Small firms are revving Britain’s economic engine
LAST week I found myself at a dinner with some leading businessmen, and a few journalists. It was held under Chatham House rules, so I’ll have to keep their identities to myself.
There was, of course, the usual gloom over Gordon Brown, and a lack of confidence in his policies for the economy. On a more upbeat note, I suggested that the next wave of economic growth would be led by entrepreneurs. As soon as the comment had left my mouth, a titan of industry said: “You can’t really believe that.” He looked horrified.
ANAMERICAN IN THE UK
It’s fascinating that what seems blindly obvious to me is not so clear to others. It could be because I come from California, the world’s seventh largest economy. Its success was built on the back of high-growth firms which – in many instances – didn’t exist 10 years ago. Now they are defining entire industries.
I recently had a conversation with Jonathan Kestenbaum, chief executive of Nesta, a former senior executive at Apax Partners, and a director of the UK’s innovation agency, the Technology Strategy Board.
Nesta’s research shows that a vital six per cent of UK companies generate the vast majority of jobs, having a disproportionately positive effect on their local communities and industries.
In 2008, there were some 11,500 firms in the UK that could be classified as “high growth companies”. They created more than 54 per cent of new jobs. And it’s not just about businesses in the South East, or technology firms. According to Nesta, high growth firms can be found across Britain – and in every sector.
And new industries – whether they be mobile banking, social gaming or digital music – are always driven by high growth firms. It is their innovation that makes them grow quickly.
MAKING THECASEFORSTART UPS
So why is the case for entrepreneurialism so hard for some to accept? Those entrepreneurs that care about recreating Great Britain often arouse suspicion, with people assuming that we’re up to no good because we’re self-interested and make too much money. Can’t the big companies just take care of the next wave of new stuff, they ask.
But, as the Nesta research shows, by focusing on building more high-growth firms, we are not creating a small group of winners, but revving up the engine that runs the UK. We are trying to build a legacy for the country.
So, the next time you hear some snide comment about start-ups being child’s play, or a jealous rant about venture capital-backed firms only profiting their founders, don’t let it go. Small becomes big, and start ups have changed, and will change the world. We will all benefit – so we should all be proud.
Julie Meyer is chief executive of Ariadne capital.