UNLOCKING UK PRODUCTIVITY - Goldman Sachs
UNLOCKING UKPRODUCTIVITYInternationalisation and Innovation in SMEs1
Unlocking UK Productivity – Internationalisation and Innovation in SMEsWe would like to celebrate the 10,000 Small BusinessesUK Graduates. lease note, these are the names of all the businesses that have graduated the programme and include businesses thatPhave since been sold, merged or acquired by other entities.10ticks2nd City Resourcing3G Printing Ltd3P Logistics Ltd4myschools4net Technologies6a ArchitectsA.E.Oscroft & Sons LtdABC Health and Safety LtdAbsolute Translations LtdAccent ClothingAccepta LtdAcies Group LLPActikem LtdActive Financial Services LtdActive TamesideAD Sprinkler ProtectionAdaptive CommunicationSolutionsADC Property Solutions LtdADECS LtdAdelan LtdAdept Consulting Engineers LtdAdept Management LtdAdvance International MediaAdvanced Expert Systems LtdAdvanced Life Support GroupAdviceExtraAerona (Air & Sea) CustomsClearing AgentsAgenda1 AnalyticalServices LtdAgile Group LtdAgripellets LtdAhead PartnershipAidem Digital CICAJB GroupAlan Browne Gauges LtdAlderminster Electrics LtdAlignandPull LtdAlkemygold LtdAlphakineticAmber Support ServicesAmbidect LtdAMSBIOAMsource Technology LtdAngels HousekeepingAngstrom Engineering LtdApadmi LtdApplelec Sign ComponentsUK LtdAquasentryArcis Altos GroupArdent Engineering LtdArdent LtdArford Steel Profiles LtdAristi LtdArk Talent GroupArmitage Construction LtdARMSA ConsultingArris LtdArt Graphics UK LtdASANAshfield Building & Roofing LtdAshley CommunityHousing LtdAskews Legal LLPAspire Sports Health &Fitness LtdAspire4UAuctus ManagementGroup LtdAudacia Consulting LtdAudio Out and The iLabAutodrainAutomotive InsulationsAWSM Farming Ltd andAWSM Recycling LtdAxillium ResearchAyudante CICbaa ram ewe LtdBack on the Map LtdBaltzersens LtdBaraka Coffee House & BarakaBookshopBarbeSkewBase Group LtdBCS Electrics LtdBE LtdBeanmachinesBeehive ResearchBeeverBells Supermarkets Ltd (NisaLocal)BenchmarkBetter Brand Agency LtdBig Cat Group LtdBig StorageBikeRight!Bioclad LtdBiotronics3DBITA PathwaysBlack Dog BallroomBLISSBliss-SystemsBlue Bell TentsBlue SkyBlue Strawberry / Table TalkBluebell Fitted FurnitureBlueberry MarketingSolutions LtdBlueleafBluenileBluesmith InformationSystems LtdBo-Concepts LtdBold DecisionsBoleyn service stationBootstrap CompanyBorwell LtdBowling Hall Medical PracticeBrampton RecruitmentBreaking Free Online LtdbreatheHRBreckland Orchard LtdBreezefree LtdBritannia Anchor RemovalsBri-Tek TechnologiesBrittons CaterersBroadcast Media Services LtdBronze Software Labs LtdBRR Media LtdBurton BeavanBuy My Wardrobe LtdCades LtdCaffe Cream of New BrightonCalibrate ConsultingCalmababy LtdCamellia’s Tea HouseCamerons BMS LtdCampus PR LtdCandelisa People LtdCanonbury Products LtdCaplor Energy LtdCapture 1 DVPCare Companions LtdCare First ManagementServices LtdCare4allCarismaCarnegie Dental ClinicCarpenter Rees LtdCarrs PastiesCarter CorsonCascade Events LtdCassidy & Ashton Group LtdCastle AssociatesCause4Cavendish House PrivateNursery LtdCccakes at the AshCelebrations & CakeCreationsCentral Self DriveCentury One PublishingCertainly Wood LLPCesium GroupCestrian Financial PlanningServices LtdChance Hunter Solicitors LLPCHANGEChangeKitchen CICChapel Press LtdChiropractic Plus LtdChurch Minshull MarinaCimlogic LtdCity LetsCladding Fabrications LtdClaremontClassic Rug CareClear Image MMS LtdClearground LtdClearview Systems LtdClearwater DiamondsCleone Foods LtdCleveland Biotech LtdClick On Tyres LtdClock CreativeCloud2 LtdCloudscape ITCobra BraidsCodegentCoen LtdCohesion Recruitment LtdColebridge EnterprisesCollabco SoftwareCombined Harvesters LtdCommon SenseCompliance LtdCommunity-MindedComplete Care Agency LtdComplete IT systems LtdComplete Kidz CiCCompliance ControlComply Direct LtdComposite Door Company LtdComtec TranslationsConcert NetworksCondor WinesConnexinConrad AndersonContour Casings LtdContract Flooring Solutions LtdControl House LtdCooper Solutions LtdCorecom ConsultingCorporation PopCounter Context LtdCream Consultancy LtdCreative AllianceCreative Ceilings (UK) LtdCreative ExampleCroft Engineering ServicesCrofts & Assinder LtdCrop IntellectCrystal Palace Physiotherapyand Sports Injury CentreCSR GroupCTC Physiotherapy LtdCuro Resourcing LtdCyanx LtdCycle Confident LtdD&AGF LtdD2P AutopartsDales of Thirsk LtdDavid Coles Architects LtdDavid Kohn ArchitectsDee 106.3 LtdDencowear LtdDenwaDES Electrical ContractorsUK LtdDetectronicDiamond Cleaning SolutionsNWDigitalGreenDirect Law & Personnel LtdDirect Voice & DataDisability Resource CentreDJSC Management LtddlbDOC Solar & ElectricalDoncaster RefurnishDon’t Panic ProjectsDouglas Scott LegalRecruitmentDublcheck CleaningDumouchel PatisserieDungarees OnlineDunton Environmental LtdDyer EnvironmentalControls LtdDynasurf (UK) LtdEarly Excellence LtdEast Street ArtsEbstar LtdeBusiness UKE-Com Group LtdEDS (NW) LtdEgelnick and Webb LtdElearning StudiosElectric String LtdElemental Design LtdElliott Hygiene LtdEmmaus LeedsEnable2Energy AceEnergy Gain UK LtdEngage SupportEngage WebEnternships.comEnvirodoorESB Developments LtdEsque LtdEternity FootballEterno Naturals LtdEthos Medical LtdEuprotec LtdEvalucom Consulting LtdEvenbreakEvidentialExquisite Handmade Cakes LtdEziserv and Wisdom SystemsFabrication & Automation LtdFace to Face Digital LtdFahey ContractsFairlawns Fitness LtdFan Frames LtdFeature Media LtdFelix Rosenstiel’s Widow &Son LtdFENS Information LtdFido PRFig Creative LtdFinite SolutionsFirma-Chrome LtdFirst Aid for LifeFirst ProtocolFirst Step Sports LtdFivenines UK LtdFleet DynamicFleetsolveFleximasFormation Media LtdFormula One Print LtdFoster LomasFourth Wall CreativeFownd Supply ManagementFox Wire LtdFrameFree to Learn LtdFripp Design and ResearchFusion Architectural BuildingSystems LtdFuture Arts LtdG&H Sustainability LtdGartenart Swimming PondsGatehouse Consulting LtdGaudio AwardsGF Foods LtdGhostbikesGlassworks HounsellGlobal Bike CompanyGlobal Support Services(UK) LtdGlobaLexicon LtdGood Results PRGoodfish LtdGoodflo LtdGoodwin ElectronicsGraduates Yorkshire LtdGrafton House PreparatorySchoolGrassGreener GroupGreen Kite PropertyServices LtdGreenlight Computers/Dansam Computer ServicesGreenwood MagneticsGrigoriou InteriorsGrowth UKGs Systems LtdGSC Grays LtdGung Ho Communications LtdGuyKat Solutions LtdHacketts PipelineHackney Brewery LtdHalifax Opportunities TrustHall and Stevens PharmacyHalliday Funeral SuppliesHampstead Tea LondonHannon HolmesHarco Engineering LtdHarrow CarersHarvey McQueen LtdHayloft FoodsHCL MarketingCommunicationsHead London LtdHealth Exhange CIC LtdHealth First ALW CICHealthy Step (Sensograph)HebeHendrix Media LtdHeritage Silverware LtdHFM Cleaning LtdHigher Folds CommunityCentre (Leigh)Higher Rhythm LtdHill Cross FurnitureHill McManus LtdHollowaysHolts AcademyHome Instead Senior CareHomestyle (WTC) LtdHopkins CateringEquipment LtdHorizon Platforms LtdHoward Civil Engineering Ltdhr180 Ltdhub.tvHugo Technology LtdHumanstudioHyco Manufacturing LtdI Am TelemarketingI D Security Systems LtdIC Solutions 24/7 LtdIdeal For AllIdeas Box LtdIDS-IndataIE Design Consultancyi-education LtdIMAImage Analysis LtdImmerseImmigration Advice ServiceImpact CreativeRecruitment LtdImpact Signs & Design LtdImpellico Services LtdImperative TrainingIn The Picture and StorycakeIN2 Access and Control LtdInciner8 InternationalIn-comm Training & BusinessServices LtdIndependent FreightSolutions LtdIndestructible Paint LtdIn-Form Consult LtdInnergy LPG LtdInsignia CommunicationsInspire International UK LtdInspired Youth ArtsInstrumental LtdISA Security Services LtdISEIT Training ZoneJ Bradshaw & SonJ Staley Stonework LtdJ W Boylin GroupJ. C. GillespieJ8 PrecisionJA DigitalJAC Healthcare LtdJacob Eco EnergyJagged GlobeJAK Inc LtdJakesJenvey Dynamics LtdJGM AgencyJigsaw CCSJivaji Auto Factors LtdJohn Caunt Scientific LtdJohn WhitakerInternational LtdJollydays Luxury Camping LtdJournalistaJRC Roofing DistributorsJTM Service LtdJuice Learning LtdJust Racing (uk) / Just Racing(challenge)JustParkJVLK2 Drives and Controls LtdKala SangamKangaroo Pouch LtdKaya Responsible Travel LtdKCM Tops LtdKensington Pysio LLPKey Production (London) LtdKeystone SoftwareDevelopment LtdKick for ChangeKilnsey Park EstateKirkwood CareKoolmill Systems LtdKSOLL G DavisLahore Cafe Bar LtdContinued page 512
Contents3Foreword: Goldman Sachs4Foreword: British Business Bank5EXECUTIVE SUMMARY6THE UK’S PRODUCTIVITY CHALLENGE8SMEs are Finally Getting More Credit10How do SMEs Improve Productivity?12INTERNATIONALISATION AND INNOVATION18Internationalisation and Productivity Growth18Innovation and Productivity Growth21The Interdependence of Internationalisation and Innovation23Promoting Innovation and International Activity among SMEs25MINDSETS AND THE GROWTH OF SMES32Is there a Growth ‘Ambition Gap’ in the UK?32Case Study of a Growth-Inclined Business3710KSB UK PARTICIPANTS ANDINTERNATIONALISATION AND INNOVATION3810KSB UK Participants and Internationalisation4010KSB UK and Innovation42How do 10KSB UK Innovators and Exporters Perform?44CONCLUSION: WHAT CAN BE DONE TO BOOSTSME PRODUCTIVITY IN THE UK?46
Foreword:Goldman SachsMichael Sherwood and Richard Gnoddeare co-CEOs of Goldman Sachs InternationalIn 2010 we made a commitment to support the UK economy byproviding business education to small businesses and socialenterprises through 10,000 Small Businesses.We believe the education of high-growth smallbusinesses has a vital role to play in enhancing thisenterprising economy.With this report, we are proud to announce ourpartnership with the British Business Bank and theEnterprise Research Centre – with support fromthe Scale-Up Institute and Said Business School,Oxford University. Together we hope to use ourevidence and findings to help the UK governmentsupport high-growth firms – strengthening the UK’sentrepreneurial ecosystem and boosting productivity.Over the past five years, the programme has seenalmost 1,000 businesses participate in high-qualitypractically-focused business and managementeducation delivered through our university partnersacross four regions in the UK.Today, we are proud to be extending ourcommitment.This recommitment comes at a time when furtherengagements are necessary to support the UKgovernment’s agenda in boosting productivity.In the July 2015 ‘Productivity Plan’, the UKgovernment identified productivity as the ‘challengeof our time’ and set out an ambition to deliver ‘worldbeating productivity’ in driving the next phase ofeconomic growth, a key opportunity for the UK.4We look forward to working with businesses aroundthe UK and creating the most innovative andrelevant learning opportunities. The entrepreneurialcommunity we have created is truly inspirational andwe welcome the chance to collaborate with others insupporting the UK’s growth agenda.
Foreword:British Business BankRon Emerson is Chairman of the British Business BankWhen the British Business Bank was invited by Goldman Sachs towork with them and the Enterprise Research Centre on this report, wewere delighted to contribute to the project.It is important to consider how improvementsto the wider SME support environment and theSME sector in general might be achieved, and thisreport provides valuable insight into how upratinginnovation, internationalisation and productivitymight help build our economy. Much of what isneeded, of course, requires improvements in accessto finance as an enabler.This is where the British Business Bank, one yearafter its formal creation, is beginning to play a majorrole as it delivers on its objectives agreed with thegovernment – increasing the supply of finance in areaswhere finance markets do not work effectively, helpingcreate greater choice for businesses in terms ofproviders and financial products, and providing betterinformation in the market to build confidence amongsmaller businesses in the finance options available.Our work in improving finance markets is helpingto secure wider government objectives aroundinvestment and growth in the economy, and it isnow widely recognised just how important smallerbusinesses are to growth. Addressing the challengesand obstacles they face in accessing the financethey need to start, grow and thrive is at the core ofwhat we do. We work through the market, providingfinance and offering guarantees in partnershipwith over 80 commercial lenders and investors.These partners use our backing – together withtheir own money – to lend to or invest in smaller UKbusinesses. In this way we leverage our impact inthe market by drawing in private sector capital to ourareas of focus – whether it be playing a major role in5the provision of early-stage equity funding, enablinggrowth capital provision, or facilitating senior debtfor more established businesses.We are also raising awareness of finance options throughour highly-regarded Business Finance Guide, jointlypublished with the ICAEW and with contributionsand endorsement from organisations across thefinancial and business sectors. Convening such awide group for the good of smaller UK businesses isa good illustration of what we can achieve throughour unique place in the SME finance ecosystem.As a champion for smaller businesses in the UK,we recognise and welcome the significant financialinvestment and resource commitment that GoldmanSachs has made to businesses so far through their10,000 Small Businesses programme. This kind ofinitiative is clearly making a real difference to thosebusinesses, and we wish its participants every success.From our experience, partnership between privateand public sector – each bringing its own strengthsto bear – can be the optimum solution for smallerbusiness support in the UK, capable of deliveringthe best outcomes for smaller businesses, the publicpurse and for the UK economy more widely in termsof growth and jobs.I hope this report proves valuable in furtheringthe debate around how best to improve oursmaller businesses’ capability in innovation,internationalisation and productivity, and that youfind it interesting and informative.
Executive SummaryThe UK faces a productivity challenge whereby its performancehas weakened compared to the rest of the G8 economies. Researchdemonstrates that small and medium-sized enterprises (SMEs) are akey under-tapped resource for addressing this challenge – especiallywhen engaged in international and innovative activities.This report seeks to identify and encourage theways in which internationalisation and innovationcan act as key drivers for growth among SMEs – inturn boosting UK productivity. The report makes thefollowing arguments:›› The UK has an opportunity to enhance itsproductivity: Whilst before 2008 productivity inthe UK was on a strong upward trend, the UK’sproductivity performance has since weakenedcompared to its international counterparts.Improving this has become a vital agenda for theUK government.›› SMEs have a key role to play in addressing thischallenge: The SME contribution to the UK economyis significant – accounting for 60% of all privatesector jobs and 47% of revenue. Boosting SMEproductivity growth can have a significant impacton UK productivity growth at large.›› The role of internationalisation and innovationin boosting SME productivity growth has beenrelatively underexplored, despite strong evidenceof its positive impact: Whilst much attention hasfocused on structural factors such as access tocapital, leadership and entrepreneurial capabilitiesand having the right talent, evidence strongly6indicates that those businesses that engage ininternational activity and innovation are morelikely to enhance firm performance – includingproductivity growth. It is estimated that between 9 and 12% of nonexporting firms within the UK could becomeexporters and just over half that do export couldbecome persistent exporters. Together thesetwo groups include more than 110,000 SMEsin the UK economy. If they are successfullyencouraged to export or export persistently,an additional 1.15 billion Gross Value Added(GVA) could be added to the UK economywithin the first year. Internationally active SMEs are three timesmore likely to introduce products or servicesthat are new to their sector than those whichare entirely domestic in orientation. Despite this positive relationship, however, only1 in 5 SMEs are exporters.›› The limited engagement by SMEs ininternationalisation and innovation can beexplained, in part, by SMEs’ low growth ambition:UK SMEs are demonstrated to be less ‘growth-
“Productivity is the challenge of our time. It is what makesnations stronger, and families richer. Growth comes eitherfrom more employment, or higher productivity. We have beenexceptionally successful in recent times in growing employment.We are proud of that. But now in the work we do acrossgovernment we need to focus on world-beating productivity, todrive the next phase of our growth1.”Rt. Hon George Osborne and Rt. Hon Sajid Javidinclined’ and ambitious than other G8 economies.The Global Entrepreneurship Monitor alone haspointed to a 17% growth aspiration in the UKamong entrepreneurs vs 27% in the US.In this context, the following recommendationsare considered:1. The overall entrepreneurial ecosystem needsto be nurtured to encourage greater growthambition among SMEs.2. We need to expand and increase appropriateforms of education to help build the UK’sentrepreneurial ecosystem: Practical andimpactful business education for SMEs isfundamental in providing SMEs with the appetiteto internationalise and innovate.3. Capital is a critical enabler for SMEs tointernationalise and innovate: Solutions focuson initiatives that stimulate demand and supportsupply through debt and equity financing.17HMT (2015) “Fixing the foundations: Creating a more prosperousnation”, Cm9098, July 2015
The UK’s Productivity ChallengeThe UK’sProductivity ChallengeEnhancing the UK’sProductivity PotentialGDP PER WORKER(G8 COUNTRIES)Fig 1WHAT DO WE MEAN ANCYANRMGE90The UK has an opportunity to enhance itsproductivity. UK productivity levels are currentlylower than other major European economies – suchas Germany and France2 – and significantly behindthe US. Fig 18ADACANUK100JAPANProductivity is the efficiency inoperating a business: that is,how much output is obtainedfrom a given set of inputs. Thebusiness owner is interestedto know how productive itsassets are to generate profit.Commonly used indicatorssuch as sales to assets, returnon assets, inventory turnover,and receivable turnover areoften subject to market priceand cyclical fluctuations and,therefore, tricky to assessand compare. For that reason,economists use the termproductivity to measure howeffectively businesses uselabour and capital to generateproducts and services.Before the ‘Great Recession’, productivity in the UKwas on a strong upward trend3 . However, since 2008,the UK’s productivity performance has weakenedcompared to the rest of the G8 economies, althoughrecently shows increased signs of revival.
The UK’s Productivity ChallengeFig 2UK-G8 PRODUCTIVITY GAPGDP PER HOUR WORKED: 2007 100G8 EXC. TYGAP IN 2013856%80Measuring productivity as GDP per hour worked, theUK’s productivity performance has been static in theperiod since 2008. Fig 2 The UK-G8 productivity gapin 2013 was 6%.The Bank of England reported the UK’s weaklabour productivity in more absolute terms: in2013 productivity levels were at 14% below thepre-crisis trend level4 . This has since worsenedwith 2015 estimates suggesting a drop to 16%below pre-crisis levels5 . Since the recent recession,productivity change in the UK has been marked by anextraordinarily flat trend over a long period of time6 .2 Office for National Statistics (2015) “International Comparisons ofProductivity – Final Estimates, 2013”, ONS Statistical Bulletin, 20February 2015.3 Office for National Statistics (2015) ibid.4 Barnett, A., Chiu, A., Fra
British Business Bank Ron Emerson is Chairman of the British Business Bank When the British Business Bank was invited by Goldman Sachs to work with them and the Enterprise Research Centre on this report, we were delighted to contribute to the project. It is important to consider how improvements to the wider SME support environment and the
4 Goldman Sachs’ Credit Profile Credit Ratings as of August 3, 2021 1 Preferred Stock includes Group Inc.’s preferred stock and the Normal Automatic Preferred Enhanced Capital Securities (APEX) issued by Goldman Sachs Capital II and Goldman Sachs Capital III Fitch Moody's S&P The Goldman Sachs Group, Inc. Short-term Debt F1 P-1 A-2 Long-term Debt A A2 BBB
Goldman Sachs International. Madeline Meyer 44(20)7774-4593 madeline.r.meyer@gs.com . Goldman Sachs International. Brian Singer, CFA 1(212)902-8259 brian.singer@gs.com . Goldman Sachs & Co. LLC. Derek R. Bingham 1(415)249-7435 derek.bingham@gs.com . Goldman Sachs & Co. LLC. Emma Jones 61(2)9320-1041 emma.jones@gs.com . Goldman Sachs .
2 My references here to Goldman Sachs include the many Goldman Sachs-controlled entities involved in this case, including without limitation the Company, Goldman Sachs Mortgage Company, PFD Holdings LLC, various Whitehall funds, the Archon Group, and WNT Holdings LLC. Goldman Sachs
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Goldman Sachs Group, Inc. April 22, 2009 Page 5 In 1928, the firm formed an investment subsidiary called the Goldman Sachs Trading Corporation to operate a closed-end fun. With an initial 10 million capitalization, the new company expanded rapidly. However, the stock market crash of 1929 dealt Goldman Sachs
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