Unleashing the potential of fastest-growing firms
THE search for the fastest-growing Welsh firms was launched last week in the Western Mail. The Wales Fast Growth 50 recognises those high-growth businesses that make a disproportionate contribution to jobs and wealth creation in the Welsh economy. Since the project was established in 1999, the 652 firms that have appeared on 23 annual listings are estimated to have created 44,000 jobs and generated £25bn of additional turnover.
With research showing that a few high growth firms – defined as those that are growing by more than 20% per annum – disproportionately create jobs and wealth all over the world, such businesses continue to be of interest in driving forward prosperity.
A recent Scale Up Institute report found that while there were 1,250 Welsh scale-ups, Wales had the lowest proportion of such firms relative to the rest of the business population.
In addressing this deficit, it proposed three key factors that will allow Welsh scale-ups to grow – access to UK and international markets (71%), access to talent (56%) and access to finance (56%). Interestingly, access to infrastructure, which seems to be the focus of policymakers and business representative organisations, was rated as important by only four out of 10 growth firms.
In terms of the support required by such firms, the most important were access to non-executive directors (66%), mentors (50%) and peer-topeer networks (41%). While only 28% saw universities as a key source of support, six in 10 wanted to collaborate more with the research facilities of higher education institutions in Wales.
With regard to government resources, only one in four required better access to general support such as the Welsh Government’s Business Wales service. In contrast, 59% wanted to be able to get support from Innovate UK, the UK Government’s innovation body. Given that only 2.6% of Innovate UK funding has gone to Welsh organisations in 2004-21, this suggests that far more needs to be done by the UK Government to ensure those Welsh firms with the most potential for growth have access to this support.
In terms of access to growth capital, while half of scale-up firms in Wales were using or planning to use equity finance, four in 10 felt they had insufficient capital to meet their growth ambitions. Indeed, the study suggests there was a funding gap for highgrowth Welsh firms of around £200m, which raises the question of why such businesses, which have the greatest potential for creating jobs, are not getting the funding they need to do so from high-street banks.
While the Development Bank of Wales remained the biggest individual investor in scale-ups, only 10 such firms were supported by the Welsh Government-owned funder, which suggests a more targeted approach is needed to support the financial requirements of growing Welsh firms.
It is clear that more could be done to support scale-up firms in Wales and this could be achieved in three ways.
First, more knowledge-sharing between the firms and the creation of peer-to-peer networks could facilitate this, as this column suggested last month. This is probably the easiest thing to achieve in the short term and would have the quickest impact.
Second, Welsh universities need to engage with growing firms in a range of ways, supporting their training needs, ensuring greater access to their research facilities and creating links between graduates and scale-ups, potentially through more replacements and internships in such ventures. Creating better links between growth firms and higher education could be a real long-term boost to the Welsh economy, as these are the type of businesses that could be the perfect vehicles for commercialising academic knowledge into the marketplace.
Finally, there needs to be greater cooperation between key actors to help create a scale-up ecosystem which ensures appropriate support is developed and delivered. For example, the creation of a scale-up hub in each of Wales’ four regions could be a step forward in ensuring greater focus on these businesses.
So yes, there remains a challenge to develop more scale-up firms in Wales and to ensure they can create greater prosperity across the nation.
Certainly, the Wales Fast Growth 50 shows us every year that we have scale-ups that are as good, if not better, than their peers in any part of the UK. What we need to do now is to encourage more of them at a time when Wales needs entrepreneurship, innovation and growth more than ever.