High-growth firms boost region’s economy

Gear4Music chief executive Andrew Wass (Picture: Russell Sach)

Gear4Music chief executive Andrew Wass (Picture: Russell Sach)

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A small group of companies were responsible for nearly a third of growth in the Yorkshire and Humber last year.

Research from Octopus Investments found just 1,500 firms created 30 per cent of the region’s economic expansion in 2014.

These companies generated and their staff generated £5.8bn of turnover in 2014.

Around 46,000 people in Yorkshire and the Humber worked for a high growth small business last year - equal to one in 57 employees.

Leeds has one of the highest concentrations of these firms outside of London, with 127 based in Leeds Central, Octopus said.

High growth small businesses are companies achieving more than 20 per cent average annual growth in turnover over a three-year period, with an annual turnover between £1 and £20 m.

The Octopus High Growth Small Business Report, produced by the Centre for Economics and Business Research (Cebr) on behalf of Octopus, urged the Government to do more to boost the number of these rapidly expanding firms in order to bridge the North-South divide.

More than two in five high growth small businesses is based in London and the South East, the study found.

If the number of these firms increased by 25 per cent in every region in the next five years, it would significantly boost job creation and growth, the report said.

In Yorkshire and the Humber, an additional 11,518 jobs and £404m additional economic output could be generated by 2020.

Last year, high growth small businesses represented less than one per cent of UK businesses and less than three per cent of total UK GDP, the report found.

However, the 22,470 British firms that were defined as a high growth small businesses created on average 4,500 new jobs each week in 2014 - three times more positions than were created within FTSE 100 companies.

Simon Rogerson, chief executive of Octopus, said high growth small businesses are “all too easily lost within the broader SME universe”. He said: “These are the companies that could make a real difference to people’s lives in Yorkshire, through their innovation and tremendous contribution to the local economy.

“There is a real need for more of these extraordinary businesses to exist here in order to bring prosperity and growth to the region.”

Executives within some of the region’s most successful SMEs said more investment is needed to support growth in Yorkshire and the Humber.

Andrew Wass, chief executive of York-based Gear4music, said the region needs more investment to boost high-growth ventures.

He said: “The success of a business such as ours is entirely defined by the people that work within it, and York continues to be a fantastic place to recruit and develop talent, because it offers a standard of living that few other places can match.

“Although York is well connected by train - less than 2 hours to London - it needs more investment into road transport and commercial property if it’s really going to create the right environment to develop more fast growing businesses like ours.”

Lisa Pogson, director of Airmaster Air Conditioning in Sheffield, said: “The Northern Powerhouse is never going to happen unless the Government invests into the infrastructure up here.

“The roads are terrible. People feel that all the money is invested in infrastructure in the South.

“I think they’re investing money in the wrong place, which is a shame as there is lots of potential for growth companies to be successful here if they have the right support.”

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SMEs in Yorkshire and the Humber are likely to consider a wide range of finance options and advice when growing their venture, including turning to friends and family, according to the Business Banking Insight (BBI).

An ICM poll found that 30 per cent of the region’s businesses would consider approaching acquaintances and relations for business investment and 52 per cent of businesses would turn to their friends and family for guidance around finance.

Almost one in five (19 per cent) companies would consider peer-to-peer lending to expand their business, compared with a national average of 23 per cent.

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