IPPR - High growth businesses outside London fail to get support they need
6 Feb 2017 05:52 PM
New report from IPPR shows high-growth businesses spring up across UK, but those outside of London will need more help to flourish and kick-start post-Brexit economy
New research by IPPR, the progressive policy think tank, on high growth businesses shows that despite being located right across the UK, those outside of London struggle to get finance. High growth businesses are those with more than ten employees attaining an employee or turnover growth rate of 20 per cent over a period of three years.
The report finds that:
- High-growth businesses, of which there are more than 12,000, are found in all sectors and all regions of the country: in fact, the North East has the highest proportion of high-growth enterprises of all regions, relative to the total number of businesses;
- However, the supply of finance, particularly equity, is extremely regionally imbalanced: the share of equity finance going to businesses in London is more than twice as high as London’s share of high-growth businesses;
- Businesses with growth ambitions are more likely to have their applications for bank lending rejected, and are more likely to be discouraged from applying for loans in the first place, due to the extra perceived risk they face;
- The Government’s Enterprise Investment Scheme and Seed Enterprise Investment Scheme costs £565 million in income tax and capital gains tax relief. The reliefs overwhelmingly benefit businesses in London, which account for just 18 per cent of the business population and 21 per cent of the UK’s high-growth enterprises, yet received 46 per cent of these reliefs.
IPPR is calling on the government to:
- Give the British Business Bank a specific objective of supporting businesses outside of London to kick start the work of small, high growth firms across the country;
- Review the Enterprise Investment Scheme and Seed Enterprise Investment Scheme to make sure small high growth businesses outside of London, which find it hardest to get finance, benefit.
Izzy Hatfield, economic analyst at IPPR, said:
“This research challenges the idea that only London is the crucible of our best and most exciting small, high growth businesses.
“In fact they exist across the UK. Everyone recognises the importance of supporting them to deliver a dynamic post-Brexit economy, but we show that the government needs to do much more to help those outside of London access the finance they need to grow.”
The regional distribution of high-growth enterprises
| |
Number of high-growth enterprises
|
High-growth enterprises per 1,000 adults
|
High-growth enterprises per 10,000 businesses
|
|
London
|
2610
|
37.8
|
25.8
|
|
South East
|
1800
|
24.9
|
20.0
|
|
North West
|
1385
|
23.8
|
26.5
|
|
East of England
|
1070
|
21.8
|
19.3
|
|
West Midlands
|
1065
|
23.0
|
25.8
|
|
South West
|
1025
|
22.7
|
19.9
|
|
Yorkshire and the Humber
|
890
|
20.4
|
22.7
|
|
East Midlands
|
815
|
21.4
|
22.0
|
|
Scotland
|
800
|
17.9
|
24.6
|
|
Wales
|
440
|
17.3
|
19.8
|
|
North East
|
380
|
17.6
|
25.9
|
|
Northern Ireland
|
215
|
14.7
|
17.3
|
Source: IPPR Analysis of ONS and BEIS Statistics
Equitable equity: Increasing and diversifying finance for high-growth SMEs in the UK's regions
Contact
Becky Malone r.malone@ippr.org 0207 470 6154
Editor’s Notes:
- Figures on the Enterprise Investment Scheme and Seed Enterprise Investment Scheme relate to 2013-2014 for the regional breakdown and 2015-16 to the total cost to taxpayers.
- IPPR aims to influence policy in the present and reinvent progressive politics in the future, and is dedicated to the better country that Britain can be through progressive policy and politics. With nearly 60 staff across four offices throughout the UK, IPPR is Britain’s only national think tank with a truly national presence.
Our independent research is wide ranging, it covers the economy, work, skills, transport, democracy, the environment, education, energy, migration and healthcare among many other areas. ippr.org