The lack of access to finance is often quoted as a reason why the region’s businesses can’t grow. In the week that a local tech company has ‘retired’ despite securing £3 million in funding I am not sure it is always the case.
I don’t think I have the entrepreneurial gene. Whilst I can get my head around the need for cash I find myself bamboozled by the whole question. The thought of borrowing £3 million would give me sleepless nights. Like I don;’t have enough of those already.
I wonder if we focus too much on big companies. In 2018 there were around 2.6 million companies in the UK. Only 10 thousand of these were big (over 250 employees). The vast, vast majority of businesses are small, with 12 being the average number of employees across all businesses. When it comes to employment, however, big companies are important with around half of all employers working in an organisation over 250 people and half of this half working in businesses over 500 people.
Yes, big companies are important yet so are small and medium ones, after all they are far easier to start and much easier to manage. They are also far less dramatic when and if they fail. The loss of a big company can be devastating for a town or even region. Think the coal mines where some communities are still struggling to come to terms with their closure decades ago.
The North East is good at creating small and medium businesses yet not so good at producing larger ones. The few we have tend to be headquartered elsewhere. I think this may have something to do with the size of our cities and the relatively sparse population density. Edinburgh to the north and London to the south each has their own gravitational pull.
For many, their business is a lifestyle choice, with no desire to be a conglomerate. Happiness is making enough money to live a reasonable lifestyle, prepare for their retirement and have enough cash to manage the ebbs and flows of business.
Perhaps rather than chasing eye-watering funding to find that next unicorn, we should concentrate on the bit that we are good at. We should be the region of small businesses, some of which, as they grow naturally, will find themselves in a good position to reassess their longer term objectives.
Bigger is not always best.