21 minute read
Review: Business incubators
HOW ARE UK INCUBATORS SUPPORTING BUSINESS GROWTH?
Some of the UK’s most successful businesses have been nurtured through the process of an incubator – but what is an incubator and what does the future hold for the concept? This article will also look at the true impact of their introduction to the UK. How are they evolving? And what support do they offer businesses and entrepreneurs?
Incubators come in many different guises, varying considerably in their offerings and areas of focus. In general, they all share the common remit of helping early-stage businesses achieve growth quickly by providing support around office space, mentoring, professional support, subsidised or free professional services and access to funding. By offering all these resources, participating businesses can focus on achieving product market fit, as opposed to spending valuable time securing this from external sources.
26 How are incubators helping businesses? Typically, incubators work with companies that aim to disrupt current business models in a variety of sectors to grow British industry, both at home and abroad. In late 2019, the Department for Business, Energy & Industrial Strategy (BEIS) issued a report which looked at the effectiveness of UK-based incubators. The report states that out of “428 start-ups that have previously or are currently attending an incubator or accelerator, we find that most start-ups consider the contribution of the incubator or accelerator as significant or vital to their success.” Dr Francine Morris, Associate Dean, Enterprise and Industry Engagement at the University of Salford Business School, gives more detail around the benefit of incubators: “Incubators are vital support systems to those in the early stages of setting up their business.
They can also give the entrepreneurs the necessary training and networks to become successful.”
Dr Francine Morris And, according to Nesta, 73% of start-ups consider the contribution of the incubator or accelerator they attended have been significant or even vital to their success. So, with entrepreneurs and start-ups gaining more opportunities to survive and thrive, the role of incubators has also become crucial to upskilling workers to new age technologies and working practices. Johnathan Matlock from Bristol-based incubator Unit DX comments: “In my experience, one of the key factors of an incubator is to upskill members of a team that wouldn’t have had the opportunity or experience to learn certain skills before. Employing people with the right skills is great, but one of the keys with incubators is providing the opportunity to give people that industryready experience and skills. A key role of incubators should be a way for people to access opportunities to upskill from c-suite, all the way down to apprenticeships.” Matt Smith, Director of Research and Policy at the Centre for Entrepreneurs, agrees. He said: “Incubators are important for closing the skills gap because of the in-house nature of the services which they provide – many offer opportunities to businesses and start-ups to not only develop their businesses but also harness key skills through different services they offer within the incubator space.” Smith also believes that entrepreneurs can benefit heavily from developing their company or companies in an environment like an incubator. He comments: “Entrepreneurs believe direct funding, access to office space, lab space and technical equipment are the most valuable support that incubators can offer. However, access to investors, access to peers, help with team formation, direct funding, press or media exposure, mentoring from an industry expert, help measuring social impact and mentoring from an investor are shown to have the highest positive impact upon entrepreneurs.” becoming a successful and stand-alone business. By providing a collaborative eco-system, these businesses within an incubator can share the trials and tribulations of starting a company – with the environment stopping an entrepreneur from shouting into an echo chamber. Leon Howe, Incubation Manager at Durham City Incubator, comments: “Incubators help businesses by providing a workspace to share with other likeminded entrepreneurs which nurtures collaboration, sharing of experiences and contacts. Providing a space, support and access to investment is critical to any new business. Incubators can develop the founders to understand the stages in starting and growing a business and if they get it right, have the potential to scale and create jobs and wealth for the economy.” Impact on the economy The natural question would be to find out what impact these incubators have had on British businesses and the wider economy – especially as this government (BEIS) has revealed ambitions to continue to support the concept. Howe continues: “Providing a safe environment where founders are supported and also challenged can help them develop the business concept into a business model that can secure investment and scale. Not every business will be a success, however those that succeed are likely to have a greater impact on the economy. “Many incubators in the UK have some flagship businesses they have supported which have grown into successful businesses, creating wealth and employment opportunities. For those that don’t succeed, the founders have the knowledge to establish their next venture and make it a success.” "ENTREPRENEURS BELIEVE DIRECT FUNDING, ACCESS TO OFFICE SPACE, LAB SPACE AND TECHNICAL EQUIPMENT ARE THE MOST VALUABLE SUPPORT THAT INCUBATORS CAN OFFER."
Matt Smith
Individual incubators have provided information on the successes and failures of the companies and individuals that use their platforms and spaces. In 2018, an independent study was carried out by Warwick Economics to access the economic impact of SETsquared – ranked the world’s leading business incubator.
The study concluded that: • 965 businesses were supported by SETsquared between 2015 to 2017, with the partnership providing 3,645 business assists since 2002. • The Gross Value-Added contribution of SETsquaredsupported businesses each year indicates that they have directly contributed a total of £5.8bn to the UK economy between 2002-17. • The level of employment supported by these businesses is estimated at 10,900 jobs in 2017. This is projected to rise to 22,200 by 2030. • Projecting the forward impact of the programme, assuming the level of support continues at the current rate, supported companies could rise to 6,650 and contribute a further £12.4bn to the economy between 2018-2030. • Including an estimate of supply chain impacts of the businesses, the cumulated direct and indirect impacts on the UK economy are estimated to be £8.6bn by 2017 and a further £18.3bn by 2030.
Jane Khedair, Director at Institute of Innovation and Entrepreneurship at London Business School, comments: “Business incubators undoubtedly have a huge impact on the UK economy; creating jobs, stimulating innovation and fostering entrepreneurial flair to enable new products and services to be brought to market which would otherwise remain only as ideas.
The Unit DX team
“Although the selective nature of incubators, only taking on the best startups, makes it difficult to quantify their added value, it’s widely recognised that both success as well as survival rates are generally much higher for businesses which have been supported by the resources an incubator programme typically offers. “It’s well documented that, across the UK, less than 40% of start-ups exist after three years so a survival rate in excess of 80% for the businesses that we incubate at London Business School is hopefully indicative of the efficacy of incubation as a whole.” The growth of incubators has increased significantly in the past few years and has had an positive impact on both regional and national economies. According to Nesta data, in 2019 the presence of an incubator within a two to three kilometre area was associated with increased growth in normalised wages (i.e. average of wages relative to average wages in a specific sector and occupation) and increased high-level occupational change up to four kilometres away.
Examples of successful business incubator services include the SETsquared Partnership, an incubation and start-up growth acceleration network, which is forecast to contribute £30.7bn to the UK economy by 2030. Have they been a success? An additional way of judging the success of incubators is to look at their popularity across the country. In terms of capacity, a report from the Centre for Entrepreneurs showed 75% of UK university incubators were at or close to full capacity, demonstrating their demand from start-ups and entrepreneurs. Matlock comments: “Without these incubator spaces, there wouldn’t be any innovative and disruptive companies entering the market because you are relying on people discovering those elements of starting a business on their own. When an incubator provides a lot of shared resources and advice that can sit across multiple businesses. With businesses in an incubator you can surround yourself with creative and knowledgeable people that can sit across multiple companies – helping them all to share ideas and grow together.”
And the future for the whole incubator space looks set to have a positive impact on the economy too. Matlock comments: “If you look at the government’s Industrial Strategy 4.0, it's about identifying which industries and sectors are going to add to the UK’s GDP over the next ten years.
"One of the key elements of that is that those companies need somewhere to be. These are the spaces where innovation and disruptive technologies are born. Incubators are absolutely critical to the formation of new companies that contribute to the UK economy.”
SWEET CONSTRUCT BENEFITS FROM WESTON COLLEGE SUPPORT
CAN YOU GIVE US AN OVERVIEW OF SWEET CONSTRUCT? Sweet Construct is a commercial construction company based in Flax Bourton. Working as a Main Contractor, we provide all services from formwork to fit-out. This includes design, civil engineering, construction, and with joinery and manufacturing involving our sister company Sweet Joinery.
The company has been in operation for over 40 years and is now run by the third generation of the Sweet family. We have experienced considerable growth in the past 18 months and rebranded in September 2019 from H Sweet and Sons. This growth has led to an office move and the recruitment of many new departments, taking us from 21 employees to more than 60. In January, we were also delighted to win the Enterprising West of England Ones to Watch 2020 Awards for North Somerset. A very proud moment! WHAT ARE THE KEY CONCERNS/ CHALLENGES IN THE CONSTRUCTION INDUSTRY? Skills shortage is a major challenge in the industry, threatened by an aging workforce and by new technologies. At Sweet Construct, we recognise the importance of retaining our key employees and we want our people to enjoy working for us by giving them more than just a job. Developing our people is a priority, and we have rolled out initiatives such as communications training because good communications help to drive engagement. We also have company-wide personal development plans to help the team map their careers and a clear focus on upskilling our early careers and apprenticeships team through a programme of bespoke training and workshops.
WHY ESTABLISH A PARTNERSHIP WITH WESTON COLLEGE? We have chosen to work with Weston College as they are clearly aligned to our business needs. One of our key objectives for 2020 is to secure more work within a 90-minute radius of our head office so that our teams can enjoy a greater work/life balance and in order for us to deliver the best possible service to clients. Weston College fits perfectly with that ambition as the location is ideal for those on our early careers and apprenticeships programme. We also wanted to strengthen our relationship with the community and provide high-quality employment for the local area. We selected Weston College because we are confident their apprenticeships would be the perfect way to recruit new employees, as well as to upskill existing colleagues. WHAT IMPACT HAS THE PARTNERSHIP HAD? Through our partnership with Weston College we have employed apprentices from intermediate (level 2) through to higher apprentices (level 4) and have another due to start in September. The people that come to us from Weston College are highly motivated and skilled, backed by a support team of tutors and assessors, and an impressive range of apprenticeships and diploma courses. Overall, we remain extremely impressed with the experience we have had working with Weston College, from the personal service we get with the Account Manager and Work Placement Officer, to the recruitment support we have had from the Apprenticeships team. WHAT ARE SWEET CONSTRUCT’S FUTURE AMBITIONS? We plan to continue to grow and develop our early careers and apprenticeships programme, and will continue to work closely with Weston College, notably incorporating the Construction Manager Apprenticeship (level 4) into our plans for future pathways to site management roles. We also look forward to engaging on the new T-Level programme and welcoming a digital work placement student later in the year. These are exciting times for Sweet Construct and for construction in the region. We are really pleased to be working with Weston College to achieve our ambitions for growth and recruitment of skilled, motivated teams. BLM speaks to Emma Tate - Early Careers & Apprenticeships Lead at Sweet Construct
Shaping Britain’s next generation of entrepreneurs
Alack of specialist teaching means most UK teenagers leave school with little or no business knowledge. Business Leader talks to Sharon Davies, CEO of Young Enterprise, to learn how the finance and enterprise education charity is working to fill the void.
Entrepreneurs stimulate growth, create opportunity and drive innovation and social change – so why isn’t the UK education system doing more to develop these skills in future generations? Only a quarter of the nation’s Generation Z leaves school with any specialist entrepreneurial education under their belts, according to a recent YouGov survey, and as many as one in two go further, saying their education has failed to prepare them for the world of work. The impact is that young people lack both the nous and the confidence to embark
30 upon entrepreneurial careers – and at a time when UK business needs dynamic leaders, this is a major worry.
‘Crucial for Britain’ There is no quick fix, but the government is being urged to look at teaching reforms as a key first step. Sir Anthony Seldon is Vice Chancellor at the University of Buckingham, which has recently secured pioneering private sector support to match-fund fees on enterprise degree courses to make its business courses more accessible. He believes British politics needs to take notice of the challenge facing industry in the wake of Brexit, and says classroom investment is essential if the nation is to remain a global business power. He said: “As British business faces an uncertain future, it is vital that we support entrepreneurialism, and ensure Britain remains a world leader in enterprise and innovation. But to do this we must nurture our next generation to enable young entrepreneurial talent to shine through.
“For too long, entrepreneurialism has been deprioritised in schools and children have been taught to avoid risk. This is a mistake.
“We urge Prime Minister Boris Johnson to get entrepreneurialism on the curriculum in schools and change the perception on enterprise education. Teaching enterprise in schools is crucial for Britain to have the edge in creating ambitious entrepreneurs.” That view is endorsed by Phillip Salter, founder of The Entrepreneurs Network, who agrees future success hinges on an improved education system. He said: “Despite political turmoil, Britain has continued to remain a global hub of entrepreneurship. However, for this to truly continue we can’t overlook key issues such as talent and nurturing young entrepreneurs. A strong start-up eco-system is key to economic growth and innovation in Britain, and to maintain this we must consider modernising school curriculums to encourage entrepreneurialism.”
‘A massive game-changer’ Delve a little deeper, and it becomes evident there is already a potential solution out there – albeit one which needs support from business to truly turn the tide. Young Enterprise is a national financial and enterprise education charity. Launched in 1962, it now helps more than 300,000 young people a year, supplementing their schooling with specialist business coaching – a service which extends to guiding schools and teachers too. At its head is CEO Sharon Davies, a passionate advocate of entrepreneurial education. Davies believes businesses must work with schools to reduce disadvantage gaps so young people can flourish in the corporate world. She said: “We have a belief that all young people should be able to access financial and enterprise education. “We provide opportunities for them to learn to earn and to manage their money, and to develop an enterprising mindset, which obviously is key. “We’re leaving the EU, and those skills are going to be absolutely pertinent to the future of this country.” Crucially, Davies knows first-hand how important support of this type can be.
Sharon Davies
corporates we work with, so the skills those young people are developing are real-world applicable. “We know there is a massive gap between what employers are looking for, and young people coming out perhaps not prepared for the world of work. “What we’re trying to do is really bring closer together the world of learning and the labour market. “What we’re talking about is young people who are adaptable, creative, curious – they have the right attitude and the right mindset.” ‘We can’t do it alone’ At present, Young Enterprise is supported by 6,000 volunteers and 3,500 businesses, and operates in around 40% of secondary schools in England and Wales. However, it has clear ambitions to extend that reach. A new three-year strategy – called No Time Like The Future – is aiming high. “We want to deliver a million learning opportunities for young people to get that opportunity to build a bright future,” says Davies. “To do that we will need to mobilise 40,000 volunteers, teachers and alumni, and we will need to secure an investment of £16m. “No Time Like The Future is really a positive opportunity for us to galvanise the country at a time when we are leaving the EU. “The potential we have got is to really develop a homegrown entrepreneurial pipeline of young people that are able to develop critical skills – adaptability, curiosity, creativity. “You can only do that if you invest in young people now. We can’t do that alone, we absolutely want the support of businesses, that’s key, and I would love to talk to any businesses that are interested in working with us to do that. “You’d get the opportunity to build the profile of your business, to professionally develop your staff, and you could have a direct impact on supporting young people to build a better future in your community.” "AS BRITISH BUSINESS FACES AN UNCERTAIN FUTURE, IT IS VITAL THAT WE SUPPORT ENTREPRENEURIALISM, AND ENSURE BRITAIN REMAINS A WORLD LEADER IN ENTERPRISE AND INNOVATION."
Sir Anthony Seldon She left home herself at 16, and ‘moved around a lot’ in a series of temporary jobs, before a chance encounter with a youth worker proved a major influence on her future direction. She said: “This youth worker was someone who was interested in me developing myself, without any angles, and I had never come across anyone like that before; someone who genuinely wanted me to do better, who believed I had some value in the world and that I mattered. “I felt that someone had given me a break, and I continue to feel that this sort of opportunity is a massive game-changer for people.” ‘Bringing influencers into the classroom’ Young Enterprise’s contemporary activities are varied and evolving. Its Company Programme gives students real-life experience of setting up and running a company, and its Tenner Challenge encourages them to be creative and resourceful in growing their cash. Private sector support is available, as is backing and resources for teachers, while there is also a wide range of digital assets available to ensure its reach is not limited by geography. “We try to work with the school to establish what it is they are looking for,” says Davies. “There is support there for the teachers in terms of lesson plans and other support. We can provide online resources on how to utilise those programmes within the curriculum, and we also have volunteer business advisors, where a mentor can come in once a week or once a fortnight. “We want to bring influencers into the classroom, so children get a better perspective on what’s out there.” In essence, it’s all about equipping young people with the tools and knowhow to thrive in the real world. Davies continues: “One of the biggest things is making sure we work very closely with our employment partners, the
Why was 2019 a record breaking year for UK exports?
According to new figures published by the Office for National Statistics (ONS), last year was a recordbreaking year for UK exports. Up until the end of December, the UK has experienced 45 consecutive months of annual export growth on a rolling annual basis.
UK companies exported £689bn worth of goods and services across the globe in 2019 – up by 5.0% on 2018. Some of the UK’s fastest-growing goods exports include cereals, which were worth £2.5bn, up by 16.6%; fish and shellfish, which were worth £2.1bn, up by 13.1%; and meat and meat preparations, which were worth £2.1bn, up by 12.4%. Secretary of State for International Trade, Liz Truss, said: "The UK is an exporting superpower and these new statistics show UK companies are exporting record levels of goods and services. As a newlyindependent trading nation, we will strike new trade deals with key partners across the world, open up new markets and make it even easier for our businesses to meet global demand." Goods exports to non-EU countries grew by 13.6% in the lead-up to Brexit. The value of British goods sold to countries outside of the EU increased throughout 2019, according to Lloyds Bank Commercial Bank. The increase helped offset the falling value of UK exports to the continent. While analysis of the latest trade figures from HMRC revealed the EU is still the UK’s single largest trading partner, the value of British goods exported to the continent fell from £173.3bn in the year ending Q1 2019 to £168.5bn in the year ending Q3 2019, according to the Lloyds Bank International Trade Index. Prior to this, the value of UK goods exported to the EU had grown consistently since 2016. The index, compiled in partnership with IHS Markit, showed the UK sold £177.1bn of goods to markets outside the EU in the year ending Q3 2019, up from £170.9bn in the year ending Q1 2019. Accounting for the trend, the report shows over the past three years, UK exports to Asia and the USA have grown at a compounded rate of 11.3% and 7.7% respectively, while new exports orders to the EU grew by just 6.9% per year. The value of British exports to the UK’s top ten markets in Asia grew over the same three-year period. Whisky and spirits exports grew rapidly, with sales to Vietnam and India increasing by 204% and 73% respectively. The Lloyds Bank International Trade Index also found economic contraction in Europe contrasted with the performance of countries outside the EU in the final quarter of 2019, highlighting further opportunities for UK exporters in far-away markets in 2020. Gwynne Master, Managing Director and Global Head of Trade for Lloyds Bank Global Transaction Banking, said: “It’s encouraging to see that UK exporters aren’t limiting
themselves to markets close to home. The fluctuating economic environment could prompt more businesses to take advantage of a diverse range of overseas markets, which in turn will hopefully enable increased sales and revenue for UK exporters. “Last year, tension between the world’s biggest economies undoubtably had an impact on global trade. Productive talks and a new deal between China and the US signed last month could represent the start of this tension dissipating, creating further opportunities for UK exporters.” According to IHS Markit PMI (economic indicators derived from monthly surveys of private sector companies) data, the economies of Germany and the Netherlands – two of the top five destinations for UK exports – softened for the first time in more than six years. Germany’s PMI for Q4 2019 was 49.7, down from 50.3 in Q3, while the Netherlands saw an index of 48.5 in Q4. Weaker economic conditions were also recorded in Italy, Austria, Poland and the Czech Republic (49.8, 46.8, 45.9, 44.8). A reading of above 50 indicates growth, while one below 50 signifies a decrease. Meanwhile, economic growth was measured in the USA (51.9) and China (52.6), and across Asia (51.1) between October and December.
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