Scaling Up Scotland
This paper sets out the scaleup landscape in Scotland, looking at its strengths, weaknesses and potential to grow. It explores how scaleups might help Scotland to address key challenges, and the role that funding can play to realise this potential.
Scaleups are a key driver of growth and productivity.
Scaleups account for just 0.52% of the total number of Scottish SMEs in 2021, but generated one third of the total SME turnover, contributing £36.12 billion to the Scottish economy. In 2021 there were 1,770 scaleups operating in Scotland with an average turnover of £20.1 million.
Scaleups are more productive than their peers, on average, they generate 61% more turnover per employee than other Scottish enterprises. The vast majority are growing between 20% and 40% in either their turnover or headcount, with a quarter growing at a rate of 50% or more every year.
Scaleups are in every sector and region of Scotland, and are significant exporters.
Scaleups have strengths in health, wholesale and retail, and the professional, scientific and technical
sectors. Whilst 61% of scaleups are found in the central belt, the Aberdeen City & Shire region has the highest scaleup density in Scotland, at 39 per 100k of population. Scottish scaleups are mainly ‘Business to Business’ (B2B) enterprises (70%) and around half are significant exporters with over 50% operating internationally and seeking to expand further.
The investment ecosystem in Scotland has certain strengths at early-stage investment, but there is a gap for investment in scaling businesses.
Early-stage investments are available from a broad range of sources both public and private. However, at the mid to later stages of a business’s growth, particularly where greater levels of investment are required, there are fewer options for accessing growth capital. The ScaleUp Institute estimates a funding gap of between £217 million - £1.5 billion for scaling businesses.
Scaleups are not just ‘accelerated start-ups’ and there are opportunities to unlock additional, unrealised growth amongst existing businesses in Scotland.
42% of scaling businesses are over 20 years old, therefore additional business growth will not only result from start-ups, but also from more established businesses that scale.
Further development of the investment available can deliver business growth in sectors that also deliver positive social and environmental impact.
There is an opportunity for investors, including the growing number of impact investors, to play a key role in supporting businesses to scale up and to realise social and environmental benefits. Of the £1.5 billion maximum funding gap mentioned above, up to £1.1 billion could be for business that provide positive impact benefits, many of which will align to the missions of the Scottish National Investment Bank.