ERC Business Demography Research Theme

Reference Group Presentation 8th July 2015

Agenda • Update on activity since December meeting • Millennial 2000 – BIS sponsored survey – update - MH • “Getting in under the hood: firm and job dynamics in the UK

before, during, and after the Great Recession” – MAD & MH • “Decomposing UK Aggregate Labour Productivity and Growth

1998--2013” – JD & KB

• AOB

Activity since December • ERC Publications:

– “Contribution to Job Creation by High Growth SMEs” – Anyadike-Danes and Hart (July 2015)

• Presentations: – Anyadike-Danes, M; Bonner, K and Hart, M (2015) “Micro-enterprises

and their contribution to job growth”, paper presented to the ERC-CDFA conference on micro-enterprises on 1st June 2015.

– Anyadike-Danes, M and Hart, M (2015) “Fecundity, survival and growth: high growth firms in the UK and their contribution to job creation, a demographic perspective”, paper presented at a workshop on “A Long-Run Approach to Entrepreneurship. The Demography of Firms and Industries in Europe: Past, Present and Future Perspectives” at Södertörn University, Stockholm, Sweden, May 28-29, 2015.

Activity (contd.)

• Academic Papers: – Anyadike-Danes, M; M Hart and J Du. 2015. "Firm Dynamics and Job

Creation in the UK: 1998-2013" International Small Business Journal, Vol. 33 (1) 12-27.

– Anyadike-Danes, M et al (2015) “An international cohort comparison of size effects on job growth”, Small Business Economics , forthcoming

• Workshops: – Business Population and Demographic Statistics User Group, BIS

London, “UK Business Demography” (June 2015)

• Growth Dashboard – 2015 – with Business Growth Service – Follow-on work with various LEPs – notably for the 3 West Midlands

LEPs in the new Combined Authority and SEMLEP.

Engagement

• The Scale-up Institute – Sherry Coutu (Launch June 2015) - formally involved in monitoring the evidence base

• OECD project on ‘dynamics of employment’ – UK component • Invest NI – HGFs and Firm growth for the new sub-regional

framework • BBB – evaluation of EFG • UKCES – HR practices and strategies and SME growth • BIS/HMT – input into pre-budget discussions related to

productivity – leading to ERC Insight Paper

MILLENNIAL 2000 – ‘M2000’

Context

• In 1998, 240,000 firms were born – most employed fewer than 5 people

• In 2014 - ~26,000 of these firms still in business (11%)

• 67% haven’t grown at all

Who are the Millennial 2000?

– 1,230 firms had 1-4 employees in 1998 But created 40x number of jobs they had in year one – 1,131 firms had <£100k sales in 1998 But generated 80x amount of first year sales – 412 firms in both categories Created 77x number of jobs they started with AND generated 137x amount of first year sales

M2000 Contribution to the UK Economy in 2014

• Employ c.110,000 people and generate around £16bn sales

• On average each M2000 firm now employs

~55 people and generates sales of ~£8.5m

Adding Jobs for 16 years

Generating Revenues for 16 Years

The M2000 Survey

• How they grew 1998-2014 • Was it a story of ‘luck’ or………………? • Strategic behaviour

– business model development; markets; innovation; knowledge sourcing;

• Funding – bank, equity, alternative finance • External advice – private and public • Leadership, Management, Skills

– evolution of the ownership/management team

What are the M2000 telling us? [Emerging Findings - 219 firms – final achieved sample

of 362 firms - analysis starts 13th July]

So far – • They are in ALL sectors of the economy and in all

parts of the UK • Over half are family businesses – and many of the

Founders still actively involved in the business • Predominantly independent businesses and most are

B2B • 1 in 3 have a formal Board of Directors

Period of Most Substantial Growth

A story of Exporting and/or Innovation?

• In 2015 – ~half sell internationally - and those that are have been exporting for more than 10 years

• … a higher proportion than in the wider economy

(20%)

• 2 out of 3 had innovated but not in the last 3 years

Finance

• A third had initial capital of <£10k – almost no PE or VC involvement

• 1 in 4 actively searching for external finance since

2012 – primarily bank finance (average sought - £700k)

• Only 1 in 10, of those seeking finance, did not obtain the finance they were seeking

Impact of the Great Recession

• Recession adversely affected about a third

• Many grew substantially during the Great Recession – how? – All about UK markets – much less internationally – Less about innovation – Not about M&A! – Most ran down reserves or managed costs

External Advice

• Legal advisors, accountants and bank managers

• Around 1 in 3 have made use of government business support – most of these still doing so

• Thirst for knowledge: – Technology; professional information; intelligence about

market competitors; skills

FIRM AND JOB DYNAMICS & THE GREAT RECESSION

DECOMPOSING UK AGGREGATE LABOUR PRODUCTIVITY

Discussion

• Priorities to January 2016 - wrapping up our 3-year work package

• Of note: – Productivity work – dissemination and further

analysis – particularly on the regional dimension – Millennial 2000 – reporting in September 2015 – Business support analysis – linked BSD/CRM data – Evaluation of EFG for BBB – Firm Growth and Skills – UKCES project – Growth, Diversity and LEPs – Themes 3 & 6

Contact us:

If you would like any more information about the Business Demography theme and any of its activities please contact the Theme Lead, Mark Hart at

mark.hart@aston.ac.uk or Michael Anyadike-Danes at m.anyadike-danes@ston.ac.uk or

Jun Du at j.du@aston.ac.uk or Karen Bonner at k.bonner1@aston.ac.uk

More details about the activities of the ERC and our latest events can be found at:

www.enterpriseresearch.ac.uk