Scottish firms struggling to break £1m revenue mark

Scotland tops the UK league table for small firms creating new jobs, but the time taken to scale-up to critical mass is slower than elsewhere, according to new research.

The study shows firms around the Aberdeen area fared best at growing their revenues above three million pounds. Picture: Ian Rutherford
The study shows firms around the Aberdeen area fared best at growing their revenues above three million pounds. Picture: Ian Rutherford

The findings have been revealed by independent institute the Enterprise Research Centre (ERC) in its annual UK “local growth dashboard”, published today.

It reveals that 13.2 per cent of Scots businesses grew staff numbers by a fifth or more per year over the three years to 2015, compared to a UK-wide average of just over 12 per cent. In total, smaller companies north of the Border created some 46,000 net jobs between 2014 and last year alone.

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But when it comes to reaching the milestone of £1 million in annual turnover, Scottish companies fall behind, the report suggests.

Of start-ups in 2012 with first-year revenues of less than £500,000, just 1 per cent of Scots firms hit their first million by 2015, compared to almost 2 per cent for the UK as a whole, and as high as 4.4 per cent of fledgling firms in Belfast.

For those firms taking the next step, growing from £1m to £2m in revenues to £3m-plus in three years, it would appear to be a more complex story – with North-east Scotland, centred on Aberdeen, having the highest rate in the whole of the UK in the 2012-15 period at 11.5 per cent of firms in that bracket.

And when it comes to start-ups, Scotland’s rate of 33.3 new firms per 10,000 people in 2015 was ahead of Wales, at 30.1, and Northern Ireland at 20.6 – but below England’s rate of 48.6. The UK average last year was 45.7.

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Professor Mark Hart, deputy director of the ERC, which represents a consortium of university business schools, said: “What we see in the growth dashboard is that firm growth and job creation is spread right across the UK and is not limited to a few cities or regions.

“Nor is it restricted to certain types of ‘fashionable’ high-growth firms – there’s a ­complex growth pipeline of companies in every corner of the country that have different support needs based on their individual ambitions.

“This is incredibly important to understand if we’re going to create an industrial strategy that capitalises on the strengths we already have without over-focusing on star firms, or regions labelled as ‘powerhouses’.”

He added: “While the Brexit vote has created uncertainty for SMEs, our research shows that the most innovative firms find ways to grow despite shocks to the economy – chiefly by focusing on their productivity and looking to export markets to provide new opportunities.”

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The report’s key findings were unveiled at ERC’s third annual State of Small Business Britain conference held in London.

The ERC is led by Hart, of Aston University, and Professor Stephen Roper of Warwick Business School, with senior researchers from partner institutions which include the University of Strathclyde.