Belfast Telegraph

Poor leadership preventing companies reaching £5m mark

 

Economy Watch: Andrew Webb

I have been fully immersed in a slightly different role of late. Having been a board member of a local enterprise park for a while now, I have been asked to step in to run the park until we find a replacement for our recently retired chief executive.

It has introduced me to a range of fascinating businesses and is giving me a whole new perspective on the entrepreneurship and business support environment here.

I often read about how we aren't entrepreneurial in Northern Ireland - and the statistics do back this up - but I'm seeing a different side to the figures and an increasingly active business community building around an expanding selection of incubators, networking events and a frankly mind-boggling network of support programmes.

It is an oft-repeated, and absolutely correct, line that small businesses are vitally important to our economy.

There are about 120,000 of them and they account for around three-quarters of private sector employment here and about £8 in every £10 of private sector GVA.

Most of these businesses are sole traders, but 30,000 have employees, according to the Federation of Small Business.

Given the importance of the sector, it's a good time to look at where Northern Ireland is when it comes to business starts and business support.

This is a particularly pertinent issue for a range of reasons. Much of our business support is wrapped up in EU funding, Invest NI has just launched a business strategy, and our councils, since the review of public administration, are much more active in business support.

There are a couple of puzzling conundrums at play in the business population. Research from the Enterprise Research Centre in Warwick recently revealed that Northern Ireland had one of the lowest start-up rates for new business across the UK.

That has been a well-known finding for as long as I can remember and remains an unsolved mystery, but the really surprising insight from the work that the Enterprise Research Centre did was their finding that Northern Ireland is the best place to start and grow a business. We have the highest proportion of start-ups that reach £1m turnover after three years than anywhere else in the UK.

That's a statistic we can be proud of but - and here is the real puzzler - our firms don't kick on from here at anything like the rate that happens in other parts of the UK, and we are one of the slowest regions in the UK for companies taking that next step from £1m in turnover to £5m.

Do our entrepreneurs sprint to hit the magic million and run out of steam? Do they max out on local custom and fear the move into new markets? Or maybe our phenomenal quality of life has them realising there's more to everything than chasing cash!

There could be multiple barriers to accelerated growth, from a lack of finance to a lack of skilled employees.

A recurring theme in research into this 'scaling challenge' centres around a lack of managerial systems and, crucially, a weakness in managerial leadership.

There is no shortage of support for companies to address these issues. At the last count, it was estimated that there were 2,000 business support programmes available across here. We really have to question how effective this support is. Could fewer but with more engagement be more effective? International research would back that view up, suggesting that effective change can best be achieved through long-term, hands-on programmes.

Typical business support programmes here, however, seem to have a much lighter touch and shorter term.

Whatever the reasons for our lagging behind other regions, our economic development agencies think we can do better.

Invest NI has just launched its business strategy for 2017-2021, and councils are taking a pro-active role in business support.

The Invest NI strategy wants to see Northern Ireland become the best region in which to start and grow a business.

To that end, we can look forward to an entrepreneurship action plan (we are brilliant at plans, after all), which will see Invest NI be a champion for entrepreneurship.

There are some pointers within the Invest NI strategy as to where its focus will lie. Encouragingly, all seem to align with previously well-defined barriers to growth.

It is particularly encouraging to note one of the themes emerging from the strategy -a strong focus on the vision and skills of leadership teams as core enablers/barriers to growth.

For too long, I have sensed that the focus had been too heavily weighted to trying to treat the symptoms - a lack of exports or a lack of innovation/R&D - rather than the cause of a lack of leadership skills. If we can crack the conundrum, we could unleash serious economic growth across Northern Ireland.

  • Economy Watch: Andrew Webb, Webb Advisory @andrewjudewebb
  • In next week's Economy Watch, we hear from Danske Bank economist Conor Lambe

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