Some businesses do more good than others. This will seem obvious when comparing the practices of a company like Enron with that of Lego, but this point goes deeper than culture and management practices. On average, businesses at different stages of their lifecycle have more or less positive impacts upon the world.
A recent report from Octopus Group shows that high-growth small businesses (HGSBs) create 20% of jobs and add 22% of gross value added, driving increased productivity. HGSBs are defined as companies with more than 20 per cent average annual growth over three years, and between £1m and £20m of annual turnover. Between 2015 and 2016, 22,074 HGSBs created 158,000 new jobs, amounting to over 3,000 new jobs every week. The report also reveals that HGSBs are significantly more productive than the average business, creating an additional two months of economic output every year compared to the average UK business.
But it’s not all good news. HGSBs are waning in number and their economic output fell by 9% year-on-year. And critically, 90% of them face some form of skills shortage, this compares to only 17% of the average UK business. Whatever shade of Brexit we end up with – soft, hard or something in between – Britain’s best businesses need talent to grow. HGSBs aren’t principally concerned about low-skilled workers, most, 62%, find it tricky hiring people with the right technical or practical skills.
As Chris Hulatt, co-founder of Octopus Group, explains: “It’s abundantly clear that, despite being small in number, high growth small businesses are disproportionately important to our economic growth, especially as Britain looks to a future outside of the European Union. We need to ensure that they are given every opportunity to flourish and grow. By championing these businesses and implementing the right policies to unlock their growth potential, they can continue to boost employment and productivity across the country.”
More of HGSBs might well be key to increasing UK productivity, which remains below its pre-financial crisis trend. And as Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy Committee, says in reference to the report: “High growth small businesses are really punching above their weight across the country and it’s great to see the value they provide to the UK economy. Productivity provides the basis for long-term, sustainable growth and improvements in living standards, and by supporting these businesses we can close the productivity gap and increase wages.”
I couldn't agree more. Read more about the report's policy suggestions in my Forbes article.
The Uncommon Good