Steph Morris, YU Associate Consultant
That was a message that came up repeatedly during panel sessions at Climb25 in Leeds earlier this month. Now, that might sound like the North doesn’t have a lot to offer scale-ups, but actually that is far from the case. Conversations at Climb25 were in fact very upbeat about the breadth and depth of support for new start-ups and scaling businesses in the North. Businesses, entrepreneurs, investors and public sector leaders all spoke warmly of the many assets this part of the UK has to offer to growing businesses.
Let’s take a look at what makes the North such an attractive place to start and scale a business:
Firstly, a recurrent theme that came up at the event is that people are the North’s biggest asset. Highly trained, motivated and resilient – northerners bring a range of skills that are vital to the success of businesses as they start up and grow. In my own part of the North – Yorkshire – the twelve higher education institutions produce a talent pipeline of over 65,000 graduates per year, equipped with specialist skills to meet the needs of regional employers in high-growth clusters and sectors. Universities also provide training and skills support for entrepreneurs and business to help them to understand how to commercialise their ideas, to develop their leadership capability and to make them investment-ready.
The North provides access to networks that support businesses to make connections and build relationships with mentors, investors, suppliers, customers and peers. Access to vibrant, diverse and dynamic networks helps businesses to share knowledge, collaborate and innovate. Regional policy makers and universities play a vital role in facilitating networks centred around local business innovation centres, such as Nexus in Leeds and 3M Buckley Innovation Centre in Huddersfield, as well as those centred around clusters, such as Space Hub Yorkshire.
Vitally, the North of England also offers innovative scale-up businesses access to a wealth of research and specialist expertise through its universities. Collaborating with universities allows businesses to test new ideas, working in partnership on proof of concept and feasibility studies to explore whether an early-stage idea has commercial potential before investing in its further development. Universities are key to de-risking the innovation process, helping many businesses through the so-called ‘valley of death’ during which investment is scarce. Yorkshire Universities, a diverse partnership of all twelve HE institutions in Yorkshire, has developed a framework to encourage university-SME collaborations by helping scaling businesses to understand the range of ways in which working with a university could support their growth aspirations.
But what about the thorny problems of access to money and infrastructure? Well, although these are unquestionably major challenges for SMEs, there are some promising developments in the North.
Let’s start with access to money: investors and businesses at Climb25 reported a funding gap in the North for businesses looking to scale up, especially when seeking investment in the £5-10 million range. Investors report that there is a liquidity challenge for venture capital funds at the moment as investments are tied up in assets that are taking longer than anticipated to exit. This means there is less money available for new investment. There were reports that businesses are looking overseas for this investment, with US venture capital investors and Middle Eastern sovereign wealth funds being two attractive sources of finance for UK companies. But there were also anecdotal reports that northern companies are happy to secure investment from overseas, while remaining firmly rooted in their local communities, attracting external finance to help grow the regional economy. There are great examples of recent developments in the provision of finance to the North, including the growth of Northern Gritstone with its aspiration to grow a ‘Silicon Valley of the North’, and the establishment of the National Wealth Fund, headquartered in Leeds. National developments in the UK’s financial system, such as the Leeds Reforms, coupled with a placed-based approach to driving growth through the Industrial Strategy, present opportunities to grow and diversify the availability of finance to northern companies.
On infrastructure, the challenge presented by panellists at Climb25 was a lack of affordable grow-on space for R&D-intensive companies in the North. Participants spoke highly of the range of business incubators across the North that provide cost-effective workspace and labs for start-ups and early-stage companies. Many of these incubators are run by, or co-located with, universities and offer wraparound support including access to mentoring, training, networking and investment opportunities. However, as businesses scale, they outgrow incubator spaces and need to find alternative premises, most of which do not currently offer the wide range of support services that these growing businesses need. Policy makers in the North are looking to address this issue through major capital development projects such as Freeports (e.g. Humber Freeport) and Investment Zones (e.g. South Yorkshire Investment Zone). These developments are improving the availability of R&D, manufacturing and office space to businesses in the North, creating dynamic spaces with access to networks and support to help businesses at all stages of their growth to scale.
So there’s reason for optimism here. Let’s hope that the message to future audiences at Climb25 will be:
Scale-ups have access to everything they need in the North of England. Full stop.
