Scots companies’ continued woes at key scale-up stage

● Slight rise in VC funding but total high growth organisations dip, says study

There has been a “modest” increase in funding for fledgling Scottish businesses, but achieving crucial high growth has proved increasingly elusive, a new study unveiled todaybybarclayshasrevealed.

The lender said that in 2016 there was a 9 per cent year-onyear jump in the level of venture capital (VC) available, to reach £12 million. However, this followed a major dip from 2014’s £53m boost and the number of firms receiving VC funding fell to 25 from 27.

Adding to the sector’s troubles was the number of companies receiving expansion funding dropping by 37 per cent to £68m.

Barclays also said that while Scotland is still a strong performer for start-ups, there were only 171 high-growth firms in 2016 compared to 221 in the previous year.

This accounted for a 4 per cent share of companies Ukwide and the fourth-lowest number across 12 regions.

However, the bank pointed out that Scotland’s figures reflect national trends, with the number of companies receiving VC and expansion funding both down from 2015 at a UK level. The number of high-growth companies hit an all-time low, and the number of companies receiving VC investment reached the lowest level in the report’s history.

There was, however, some cause for optimism north of the Border regarding private equity, with 58 companies currently backed by this source of capital. Barclays said the total marks a year-on-year drop from 72, but proportionally sees Scotland rank behind only Wales, in second place, and London.

John Godfrey, director at Barclays of wealth and investments in Scotland, stated that there has always been a robust start-up culture in Scotland, “even in this challenging environment”. He added: “It’s positive to see funding in our region has picked up on last year. However, despite this uplift, investment is down on previous years and the number of high-growth companies has fallen.”

It comes after the first Scottish Startup Survey published earlier this year found that 95 per cent of respondents were seeking further growth funding in the following twelve months, with 47 per cent in the market for VC funding.

Godfrey also said: “At Barclays, we are continuously looking at ways to help support the UK’S entrepreneurial community, from our innovation finance loans to our venture debt funds. We want to ensure enterprises have the tools and resources they need to go on to expand and grow winning businesses that triumph in their industries.”

A separate study published today by merchant bank Close Brothers Group said UK SMES require more support to help shrink the productivity gap with European peers as Brexit unfolds. It said a quarter of such firms plan to invest in new technology and software, but the same percentage are very worried about staff shortages. It also said teaching SMES to measure productivity is key to them improving it.