Incredible number of fast-growth British companies founded in recessionary times
8 min read
22 November 2016
Everyone is looking for a business success secret sauce, and our analysis of fast-growth British companies has shown a correlation with economic slowdowns.
Our Hot 100 list is out, and while it shouldn’t be surprising, firms created after 2008 are a rare find – but looking at corporate age allowed us to discover a surprising group of fast-growth British companies that ploughed through a crisis to great success.
Ever heard the saying “grow fast or die slow”? Well, it’s the epitome of our 2016 Hot 100 list, putting a spotlight on the UK’s fast-growth British companies. How do we know what we’re talking about? Well, the proof is in the data, courtesy of Jordan’s and Companies House, and it’s allowed us to gain deeper insight into British business – such as corporate age groups.
Corporate age has been argued as one of the most important determinants of growth, and with our oldest firms scratching the 1850s – RGB Building Supplies and Hays Travel – we’ve managed to gain a substantial pool of company ages to test the theory out.
To put it simply, the years 1850-1979 collectively unveiled 25 (still fast-growing) companies on the Hot 100. But in a much shorter span of time – 2000-10 – 27 companies were created, with some even being founded during and after 2008.
Those 27 firms show that while young firms have high failure rates, those businesses exhibit higher average growth rates in comparison to older firms. It echoes 2013 research from Page Ouimet and Rebecca Zarutskie – entitled “The Relationship Between Firm Age, Employee Age and Growth”.
It suggested: “On average, young employees in young firms earn higher wages than young employees in older firms. Further, young employees disproportionately join young firms with greater innovation potential and that then exhibit higher growth.”
One could say that those rolling with the times are reaping the most rewards. Take Signature Pubs, for example, the most successful venture created by brothers Nic and Garreth Wood in 2006. The Scottish-based firm has seen significant growth thanks to a smorgasbord of portfolios and a healthy dose of innovative thinking.
The two masterminded a £10m+ deal to acquire and transform the Rutland Hotel, which boasts the UK’s first interactive iBar. And behind said growth is the ability to be different in a highly crowded era. Of this, Garreth Wood said: “People want something that stands out, little points of difference. It’s all about a new concept.”
Arguably, it’s far easier now to start a business than it was in the 1850s, but let’s not ignore the power of the older firm – especially those “born” between 1980-89. It’s the “time period cluster” to produce the second largest group of fast-growing firms on the list – after those created between 2000-07.
Sewells Reservoir Construction (SRC), created in 1989, is an excellent example in our fast-growth British companies ranking, being well-acquainted with the Hot 100 – it featured in last year’s list as well. While it highlights the Woods’ point on staying current, SRC had long recognised that the ability to know when to make a change is a crucial one – it could lead to your next opportunity.
As was suggested in our previous profiling of the firm when we noted that in 2011 the company opened a quarry in Ardleigh – away from the comforts of Essex for the first time – which resulted in the production of sand and gravel for clients. Some two years later and the firm dramatically changed the way the business was run in order to stay ahead. SRC moved on from operating solely with contract drivers and hired vehicles by activating its first company fleet.”
But what we intriguingly found after delving into the different time clusters was that fast-growth British companies came hand-in hand with the ability to go through troubled waters.
The 1980s, for example, began with a recession before having what’s deemed as the “longest peace-time expansion on record”. It brought an end to double-digit inflation – a whopping 19.6 per cent at the time – gradually resting on 3.5 per cent in 1987. This stagflation, as they call it, gave way to the robust growth and perseverance of nine firms on the Hot 100.
The Great Depression, all the way to the mid-1970s recessions and the 2008 financial crisis, all spurred numerous firms. In fact, we could overzealously say recessions had borne almost 50 per cent of our list. In reality it was 40 per cent – when you count the date of recession and the three years directly after it – but it remains quite a high number given that one tends to link recessions with businesses closing down.
Firms like the Wernick Group though, founded just after the Great Depression, shows it’s possible, and used its experiences to help it wade through the many more recessions that hit Britain. According to chairman David Wernick: “In 1931-32 the level of unemployment averaged 15 per cent, compared with a maximum rate of a little over eight per cent during the 2008 recession. In reality the figures were even worse, since the official statistics covered only insured workers. Many families experienced long periods of extreme poverty in an era without the safety nets brought by the post-war Beveridge settlement. Sam Wernick [the firm’s creator] just about kept the business afloat.
“While his three eldest sons were away, Sam Wernick found that his business began to prosper after the trying times of the 1930s. Like so many other manufacturers, he began carrying out work for the government. As food became scarce and rationing was introduced, posters everywhere were urging people to ‘Dig For Victory!’ and he tapped into a growing demand for garden sheds and poultry houses.”
The first mid-1970s recession, made worse by an oil crisis, lack of production and the decline of traditional UK industries, was quite prominent as well – it saw nine entries on the list. More importantly, however, 1994 was the year which saw the most firms on the Hot 100 – six.
At the end of the day, however, this shouldn’t be such a shocking revelation. Disney, General Electric, and even Apple, all started in tough economic times – look where those fast-growth British companies are today.