Fast-growth companies in Scotland

The aim of the research was to develop a better understanding of fast-growth companies in Scotland, in order to contribute to Scottish Enterprise’s (SE’s) evidence base on their contribution to productivity performance. The report also aimed to identify the characteristics of fast-growth companies in Scotland, and highlight any potential implications of the nature of these companies for economic growth in Scotland.

The research was carried out using the FAME database. The analysis focused on companies with turnover between £5m and £25m, with at least 10 employees, and growth levels of at least 60% between 2011 and 2014.

The analysis found that, based on the definition used for the research, there were 132 fast-growth companies in Scotland in 2014. Although this represents only 3% of all fast-growth companies in the UK, it is the fourth largest regional total, behind the South East, London and Wales. It was found that Scotland produces fast-growth companies from its business base at the same rate as most other UK regions. Fast-growth companies were found to have had a combined turnover that increased from £570m in 2011 to £2bn in 2014, a growth rate of 266%. This suggests that 5% of the type of companies analysed were responsible for 33% of all turnover growth across businesses of this type, highlighting the disproportionate contribution that fast-growth companies make to the economy. It is suggested that Scotland’s largest fast-growth companies tend to be involved in low productivity activities, and therefore the jobs they provide are likely to be low skilled and low paid. As the majority of employment, and employment growth, in fast-growth companies is located in businesses with productivity levels below the total industry average for Scotland, the report suggests that fast-growth companies are not making a positive contribution to the country’s productivity levels or to inclusive growth. It was found that while fast-growth companies are spread across Scotland, 55% are located in Aberdeen, Edinburgh or Glasgow. The largest numbers of fast-growth companies were found to be located in financial and business services; technology and advanced engineering; wholesale and retail; and construction. It was found that most Scottish, and UK, fast-growth companies are located in ‘non-tradeable’ sectors that are more focused on domestic, rather than international markets.

The report does not make any specific recommendations, however it suggests that the findings raise two key policy issues: how to create more and larger fast-growth companies in higher productivity sectors in Scotland, such as life sciences, chemical sciences and aerospace/defence/marine (ADM); and how to increase productivity in low productivity companies and sectors?