Why not pick winners?

This sliver of UK enterprise – about 0.6 per cent of all UK businesses – generates just under 15 per cent of private-sector turnover and about 11 per cent of employment. The one thing they have in common is that they all employ between 50 and 250 people.

This is the heartland of Britain’s economy – our Mittelstand. These businesses operate across many sectors – with a strong profile in manufacturing, healthcare and wholesale. 

Many will have had a rough couple of years; some will still be struggling against depressed demand, a tight credit market and fierce global competition. Others, however, are thriving in a new, global, digital economy. 

Working with LCF Research, we’ve identified a small group of UK businesses that are changing the rules in their industry and taking that dramatic, central innovation into the global market. It’s thrilling to read how such businesses are reinventing huge sectors such as blood-testing, music and online video.

One of the great truisms of the past 25 years is that, when it comes to business and industrial strategy, you can’t pick winners. This will inevitably lead to the state propping up defunct industries of “national significance”. It’s hard to disagree.

But doesn’t everyone pick winners? Banks place their bets on customers they feel are most likely to repay their money; investors want their outrageous returns; companies’ fortunes can be dependent on the arcane lottery of the credit rating system.

The state’s involvement in daily economic life can lead to grotesque aberrations: look at how the enterprise culture of many UK regions has been squashed by huge government investment.

But let’s not lose sight of the numbers here. I’ve quoted before NESTA’s research on the “vital six per cent” of UK companies that will create most of our future employment. Combined with the BIS numbers above, you see vividly how the UK’s fortunes could be turned around by just a few thousand dynamic individuals and businesses.

We may not know who all of them are yet (some will be just baby businesses now), but we do know that they will be global in outlook, underpinned by digital technology and ruthlessly innovative in their view of their industries. At the very least, we should take active steps not to disrupt their fortunes.

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