Full scale: How to ensure more British firms grow to their potential

SUMMARY

• Although the UK has a positive business environment and is a very attractive place for startups, it struggles to help them achieve scale.
• Many of the measures aiming to support scale-ups, such as the creation of the British Business Bank, have focused on the issue of their access to capital.
• This report argues that, although finance is an important obstacle due to weak institutional investment and a lack of venture capital investment outside of London and the South-East, it is neither the only, nor the most important, barrier to the growth of scale-ups.
  • The proportion of SMEs who report that it is difficult to access external finance has fallen from 41% in Q4 2019 to 31% in Q4 2022.
• Contributors to our expert roundtable echoed evidence from the Longitudinal Small Business Survey that the main barrier was access to skills.
  • 69% of SMEs and 76% of high-growth SMEs between 2016-2021 reported staff recruitment and skills as a barrier to their business success.
• Both the education system and the immigration system contribute to this shortfall:
  • 55% of scale-ups face digital skills gaps in the workforce, yet the number of students taking IT or computing qualifications has declined by a third since 2015.
  • Brexit has made it much harder for scale-ups to access high-skilled labour from the EU, while the rise in non-EU immigration has not compensated for this.
• Other obstacles to scale-up growth include the UK’s restrictive planning system for housing and infrastructure, barriers to accessing foreign markets, the tendency of the Government and businesses to favour established businesses in procurement, government regulation and the UK’s business culture.

The report contains 10 recommendations for how to overcome these obstacles, from establishing a cross-governmental Scale-ups Unit and reforming the visa system to investing in addressing skills shortages.