Conference 2024 presentation master - public final.pptx

Master presentation slidedeck for the ERC State of Small Business Britain Conference 2024

1. @ERC_UK #smallbizbritain24 STATE OF SMALL BUSINESS BRITAIN CONFERENCE 2024 Other Funders

2. 09.45: Chair’s introduction and welcome: Jane Galsworthy, Oxford Innovation Advice 09.50-10.10: Opening presentation: Business support conundrums – what’s the target? Stephen Roper and Mark Hart, Enterprise Research Centre 10.10-10.40: Research presentation: P roductivity heroes – moving on from the Vital 6% , Karen Bonner, Ulster University 10.40-11.15: Panel discussion: Business support and productivity – what works? Andrew Henley, University of Cardiff; James Phipps, Innovation Growth Lab; Eva Kolker,Behavioural Insights Team; Kevin Mole, Enterprise Research Centre. Chair: Mark Hart, Enterprise Research Centre 11.15 - 11.30: Coffee break 11.30-12.00: Research presentation: Exporting and small business productivity , Jun Du, Aston University 12.00-12.20: In conversation: Supporting small business exporting – what works? Alan Lowry, CEO Environmental Street Furniture Ltd,and FSB Northern Ireland in conversation with Stephen Roper, Enterprise Research Centre 09.15 - 12.20 SESSION 1: Enabling small business productivity Event Programme

3. Chair’s introduction and welcome Jane Galsworthy Oxford Innovation Advice

4. Opening presentation Business support conundrums – what’s the target? Stephen Roper Enterprise Research Centre Mark Hart Enterprise Research Centre

5. Stephen Roper and Mark Hart Business Support Conundrums Other Funders

6. Rising levels of start-ups and early-stage entrepreneurial activity but…………….. Great environment to start a business but few scale – 2% get to £1m T/O within 3 years Marginal activity of many of the self-employed and small-scale start-ups – especially for women Inclusivity remains elusive despite some improvements

7. Business dynamism in decline for over a decade – how can we reverse this? Business dynamism important for productivity growth –i.e., creates high level of productive churn Key reason is lack of growth in established firms – proportion growing declined significantly in last decade Scaling remains the major policy challenge in the UK as it has done for decades – how do we break the trend? Access to finance a loaded deck for women-led businesses?

8. Productivity a key policy focus yet.….enduring challenges Remains a large productivity and innovation gap between frontier and non-frontier firms There is a lack of overall investment, especially in the adoption of new digital technologies. Translation of investment into innovation and productivity improvement is also an issue (?) Investment issues are exacerbated by skills shortages, which are highly concentrated spatially There remain open questions over how we can shift the dial on investment, innovation, productivity ….

9. Support for innovation is intensive yet……..remains a problem Public sector innovation support delivers positive outcomes – UKRI-engaged firms grow faster But despite growing R&D tax credit spending, we see persistent declines in innovation rates (particularly product innovation) and SMEs moving out of innovating Why is this? How can we better measure and support and de-risk SME innovation? Partnerships? Peer learning? Pilots?

10. Extensive suite of business support – yet not cutting through Lots of evidence on what works and in what settings (public and private) but the needle not moving on overall growth and productivity at firm level Why not? Poor design and implementation of programmes Too small scale Short-termism – no stability in delivery (organisations and personnel) Awareness of quality support

11. Karen Bonner Ulster University Research presentation Productivity heroes – moving on from the vital 6%

12. Productivity Heroes – moving on from the vital 6% Dr Karen Bonner & Prof Mark Hart 3 rd October 2024

13. Context Note: This presentation contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. The analysis upon which this presentation is based uses research datasets which may not exactly reproduce National Statistics aggregates.

14. Business Dynamism in the UK – a story of long-term decline Source: ONS BSD Business Dynamism in long-term decline since 1998 – Job Allocation Rate (JAR) falling from 35% in 1998 to 23% in 2023 – clear evidence of the enduring productivity problem in the UK

15. Scaling and HGFs….. Hart, M; Prashar, N and Ri, A (2020) “From the Cabinet of Curiosities: The misdirection of research and policy debates on small firm growth”, International small Business Journal, 2020 (with Neha Prashar and Anastasia Ri) https://journalsˌsagepubˌcom/doi/10ˌ1177/0266242620951718 Scaling’ is an important dynamic to nurture in the economy. Current discussions about ‘scale-ups’ profoundly unhelpful from a policy perspective. Having started the ball rolling a decade ago with our work for NESTA (i.e., the Vital 6% - HGFs 2005-08 – 40% had exited the market by 2016!!) we now state: “There’s no such thing as a High-Growth Firm (or ‘scale-ups’) only firms that have high-growth episodes” To use, e.g., the OECD definition of a HGF renders invisible the actual growth that takes place in a firm over its life cycle and indeed the wider firm population! Importance of interplay between firm size and age cannot be understated in our understanding of the scaling process

16. Productivity or Jobs? Source: Anyadike-Danes, M and Hart, M (2016) “Seeing the trees for the wood: going with the grain of the extraordinary heterogeneity of firm-level productivity”, ERC WP, November 2016 Source: ONS BSD From a productivity perspective HGFs, as defined by the OECD, are not an important group of firms. Only 20% of 10+ employee firms that increased their productivity were HGFs (Turnover definition) Only 5% of 10+ employee firms that increased their productivity were HGFs (Jobs definition) When considering both turnover and jobs growth only one ‘space’ where growth in turnover; jobs and productivity are all +ve – the ‘green zone’

17. Productivity Heroes

18. Productivity defined as turnover per employee (turnover/employment) Number of ways that productivity growth can be experienced: Turnover growth (+) > employment growth (+) Turnover growth (+) > no employment change (=0) Turnover growth (+) > employment decline (-) No turnover change (=0) > employment decline (-) Turnover decline (-) < employment decline (-) What is a Productivity Hero? Productivity Heroes

19. Productivity Hero trends Year No. of SMEs (3 years+) No. and % achieving productivty growth No. and % of Productivity Heroes 2000-01 676k 347k (51.3%) 15,622 (4.5%) 2007-08 825k 449k (54.4%) 39,245 (8.8%) 2010-11 883k 359k (40.7%) 23,740 (6.6%) 2018-19 1.13m 557k (49.2%) 37,125 (6.7%) 2021-22 1.22m 453k (37.0%) 36,298 (8.0%) Source: ONS BSD

20. Productivity Heroes in comparison 2021-22 Category Description N Turnover growth % Employment growth % Productivity growth % Cat 1 PHs turnover growth (>0) > emp growth (>0) 36,298 196 29 156 Cat 2 turnover growth (>0) > emp growth (=0) 323,753 44 52 Cat 3 turnover growth (>0) > emp growth (<0) 33,856 46 -21 150 Cat 4 turnover growth (=0) > emp growth (<0) 8,989 -28 111 Cat 5 turnover growth (<0) < emp growth (<0) 50,335 -20 -40 47 In 2021-22 the 36,298 Productivity Heroes added 137k jobs and £178bn turnover to the UK economy Source: ONS BSD

21. Productivity Heroes Contribution to UK Economy 2021 2022 Growth % Growth Employment 470,555 607,106 136,551 29 Turnover £90,768,330,000 £268,545,400,000 £177,777,070,000 195.9 Turn/Emp £192,896 £442,337 £249,441 129.3 Average Emp 13 16.7 3.8 29 Average Rev £2,500,643 £7,398,353 £4,897,710 195.9 N 36,298       Source: ONS BSD

22. What about their productivity level? Source: ONS BSD Productivity level of Productivity Heroes versus SME pop 2021 Productivity level of Productivity Heroes versus other productivity growth categories 2021

23. Productivity Hero Characteristics Source: ONS BSD

24. Persistence of being a Productivity Hero? PH2000-01 PH2007-08 PH2010-11 PH2018-19 PH2021-22 PH2000-01 15,622 926 427 354 145 PH2007-08 926 39,245 2,038 1,257 549 PH2010-11 427 2,038 23,740 874 565 PH2018-19 354 1,257 874 37,125 2,948 PH2021-22 145 549 565 2,948 36,298 No. of Spells/Episodes? PHs 2021-22: 36,298 firms: 89% only one occurrence - 2021-22 10% had two spells: 75% in 2018-19 11% in 2010-11 11% in 2007-08 3% in 2000-01 0.7% had three spells 0.05% had four spells Source: ONS BSD

25. Further analysis by preceding/consecutive years – what were they doing if not a Productivity Hero, another type of productivity growth or not? What’s the story in Northern Ireland? – deeper analysis of the NI cohort Using a commercial datasets ( DataGardner and Red Flag Alert/Growth Flag) to explore and identify Productivity Heroes – need for more variables and qualitative data: - e.g., Project for Economic Intelligence Wales (October 2024 to February 2025): Investigation of their characteristics and, more importantly, the drivers of this productivity growth is of critical importance to addressing the long-standing productivity problem in the UK and Wales. What are the implications for economic and business support policy? So what next?

26. Contact Details: Dr Karen Bonner Principal Economist Email: [email protected] Telephone: [phone] Thank you

27. Kevin Mole Enterprise Research Centre Chair: Mark Hart Enterprise Research Centre Eva Kolker Behavioural Insights Team Andrew Henley University of Cardiff James Phipps Innovation Growth Lab Panel discussion Business support and productivity – what works?

28. Coffee Break

29. Jun Du Aston University Research presentation Exporting and small business productivity

30. Prof. Jun Du Aston University 3 October 2024 ERC Annual Conference Other Funders Exporting and Small Business Productivity

31. Context The Trade and Cooperation Agreement (TCA) fours year on Global Britain and Race to Trillion UK Trade in Goods UK Trade in Services Source: Du J, Liu L, Shepotylo O, Shi, Y, 2024, Unbound: UK Trade Post Brexit, https://www.aston.ac.uk/research/bss/research-centres/business-prosperity/unbound

32. UK Exports: Trend Note: Data from Trade Data Monitor (TDM). 3 month moving average index with January 2019 equals to 1. Aggregate values to EU and ROW, gold (HS7108) excluded.

33. Varieties of Trade

34. Brexit, TCA, UK-EU Trade in Goods (Monthly data)   Export Import   (Monthly data)     Between 2021-2023 (Annual data)   (Monthly data)   (Annual data)   (Annual data)   Between 2021-2022 (Monthly data)   (Annual data)   Source: https://www.aston.ac.uk/research/bss/research-centres/business-prosperity/unbound     Consumer and intermediate goods All sectors, most pronounced: agrifood, textiles, and material-based on manufacturing Impacts are associated with the increased non-tariff measures (NTMs) in trading with the EU A Causal Analysis

35. Why is this a problem… apart from the obvious?

36. Role of NTMs Trade and Productivity across Regions: Understanding the Dynamics and Causal Links 2023-2025 CBP Team Aim: NTMs – Trade NTMs – Productivity Regional distribution Data: HMRC + IBDR/Orbis

37. What we find so far Inputs Outputs Trade restriction (exports) Productive Machine Imports Exports Imports Overall NTMs: Limited; Inspection and Licensing – no effect TBT ↓ SPS ↓ SPS ↓ Inspection ↑ Licensing ↑ SPS; TBT ↑ Size matters: Micro and small firms are more impacted negatively by input NTMs on export value and quantity. Medium and large counterparts appear to experience positive effects. Output NTMs through inspection negatively impact on small firms export quantity, akin to red tape. Output NTMs through TBT positively impact on small firms export quality.

38. Policy Recommendations Mitigate the Negative Effects of the TCA More flexible and adaptive trade policies that aim to renegotiate to reduce non-tariff barriers and regulatory barriers Targeted policy interventions, reconfiguring supply chains and supporting SMEs to adapt to new trade requirements. Reconfigure Supply Chains for Resilience The UK’s disentanglement from EU value chains has resulted in a weakened and more fragmented supply chain. In response, businesses and policymakers must reconfigure supply chains to build resilience by reshoring critical production, diversifying global sourcing, and strengthening infrastructure. Support SME Adaptation and Productivity SMEs, the backbone of the UK economy, are struggling to cope with the increased costs and complexities of new trade barriers. Providing targeted support, including access to finance, export training, and fostering innovation, is essential to help these firms thrive in the post-Brexit landscape.

39. Conclusions

40. [email protected] Linkedin.com /company/enterprise-research- centre - uk - Contact us @ERC_UK www.enterpriseresearch.ac.uk Other Funders Professor Jun Du Enterprise Research Centre Lead for ERC4 WP4 Internationalisation and Productivity Centre Director for Centre for Business Prosperity (CBP) Professor of Economics, Economics, Finance & Entrepreneurship Group Aston Business School, Aston University Birmingham B4 7ET, UK Email: [email protected]

41. In conversation Supporting small business exporting – what works? Alan Lowry CEO, Environmental Street Furniture Ltd., and FSB Northern Ireland Stephen Roper Enterprise Research Centre

42. Lunch & networking

43. 13.15-13.45: Policy case study: The challenges faced by SMEs in Austria and policy response , Karin Bachinger, Austrian Institute for SME Research 13.45-14.20: Panel discussion: Using evidence to inform better business support at local level – What works? Victoria Sutherland, What Works Centre for Local Growth; Robert Wapshott , University of Nottingham; Cathy Keenan, Belfast City Council Chair: Eugenie Golubova , Enterprise Research Centre 14.20-14.35: Refreshment break 14.35-15.00: Business case study: Gripsure UK’s growth and finance journey, Mike Nicholson, Managing Director, Gripsure UK Ltd 15.00-15.35 : Panel discussion: Strengthening financial resilience in small businesses - what works? Liz Barclay, Small Business Commissioner ;Miriam Koreen, OECD; Richard Bearman, British Business Bank Chair: Maria Wishart, Enterprise Research Centre 15.35-15.45 Closing remarks – Jane Galsworthy and Stephen Roper Event Programme 13.15 - 15.45 SESSION 2: Strengthening small business support systems

44. Karin Bachinger Austrian Institute for SME Research Policy case study: The challenges faced by SMEs in Austria and policy response

45. Karin Bachinger / Austrian Institute for SME Research The challenges faced by SMEs in Austria and policy response

46. Over 80 projects per year Since 1954 active in economic research The Austrian Institute for SME Research is an independent non-university research institute in the field of economics and social sciences. Small and medium-sized enterprises (SMEs) are a core area of our research activities. About us

47. The Austrian institutional framework – What‘s special ? Key challenges faced by Austrian SMEs Austria’s policy response Transitioning to a climate neutral economy - Austria's policy response based on findings from ongoing research Recap & conclusion Outline of the presentation

48. The responsibility for SME policy lies with the Ministry of Labour and Economy Corporatism / social partnership - important role of the Chamber of Commerce Strong direct funding system Austrian Research Promotion Agency (FFG) Promotional bank of the Austrian federal government ( aws ) Important driver from the regulatory side : EU What‘s special ? (I) The Austrian institutional framework

49. No formal governance structure specifically designed to coordinate SME policies Monitoring tool : Report „SMEs in focus “ (KMU im Fokus) Annual analysis of the state of Austrian SMEs & overview of SME policies Monitoring progress towards the European SME Strategy for a sustainable and digital Europe What‘s special ? (II) The Austrian institutional framework www.kmuimfokus.at

50. Adoption of digital technologies Transformation to climate neutrality Attracting, training, and retaining skilled workers Business dynamism and productivity / low startup rates Rising costs ( energy , raw materials , production , and labour ) Innovation / innovation capacity Resilience to multiple crises Equity and venture capital financing Key challenges faced by Austrian SMEs

51. Adoption of digital technologies Transformation to climate neutrality Attracting, training, and retaining skilled workers Business dynamism and productivity / low startup rates Rising costs ( energy , raw materials , production , and labour ) Innovation / innovation capacity Resilience to multiple crises Equity and venture capital financing Key Challenges faced by Austrian SMEs

52. Key Focus Topics of the “SMEs in Focus” Reports Over the Past Decade Austria’s policy response Enhancement of Dual Vocational Training and Development of the Skilled Workforce Strengthening Competitiveness and Location Attractiveness , and the Promotion of Startups Promoting Digitalisation and Cutting Red Tape Mitigating the effects of the COVID-19-crisis and the Russia -Ukraine war Tackling the Skilled Labour Shortage Transformation towards a climate-neutral economy Source: Austrian Institute for SME Research

53. Key Focus Topics of the “SMEs in Focus Reports” Over the Past Decade Austria’s policy response Enhancement of Dual Vocational Training and Development of the Skilled Workforce Strengthening Competitiveness and Location Attractiveness , and the Promotion of Startups Promoting Digitalisation and Cutting Red Tape Mitigating the effects of the COVID-19-crisis and the Russia -Ukraine war Tackling the Skilled Labour Shortage Transformation towards a climate-neutral economy Preliminary results of our ongoing research project „TranS4MEr“ Source: Austrian Institute for SME Research

54. TranS4MEr research project : Transformative SME Policy for Broad-Based Decarbonisation Objective : Develop climate mitigation policy goals for SMEs Funded by the Austrian Climate and Energy Fund Background : Transformation to a climate-neutral economy (in Austria by 2040) as a key policy objective, important role of SMEs -> Where and how should the federal government intervene ? Methodology : Enterprise survey Repository of 267 policies – an appraisal of the Austrian climate policy mix from an enterprise perspective Interviews with 21 policy experts Austria’s policy response

55. TranS4MEr research project : Transformative SME Policy for Broad-Based Decarbonisation Objective : Develop climate mitigation policy goals for SMEs Background : Transformation to a climate-neutral economy (in Austria by 2040) as a key policy objective, important role of SMEs -> Where and how should the federal government intervene ? Methodology : Enterprise survey Repository of 267 policies – an appraisal of the Austrian climate policy mix from an enterprise perspective Interviews with 21 policy experts Austria’s policy response

56. Exploratory analysis of the Austrian policy mix - Economic instruments predominate Austria’s policy response Policy repository Compilation of policies at the federal level contributing to climate neutrality of enterprises policies active in 03/2023 – 02/2024 total of 267 policies Source: policy repository (n=267), Austrian Institute for SME Research

57. Thematic scope - Energy transition policies predominate Austria’s policy response Source: policy repository (n=267), Austrian Institute for SME Research Number of policies Federal policies contributing to the climate neutrality of enterprises

58. Thematic scope - Energy transition policies predominate Austria’s policy response Source: policy repository (n=267), Austrian Institute for SME Research Number of policies Federal policies contributing to the climate neutrality of enterprises e.g. Subsidies for energy technologies e.g. waste management

59. Many policies do not specifically target enterprises No climate strategies or implementation plans dedicated to enterprises Few policies are targeted only at SMEs: other categories are more important Target group specificity Austria’s policy response Source: policy repository (n=267), Austrian Institute for SME Research Federal policies contributing to the climate neutrality of enterprises

60. Key intervention points for transformative change towards climate neutrality Rooted in different scientific debates and disciplines Where and how should the federal government intervene ? Austria’s policy response Transformative policy approaches 1) Reorienting towards a climate -neutral economy 2) Ensuring a socially inclusive and just transition 3) Shifting to transformative governance arrangements 4) Creating favourable market frameworks 5) Investing in infrastructures for climate-neutrality 6) Building competitive environmental goods and services industries 7) Stimulating eco-entrepreneurship 8) Fostering the adoption of low-carbon alternatives 9) Creating spaces for experimentation and collaboration 10) Supporting businesses to reduce their carbon footprints Source: Austrian Institute for SME Research

61. Austrian government intervenes in many areas – but some are neglected Austria’s policy response Federal policies contributing to the climate neutrality of enterprises Source: Austrian Institute for SME Research

62. Key challenges for SMEs : Digitalisation , transformation to climate neutrality, skilled labour Austrian policy response : Key challenges are being addressed Stable framework conditions through some long -term support programmes Enterprises are confronted with a large number of diverse policy interventions High proliferation of direct funding / subsidies – Complex funding landscape Few regulatory interventions Recap

63. Transformation to climate -neutral economy : Austrian policy response Ambitious target : climate neutrality by 2040, important role of SMEs Thematic scope : Many measures are too narrowly focused on energy Target groups : Often implicit rather than explicit targets, rarely tailored to SMEs No climate strategies dedicated to the enterprise population Intervention points : The Austrian policy mix is broad, but some key intervention points are neglected, in particular those related to socially inclusive and just transition processes Recap

64. Simplification and guidance e.g. through One-stop shops, policy packaging Target group specific policies Clear objectives and communication for SMEs What is needed ? for the transformation to climate neutrality

65. Senior Researcher Austrian Institute for SME Research [email protected] Karin Bachinger Thank you for your attention !

66. Chair: Eugenie Golubova Enterprise Research Centre Cathy Keenan Belfast City Council Victoria Sutherland What Works Centre for Local Growth Robert Wapshott University of Nottingham Panel discussion Using evidence to inform better business support at local level – what works?

67. Refreshment break

68. Mike Nicholson Managing Director, Gripsure UK Ltd. Business case study Gripsure UK’s growth and finance journey

69. Chair: Maria Wishart Enterprise Research Centre Richard Bearman British Business Bank Liz Barclay Small Business Commissioner Miriam Koreen OECD Panel discussion Strengthening financial resilience in small businesses – what works?

70. Closing remarks Stephen Roper Enterprise Research Centre Jane Galsworthy Oxford Innovation Advice

71. Networking & drinks reception

72. www.enterpriseresearch.ac.uk [email protected] @ERC_UK enterprise-research-centre-uk Contact Us: @ERC_UK #smallbizbritain24 Other Funders