HGSBs Are Making A Significant Contribution To The Economy

The successes and contributions to the UK's economy of high-growth small businesses (HGSBs) have been highlighted in a new study.

Fund management company Octopus Investments has analysed the activity of this type of SME, making some significant findings, the Telegraph reports.

To be classed as a HGSB, a firm must generate between £1 million and £20 million annually and have grown by more than 20 per cent for at least three years.

Octopus' results show that HGSBs are creating around 256,000 new jobs every year, which equates to approximately 5,000 each week. Therefore, this indicates that in the region of 667,000 people are currently employed by these high-growth SMEs, providing a substantial contribution to the country's economy.

In addition, HGSBs accounted for 36.2 per cent of Britain's gross value added economic growth during 2013, due to their combined annual turnover of £114.4 billion.

What's more, just three per cent of these SMEs recorded a loss in the 12 months leading up to August 2014 - something that has led to HGSB turnover increasing by more than 40 per cent year-on-year.

Despite these successes, Octopus found a significant north-south divide among HGSBs, with over one-third based in London or the south-east. This means fewer than 1,000 are located up north.

Figures show that around one in 25 London employees works for a high-growth SME, but in Wales, this falls to just one in 80.

Chief executive officer of Octopus Investments Simon Rogerson commented: "Out of the seven million businesses that exist in the UK today, just 30,000 of these are HGSBs. Yet this tiny universe of companies are punching way above their weight.

"This report shows they need to be given serious consideration and we need to do everything we can to help them flourish."

Business secretary Vince Cable added: "[The] government recognises that a small percentage of firms generate a disproportionate amount of innovation and employment growth."

Expert Opinion

This research provides an interesting insight into some of the sub-categories of businesses which exist and can be defined by the broader term of small and medium-sized enterprise. While many SMEs are smaller firms made up of only a handful of staff, there are larger organisations within that bracket which have enjoyed significant growth and development as the economy has improved. <br/> <br/>"Such companies set an important example to other businesses about what can be achieved with the right help and support. We cannot stress enough how key advice can make a huge difference in the development of small businesses." Steven Beahan - Partner