Business Growth and Job Business Growth and Job Creation – What a Gig!Creation – What a Gig!

Professor Mark HartEconomics & Strategy Group 16th November 2011

Who’s Creating the Jobs? – Annual Averages (1998–2010)Who’s Creating the Jobs? – Annual Averages (1998–2010)

-1.5

-1.0

-0.5

0.0

0.5

1.0

Start-ups 1-9 emps. 10-49 emps.

50-249 emps.

250+ emps.

Mill

ions

Existing Businesses

Exits Contractions Gains

majority of gross jobs (71%) were being created by start-ups and small firms - a total of 1.63 million jobs.

Birth and Death Rates in the West Midlands Birth and Death Rates in the West Midlands

579

1113151719

% R

ate

Birth Rate Death Rate

Job Creation and Destruction – West Midlands – 1998-2010Job Creation and Destruction – West Midlands – 1998-2010

Job Creation and Destruction – West Midlands – 2010Job Creation and Destruction – West Midlands – 2010

Summary Summary

• The ability of the private sector to create jobs is crucial to the economic recovery - we have set out some of the dynamics of that process in some very simplistic metrics on job gains and losses.

• The majority of jobs in the UK were created by small firms; they also demonstrated the greatest levels of churn – intensified since 2008.

• Smaller firms have been increasing their share of total employment year on year and in 2010 their share was triple that in 1998.

High-Growth Firms – the obvious solution!High-Growth Firms – the obvious solution!

• High-growth firms are of central importance to economic policy. These ‘exceptional firms’ have the potential to drive UK economic performance through their extreme rates of growth.

• ….and they are expected to play a major role in increasing employment as the economy emerges from the current downturn.

• But despite the importance of business growth for job creation and productivity growth, we do not really know much about how businesses grow in the UK.

High-Growth Firms and Job Creation - UKHigh-Growth Firms and Job Creation - UK

Econometric analysis shows that innovation is driving business growth. The effect is more marked the faster a company is growing.

Faster growing firms are more likely to continue to innovate.

Source : NESTA, Measuring Business Growth, The Vital 6%.Contributing author – Prof Mark Hart , Aston Business School

Geography of High-Growth Firms (2007-2010)Geography of High-Growth Firms (2007-2010)

302 HGFs in Birmingham PUA

High-Growth Firms: Contribution to Jobs in BirminghamHigh-Growth Firms: Contribution to Jobs in Birmingham

•The ~ 140 high-growth firms responsible for an increase of around 10,000 net jobs

•In comparison, the ~ 600 firms (with 10 or more employees) that had average annual growth of 1-19 per cent increased their employment by 20,000 net jobs.

•High growth firms had a 2.5 fold increase in employment compared to a rate of increase of just 1.1 for these more modestly growing firms.

Time to get real about HGFs?Time to get real about HGFs?

• HGFs are few in number ...... and very few have been involved with public sector business support

• They are in a range of sectors; most are between 10-49 employees and are well established (5+ years trading)

• High growth is episodic and a ‘random event’

• Need to move away from a policy fixation with HGFs and focus on businesses with growth potential .......

• Only 3% of start-ups get to £1million TO in 3 years – turning this around is more challenging.....

• Trade development and innovative business practices the key