone’s throw away. RNF’s apps allow sales teams on the move to input data directly via an iPad, enabling them to compare options for customers, automate pricing and produce quotations in seconds. One app even allows super-yacht captains to pre-order fuel to their exact requirements and have it waiting on the dockside at the next port.
“Being in the Midlands is not restricting our ability to win business,” said Rob. “We’re very well positioned and because our overheads are lower we can be quite competitive compared to London agencies whose pricing will be somewhat higher than ours.”
Commenting on the impact of Brexit, he added:
“Our business will continue to thrive because we’re working in a sector that is growing exponentially. But others are working on very tight margins, often buying in foreign products and services, all of which are going to be impacted by the weak pound.
“The uncertainty led one of our customers to cancel a project immediately after the result and our international costs have increased by nearly 20%, but despite this we continue have an extremely strong order book and continue to grow. The referendum was only a few months ago and I don’t believe we will really understand the true impact until later on next year and beyond.”
Notes to editors
1. Full report
The full report, UK Growth Dashboard 2016, including detailed maps showing the distribution of firm growth right across the UK, is available on request – please contact James Tout (details below).
About the Enterprise Research Centre
ERC is the UK’s leading independent research institute on the drivers behind the growth and productivity of small and medium-sized enterprises (SMEs).
ERC is producing the new knowledge around SMEs that will allow us to create a business-friendly environment nationwide, grounded in hard evidence. We want to understand what makes entrepreneurs and firms thrive so we can spread the lessons from best practice and make the UK a more successful economy.
The Centre is led by Professors Stephen Roper of Warwick Business School and Mark Hart of Aston University. Our senior researchers are world-class academics from both Aston and Warwick Universities as well as from our partner institutions which include Imperial College, Queens University Belfast and the University of Strathclyde.
For further information, please contact James Tout at Journalista on 07989 610 276 or email email@example.com.