Growth of Scottish SMES lagging behind other parts of the UK

Scotland’s small and medium-sized enterprises (SMES) are growing more slowly than their counterparts elsewhere in the UK, according to an annual healthcheck report out today.

Figures from the UK government funded Enterprise Research Centre (ERC) found that Scotland’s rate of new start-ups of 33 per 10,000 people is significantly below the UK average of 50.

Of firms that survive their early years, Scottish companies are also slow to grow according to the ERC’S annual UK Local Growth Dashboard. Only 1.3 per cent reach turnover of more than £1 million in their first three years compared to a UK average of 1.9 per cent.

The picture is similar for established firms “stepping up” from a turnover of £1m-£2m to £3m-plus in three years, with Scotland’s rate of 5.3 per cent the lowest in the UK where the average stands at 7.2 per cent.

Productivity growth over the 2014-17 period – where a faster increase in turnover than employment indicates a rise – was also relatively subdued in Scotland, with 7.4 per cent of firms achieving this against a UK average of 8.4 per cent.

The report found that startup rates are highest in London and the wider south of England, with hotspots also in the Midlands and North. Northern Ireland has some of the UK’S fastest-growing and most productive firms. The Northern Powerhouse region also performed strongly on productivity, led by Greater Manchester and Greater Leeds.

Professor Mark Hart, deputy director of the ERC, said the findings challenge some of the preconceptions about the “hotspots” of business growth across the UK.

“What’s clear is that there are pockets of SME dynamism right across the country and it’s not as simplistic as either a Northsouth or urban-rural split. That being said, it’s also true that firms in some parts of the country face more of a struggle to scale up and grow their productivity,” he said.

“The challenge now for policymakers is to learn the lessons of what’s working at local level so that we spread best practice right across the country. This is especially important as the UK prepares for Brexit to help mitigate any shock.”