Ministers urged to search beyond tech start-ups

ACADEMICS have demanded a “significant overhaul” of support for high-growth firms in a damning report that accuses the Scottish and UK governments of focusing too heavily on technology start-ups that are “incapable of growing”.

Brewdog: A 'growth-oriented firm'.. Picture: Neil Hanna

The study says current support – such as research and development (R&D) grants and equity investments – is “substantially misconceived” and may hold back economic growth.

The report – commissioned by the National Endowment for Science, Technology and the Arts (Nesta) from Glasgow, St Andrews and Stirling universities – says too much emphasis is placed on start-ups. Instead, ministers should be trying to aid existing small businesses, offering them advice rather than funding, it says.

Suzanne Mawson, one of the report’s authors from the University of Stirling, said: “It’s frustrating that policymakers continue to push the same old support interventions. Simply providing funding is not the ultimate way of supporting growing firms.

“What these firms really need is a more flexible, responsive and relational support, where peer-to-peer support and specialised advice – for managment buy-outs or acquisition of another company – are prioritised. Advice, not cash, is paramount.”

Colin Mason, professor of entrepreneurship at the University of Glasgow, said: “A significant overhaul of activities is needed towards a stronger support on growth-oriented firms irrespective of their sector.”

University of St Andrews management lecturer Ross Brown added: “The vast majority of high-growth firms are well-established firms from traditional sectors and do not equate with the hypothetical ‘techie’ view.

“Policymakers may be over-subsidising technology firms that are incapable of growing. Policy is largely ineffective in this area, which could be undermining economic growth.

“The UK has some fabulous growth-oriented firms – for example, Brewdog and Skyscanner – but these tend to be in consumer-oriented or service industries not R&D-intensive sectors like life sciences.”

Colin Borland, head of external affairs at the Federation of Small Businesses in Scotland, told The Scotsman: “Enterprise policy should be focused on the economy we have rather than the economy policymakers would like us to have. We have been sceptical about enterprise policies that focus on just a few sectors – it’s much better to improve conditions for all high-growth companies.”

But Laura McMahon, senior policy executive at CBI Scotland, argued: “We wouldn’t call for a wholesale change in enterprise support. We continue to support policies focussing on R&D as we know the most-innovative firms often have big growth ambitions.”

Eleanor Mitchell, head of commercialisation at Scottish Enterprise, defended the economic development agency’s record. She said the body was already offering advice and mentoring as well as funding, and that its “companies of scale” programme and its co-investment schemes were not limited to just technology firms.

“We support companies focused on innovation, but that’s not just technology innovation, it can also be business model or service innovation, for example,” Mitchell added.

Calum Paterson, managing partner at investment firm Scottish Equity Partners, also defended tech support.

“If there are initiatives to help encourage growth then, contrary to the conclusions of this report, there is a pretty strong argument for targeting them towards more-innovative, technology-oriented sectors, rather than more-established industries where where helping one indigenous company is likely to be at the expense of another,” he suggested.

The Scottish Government spokeswoman was unavailable for comment.