Yorkshire and Humber’s potential £5.4bn growth boost
20 Mar 2018
Businesses in the Yorkshire and Humber region could miss out on £5.4bn1 of untapped growth in 2018.
Our research, Planning for growth, found that in 2018 businesses could leave £72.5 billion untapped potential on the table in the UK. This is the equivalent to creating a new economy the size of Greater Manchester, or put another way this could translate into 1.4 million jobs. In Yorkshire and the Humber, this figure breaks down to £5.4 billion measured as gross value added (GVA).
The research also unveiled a sustainable high-growth group of businesses that nationally achieved 20% or more in growth in 2017 – and sustained growth for the past three years2. These Growth Generators are almost five times more likely to be achieving their one–to-two-year growth targets than the rest of the market. And they are also nearly 10 times more likely to reach their targets than low-to-no growth companies. On top of this financial performance, Growth Generators share a growth mindset based on four key characteristics:
2 invested in top-line growth and willing to seek external funding and engage in M&A activity
3 tech confident
Growth Generators: Regional breakdown
The growth picture for Yorkshire and the Humber
The European Commission’s Regional Innovation Scoreboard 2017 ranks the Yorkshire and Humber region as a strong innovator3. Traditionally a manufacturing-led economy, it now has many growth sectors, with an emerging digital industry, strong financial services and pioneering public services, especially in health and education.
The region’s core cities offer unique growth opportunities, but there are challenges including a skills shortage and issues of inclusion and social mobility, as well as areas of low confidence.
Top 10 barriers to growth
Growth Generators have a clear purpose that drives decision-making. Yorkshire and Humber businesses cite a wide range of key business purposes. These include creating jobs and opportunities locally (30%); being focused on delivering high-quality products and services to customers (25%); and ensuring the security of shareholders, leaders and employees (22%).
One of the areas where Yorkshire and Humber business owners are short of confidence is in implementing company vision, culture and purpose as an accelerator to growth. Just two-thirds (67%) believe they do this effectively compared with 82% of Growth Generators.
Talent, skills and innovation at all levels remain a key accelerator to growth, but just over half (55%) expressed confidence in this area, against 66% of Growth Generators.
As Glynn Robinson, Managing Director at Leeds-based IT consultancy BJSS, says: “Access to key skills, especially digital skills, is an important factor for high-growth businesses, such as ours, to continue to prosper. We work to build relationships between young people and our business to break down barriers to growth. This includes a mentoring scheme between graduates and year 13 students to help them get a view of working life, as well as financing 300 scholarships a year via our partner Turinglab for children aged 11 to 16 from low-income families to learn fundamental coding.”
The role of culture
When asked about a series of identified growth accelerators related to the wider region, just 30% of Yorkshire and Humber businesses felt confident in being able to assimilate local culture and amenities versus 61% of Growth Generators. While 84% of Growth Generators believe the quality of healthcare and general wellbeing in their regions can support growth, only 56% here agreed. Inclusion and equality, an issue identified as a barrier in the region’s cities, revealed another contrast between Yorkshire and Humber businesses and Growth Generators, with 77% of those that stated this as an accelerator confident in their ability to leverage this versus 94% of Growth Generators.
Sharon Watson, Artistic Director of Phoenix Dance Theatre and Chair of the Leeds 2023 Independent Steering Group, comments: “This research shows the importance of the marriage between business and culture. Culture is the beating heart of a place, it creates opportunities for strong economies and compassionate cities. From helping to bring communities together, to celebrating diversity and difference, culture is an essential ingredient to foster a sense of collaboration, progress, place and purpose. During an unprecedented period for Brexit Britain, culture is the one constant that we must capitalise on to help break down barriers and drive future growth.”
In Yorkshire and the Humber, 44% think that the political uncertainty caused by Brexit is holding business back with 41% believing it deters international expansion, despite 48% rating international expansion as important for growth over the next one to two years. It appears that while Yorkshire and Humber businesses understand the opportunities and benefits of international expansion, they need a better understanding of how to navigate the risks before they can make it happen. Four out of five say that having a defined strategy would enable them to achieve international growth ambitions faster. This was followed by a better understanding of the company’s risk exposure in different markets (60%) and clarity about those potential markets (60%).
Growth Generators do not see technology as a barrier to growth and are confident and ready to unleash its potential. In Yorkshire and the Humber, recognition of technology as a growth accelerator is high, with 61% citing it as one of their top five investment priorities. But in terms of investment made so far, technology ranks lower than regulation, risk, talent and implementing company vision, culture and purpose, and partnerships. On the upside, 64% are confident of their ability to implement technology as a growth accelerator.
Invested in the bottom line
Half of Growth Generators put more emphasis on top-line revenue rather than operating profits. However, 42% of businesses in Yorkshire and the Humber see operating profit as the priority, rather than top-line revenue (25%). This is higher than the national average (34%). They are also focused on cutting costs. The region’s businesses may be missing out on growth opportunities by focusing on the bottom line and could benefit from more top-line focus and M&A, in line with Growth Generators. In terms of operations, half put investment in talent to reach growth, again emphasising the importance that the region’s businesses have on putting the right skills in place.
Initial Public Offerings (IPOs) and mergers are another area for growth and expansion with Yorkshire and Humber businesses, with one in five (22%) citing an IPO and 45% a merger or acquisition as part of their plans for revenue growth over the next three to five years, versus 24% and 70% for Growth Generators. Ken Beaty, Non-Executive Chairman of Sheffield-based Sumo Group Plc, says: “As a company that has recently undergone an IPO, it is pleasing that these findings show IPOs and mergers as key drivers of growth for our region. Our IPO has been driven by striving for excellence within the business and, as one of the UK’s largest providers of creative and development services to the global video games and entertainment industries, we are excited about our growth and development and believe public markets represent the best platform to allow Sumo to deliver its strategy.”
Andy Wood, Practice Leader of our Yorkshire and Humber team, added: “Our region is home to strong, successful companies, who have the potential to unlock further growth by learning from Growth Generators. While the region’s businesses share a lot of the same characteristics, are purpose-driven and networked, there may be further opportunities that could be leveraged by seeking their advice.”
Top 10 accelerators to growth
Our Growth 365 team has helped Pricecheck increase their exports by 45%
Our growth survey was conducted between August and September 2017. We heard from 1000 business owners, CEOs, CFOs or CSOs at businesses with turnover of £10 million to £1 billion across all industries and regions4. We also conducted in-depth interviews with 15 CEOs and/or managing directors from high-growth companies, academics and market commentators5. For more about our research, please see our report, Planning for growth.
Measured in terms of GVA (gross value added)
Based on respondents which said in the survey their turnover had increased by 20% or more in the last year