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Stephen Caddick

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Forget the 80/20 Rule - In Business It's the 1% That Will Deliver Growth

Posted: 01/05/2013 13:28

For most of us the 80/20 rule provides an uncannily accurate measure of events - and the world of business is no exception. So I was expecting this effect, known as the Pareto principle, to rear its head as I was reading Goldman Sach's recent report on stimulating small business growth in the UK.

However what most struck me when reading the report was the assertion that the vast majority of small businesses are unlikely to drive the jobs and economic growth which we in the UK's so desperately need.

In fact, it's estimated that in the UK only 1% of small businesses are high growth, and that it's these enterprises that have the capacity to make the most substantial impact on unemployment. The rest are essential to help keep our economy ticking over, but not to drive new growth. The figures bear this out; these high growth businesses that have created 1 million new jobs - some 23% of the total - between 2007 and 2010.

So if we are serious about economic growth in this country we need to pay particular attention to supporting such high growth firms, especially because in the UK and Europe they are in shorter supply than in the US. We need to make sure we provide specific support for them if we want to fast track economic recovery.

It was with this in mind that Goldman Sachs, working with a network of experts from Oxford, Aston, Leeds, Manchester Metropolitan and UCL, set up the 10,000 small business programme. The purpose of the programme is to provide practical support specifically to that 1% of high growth small businesses, and brings together 25-30 entrepreneurs to participate in an intensive course run by the university partners.

The results so far are very promising - of the 480 participants to date, 77% of them indicated an increase in staff employed, with a 23% net increase in their employment, and 16% increase in turnover. The data shows the success of this targeted approach.

The Government makes much about the key role universities can play in driving the economy. Of course, its often forgotten that higher education makes up a significant sector of the economy in its own right - by some estimates generating more than £60bn as a contribution to the economy and providing over 650,000 jobs in the UK.

But it is the role that universities can play in helping business that continues to be a focus of attention. The Government has commissioned Sir Andrew Witty of GlaxoSmithKline to chair an independent review on how universities can build further on relationships between themselves and business to promote economic growth.

No doubt the Witty review will consider the economic benefits of university spinouts, commercialisation of IP and collaborative research partnerships. But laudable as those activities are, they are mostly for the long term and will need to be complemented with activities that will have an immediate impact.

With approximately 1m young people unemployed, we are in critical need of action that will help create jobs and growth and prevent this country losing the potential, of its next generation, and a focus on high growth business must be one of the highest priorities. Networks of university experts, with their commitment to nurturing the future of young adults are perfectly placed to work with large corporations to support our best, fastest growing small businesses to do this. Let's get it done.

 
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