Business Growth and Job
Creation – What a Gig!
Professor Mark Hart
Economics & Strategy Group
16th November 2011
Who’s Creating the Jobs? – Annual Averages (1998–2010)
Exits
Contractions
Gains
1.0
Millions
0.5
0.0
majority of gross jobs (71%)
were
being created by start-0.5
ups and small firms - a total of
1.63-1.0
million jobs.
-1.5
Start-ups
1-9 emps.
10-49
emps.
50-249
emps.
250+ emps.
Existing Businesses
Birth and Death Rates in the West Midlands
% Rate
Birth Rate
19
17
15
13
11
9
7
5
Death Rate
Job Creation and Destruction – West Midlands – 1998-2010
JOB GAINS
17,521 entry
16,269 expansion
JOB LOSSES
15,750 exit
12,461 contraction
OUTCOME
NET 5,579 jobs
GROSS 62,001 jobs
Job Creation and Destruction – West Midlands – 2010
JOB GAINS
14,040 entry
18,854 expansion
JOB LOSSES
18,897 exit
16,749 contraction
OUTCOME
NET -2,752 jobs
GROSS 68,540 jobs
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 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 - 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)
302 HGFs in
Birmingham
PUA
High-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?
• 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