Thousands of high-growth UK companies in ‘financial ill health’
Tens of thousands of UK companies are showing “distinct early signs of financial ill health” despite being predicted to grow by 20 per cent over the next year, according to a new report.
Data released in the first-ever Growth Flag Annual Report shows that 13.1 per cent of businesses are likely or very likely to grow by a fifth in the following 12 months. However, more than 66,000 of those have been identified as at risk.
Developed by The Growth Company and Red Flag Alert, the report also states that while high-growth firms can be found in every postcode and industrial sector, that potential is not evenly spread across the economy.
Higher levels can be seen in the devolved administrations of Scotland, Wales and Northern Ireland and there are varied levels within and between combined authorities.
On the 66,000 high-growth companies that are showing signs of financial ill health, the report said: “Looking at businesses which simultaneously have high growth potential and distinct signs of financial
ill health could allow local areas or even national governments to better target business support from understanding potential barriers to growth being achieved.
“In the challenging economic context, picking up on signs of distress that may harm the chances of growth being realised and taking action could have transformational impacts in kickstarting broader growth in the economy.”
The report adds that while the UK’s major cities often have high absolute numbers of growth potential businesses, these are generally small proportions of their business bases – just 6 per cent of firms are part of this group in Canada, while Cardiff, Manchester, Birmingham, Liverpool and Edinburgh are all “significantly below” the UK average.
It also states that areas geographically close to but outside of city centres “tend to have higher proportions of businesses with growth and high growth potential”, such as West Berkshire and Essex.
Richard Jeffery, co-founder of Growth Flag and national director, GC Business at The Growth
Company, said: “Understanding where we can find pockets of growth will be crucial to developing
cohesive and evidence-based economic strategies and approaches to business support.
“The research detailed in Growth Flag’s annual report challenges assumptions about the steps
needed to lead the UK economy into a high-growth future, while also demonstrating the approaches
every local authority can take to embrace what it already has and to encourage existing businesses
achieve their full potential.”
The report’s authors have said the analysis identifies for the first time the total assets of high-growth businesses across local authorities which provides an insight into the potential value of growth across different areas.
When looking at combined authorities (CA), the North of Tyne Combined Authority has the highest level
of total assets for high growth potential businesses in a CA at £116bn, while Greater Manchester comes in second with a total of £103bn.
Chief economist and brand ambassador at Red Flag Alert, Dr Nicola Headlam, said: “High growth
SMEs are not always within sexy sectors or in R&D-intensive or frontier firms.
“They may not pull focus when looking at an area, but they are the bedrock of local growth potential and prosperity.”
Headlam continued: “We are ever more convinced that working with detailed data on SME health and propensity for growth should be the bedrock of economic assessment at any scale.
“Evidence-led strategies on the ways in which places can identify and support SMEs with propensity for high growth could be transformative.”