Definition of a high growth firm (HGF): An enterprise with growth in employees or turnover greater than 20% per annum over a three year period, who had at least 10 employees at the start of the period.
An analysis undertaken by the Department for Enterprise, Trade and Investment shows that there were 720 high growth firms in Northern Ireland between 2010 and 2013, accounting for just over 10% of businesses employing 10 or more employees. If a broader definition is adopted and firms with less than 10 employees are included, the number of high growth firms between 2010 and 2013 in Northern Ireland increases to 10,150, a fifth of all firms.
The data also shows that being a HGF:
So high growth firms in Northern Ireland are a diverse bunch. This is very positive and reinforces the contribution which HGFs are making and can make to economic growth and prosperity across Northern Ireland.
Overall, HGFs have not dominated growth in Northern Ireland in recent years by as much as they did previously.
On the flip side, however, the number of HGFs has fallen in Northern Ireland in recent years, a decline which is not just down to the recession, whilst Northern Ireland still has fewer HGFs as a share of the overall business base compared to the UK as a whole. HGFs in Northern Ireland also don’t scale as significantly as elsewhere – between 2010 and 2013, HGFs in Northern Ireland created an average of 29 net jobs compared to 83 net jobs in the UK.
With ever increasing pressure on resources, it would be very helpful if high growth firms could be easily identified and then support channelled to them. What the analysis above shows, is that there are no easy ways to select them. It is not possible, for instance, to focus solely on specific sectors or types of firm to deliver high growth.
This complex picture is reflected in the approach taken by Invest NI in working with its customers, balancing solutions tailored to an individual company’s requirements with more focused support for those firms with the greatest growth potential. Account Development Plans form the bedrock of this work, identifying the key growth opportunities for customers.
“TES has succeeded in winning new customers by offering high quality, customised solutions within the tightest of timescales. The recent awards successes for the company reflect the hard work and dedication of the TES team. Invest NI support has been a key component in the growth achieved by TES.” Brian Taylor, MD TES NI
A key part of the Invest NI approach is the Scaling Team who work closely with a small group of firms to deliver rapid growth. One Invest NI Scaling customer is Cookstown based TES NI. The company has achieved turnover growth of 83% over the past 3 years, focusing on export sales and building a global presence. It has won numerous awards and accolades including being named as one of the UK’s fastest-growing private companies in the inaugural Investec Mid-Market 100 list.
Overall, the scaling group of companies supported by Invest NI grew their employment by 44% between 2010 and 2013, a phase when the economy was recovering from the recession. Behind the overall growth figure of 44% there was, however, a broad range of experiences. At one end of the spectrum, a small number of firms more than doubled their employment, with high growth achieved in the advanced engineering, agri-food and business services sectors, to name but three. Less positively, a handful of firms in the scaling group actually experienced falling or largely static employment levels, highlighting the tough trading conditions over this period.
However, according to a recent report produced by the Enterprise Research Centre (ERC), Northern Ireland is the best place to start and grow a business showing that more businesses in Northern Ireland hit revenues of £1m within their first three years in business, than anywhere else in the UK.
The challenge of equipping more businesses to achieve high growth in Northern Ireland reinforces the importance of expanding the pool of businesses with significant growth potential. Announced yesterday by Minister Bell, Northern Ireland’s first ever start up accelerator, Start Planet, is due to kick off later this year. Originating in the USA a decade ago, a start up accelerator is a new model for developing high potential start up businesses. An accelerator combines a focus on small teams of individuals, pre-seed investment (usually in exchange for equity) and time limited support comprising programmed events and extensive mentoring. Start up Planet will support 20 teams of entrepreneurs over the next 2 years, with each new business which starts up creating, on average, 14 jobs by the end of Year 3. Invest NI has high hopes for the accelerator but it needs to be recognised that it is a completely new concept in Northern Ireland so it is important to be realistic.
A relatively small proportion of firms in Northern Ireland are responsible for a disproportionate share of job creation, even if that share has fallen over time. If the objective of rebalancing the Northern Ireland economy from the public to the private sector is to be achieved, a much bigger business base is needed and there needs to be more firms of scale.
The evidence shows that both start ups and established firms can have rapid growth potential but there is no common set of factors which will drive accelerated growth. This reinforces the need for a diverse set of solutions and a greater understanding of what works over time. Invest NI will continue to develop and refine its approach to driving company growth so that over time the number of HGFs grows and delivers even more benefits to the Northern Ireland economy as a whole.
The HGF definition was first developed by the Organisation for Economic Co-operation and Development and is widely used. It is recognised by some researchers e.g. the Enterprise Research Centre at Aston University that the definition is somewhat arbitrary and that it may not capture the episodic nature of the growth in many fast growing firms. For the purposes of this blog, the HGF definition has been retained.