Targeting ‘champion’ businesses can assuage unemployment fears

December 23, 2010

Charlotte Hogg— Charlotte Hogg is Managing Director of Experian UK & Ireland. The opinions expressed are her own.

Recent news that UK unemployment has risen above 2.5 million has refocused attention on the anticipated reduction in public sector employment levels. The Office of Budget Responsibility now expects 330,000 public sector job losses over the next four years, far fewer than it forecast in June, but with the unemployment rate already running at 7.9 percent there are those who doubt the private sector’s ability to fill the employment void.

The question at the centre of the debate is whether the UK is currently experiencing a jobless recovery. It is clear that the private sector needs to create employment – and fast – if long-term economic recovery is to be achieved.  As small and medium enterprises make up 99 percent of the private sector, the bulk of this burden is likely to lie with them.

The impact of austerity measures have thus far been felt most keenly in the North East, South West and East of England.  However, Experian has conducted research that identifies a healthy number of private sector firms in these regions that have the potential to grow quickly and with the right support could make a big difference in stimulating regional employment.  Were they to realise their potential, these small businesses could between them reverse the fortunes of these regions.

On a nationwide level, our recent Insight Report shows that less than 10 percent of small companies are actually responsible for two-thirds of all the new jobs that are created by small to medium sized businesses, a statistic that has wide-ranging implications when it comes to delivering Government support.  The challenge for the Government is how to identify these budding ‘champions’ – that effectively underpin the economy – and give them the support they need to help overcome the various barriers they face and fulfil their potential.

In the past few years considerable efforts have been made to advance the UK’s green and high-tech sectors, two areas of industry with strong economic potential.  However, there is also a danger in over-emphasising sectors in which employment opportunities are likely to be limited by the niche technical skills required.

The truth is that potential champion businesses exist in all sectors; crucially, this includes struggling or declining industries as well as those currently surviving the difficult economic conditions. Targeting business support only at the most successful or fashionable sectors will risk excluding a large number of potential high growth firms in other industries.

The Government is in the process of establishing Local Enterprise Partnerships, Growth Hubs and Regional Growth Funds to assist small businesses and help them create jobs.  It’s vital that these support services are made available to firms across all industries, but are also targeted towards the firms that are best-placed – and have a genuine desire – to grow.

Currently just one in five small businesses with the potential to become high-growth champions manage to achieve this status, and if we’re to avoid a jobless recovery, we need to hone in on these potential champions and give them the support they need to flourish.

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