“Scaleups have the potential to put a rocket under an economy”: EISA’s Mark Brownridge on funding for scaling UK businesses
Written by EISA director general Mark Brownridge.
There is no doubt about it, the UK has a thriving enterprise culture. Indeed the OECD ranks the UK third in the world for startups.
We all know that SMEs are absolutely at the beating heart of our economy, representing some 99.9 per cent of businesses and employing more than 60 per cent of the private sector workforce.
But these positive figures mask a serious problem in our small business ecosystem. Too many of our startups are failing to become ‘scaleups’ – businesses which grow rapidly in revenues and turnover, and which have the potential to put a rocket under an economy.
The OECD ranks us only 13th on this measure. Meanwhile, the Federation of Small Businesses has said SMEs face a massive financing and support gap unless a direct replacement is found for £3.6bn of EU funding that will be lost after 2020.
I am not unduly pessimistic about the long-term economic impact of Brexit, but I am realistic.
There’s sure to be some short-to-medium-term pain as the UK readjusts and refocuses in a post-EU membership landscape.
So we need to find ways to help more businesses reach the scale-up stage, and as the election hots up we are starting to note the main parties’ attitude to helping small businesses.
Currently, there are a number of financing options available to businesses, grants, loans and equity. The problem isn’t necessarily supply, its that businesses are not always aware of them.
That means part of the answer to our scale-up conundrum could be educating businesses about programmes such as the Enterprise Investment Scheme (EIS).
Since EIS was launched in 1993-94, over 26,000 individual companies have received investment through the scheme, and over £20bn of funds have been raised.
That is a fantastic achievement, but we believe many more businesses could benefit from EIS - and the start-up-focused Seed EIS - if they knew more about them.
Armed with such information, we believe more businesses will be able to use EIS and SEIS as keys to unlock their growth potential, which in turn will help secure our economic future after Brexit.
The Scale Up Institute estimates, for example, that converting just 1 per cent of existing companies into scale ups would create 238,000 additional jobs and £38bn in additional annual turnover in the UK within three years - numbers any new government would be proud of!
What are your thoughts? Join the conversation on Twitter with @Bdaily and #ScaleupFocusWeek
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