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The London Stock Exchange’s (LSE) latest annual ‘1,000 Companies To Inspire Britain’, has for the first time selected to profile in detail some of the enterprises within the green and sustainable arena that made the cut in this year’s study. Around £500 million (c.$650m) was generated in revenues last year by these dozen or so dynamic firms among the thousand and they are investing further.

The 150-page publication from the LSE, the world’s second-largest financial market by number of companies listed, is the fourth edition of their annual report since 2013.

It identifies the United Kingdom’s most dynamic small and medium-sized enterprises (SMEs) and high growth potential companies and regions. SMEs are the lifeblood of the British economy and create up to two-thirds of all new jobs in the country, account for 60% of all private sector employment and around half (47%) of all private sector turnover in the UK.

So we should be taking their contribution seriously. But right now, if one takes a look at the government’s ‘Building our Industrial Strategy’ consultation paper, Britain is on average one day a week less productive than France, Germany and the US. That’s a sobering thought.

According to Xavier Rolet, CEO of the London Stock Exchange Group (LSEG) writing in a foreword to the current report “the best of British small business” are highlighted. The French-born exchange head, added: “Combined with the fact that the UK created a record number of 650,000 start-up firms in 2016, this report starkly illustrates the economic potential of the UK’s SME’s.”

A London Stock Exchange sign sits on glass in the atrium of the LSEG Plc’s offices in Paternoster Square in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg).

The report, which was based on data crunched by financial technology company DueDil, gives a platform to firms growing at “70% on average” that requires firms to have out-performed their sectors. In order to build the list, DueDil combined key financial performance indicators and sector benchmarks available via its online tool.

Drilling down into how much the 1,000 companies that made the grade have grown from 2012 to 2016 by annual revenue size, the £6m-£50m segment (833 companies) witnessed 68% growth, the £50m-£100m revenue bracket (112 companies) saw 72% growth and the £100m-£200m segment (44 companies) reached 139%.

Company Status & Size

To qualify for selection, companies have to be registered and active in the UK (companies whose parent is incorporated in a foreign country are excluded, except for specific tax shelters). While Ltd., PLC and LLP entities are all considered, investment vehicles and funds are excluded, as are charities and non-profit organizations.

The independent company or consolidated group revenues had to be in the range of £6m to £250m based on latest Companies House filings, with entities incorporated within the past three years (i.e. after November 1, 2012) excluded.

Each company’s average turnover growth rate was calculated over a three-year period and based on four sets of accounts – where four were available.

Sector Representation

The biggest industry sector represented in terms of the number of companies in this year’s report – engineering and construction (134 companies) – is followed by financial services (82). Thereafter it is retail (63), manufacturing (60), professional services (59) and food and beverage (58).

Over 50% of the companies hark form outside London and the south-east of the country, with more than 35% coming from the regions of the Northern ‘Powerhouse’ (97 in the North West of England/42 in Greater Manchester) and Midland’s Engine (80 in the West Midlands, 76 in the East Midlands and six from Birmingham). The average annual revenue growth in the West Midlands was 60% between 2012 and 2016.

The UK snapshot published in recent days this May also revealed that 288 companies are based in the Greater London, 119 in the South East of England, 100 in the East of England, while are 73 represented from the Yorkshire and The Humber region, with 57 in the South West of England (seven being in Devon).

Scotland accounted for 41 companies in the list with the average annual growth in the region being 91% over the period 2012-2016. SMEs play a pivotal role in the Scottish economy, with 348,000 such entities operating in this region and providing an estimated 1.2m jobs.

The majority of fast growing companies represented in the study are micro-companies, with annual revenues ranging from £6m to £50m.

Rolet stated that: “We need to help more of these smaller companies to scale-up to the next level and beyond.” He added: “While debt may be a suitable funding tool to help established blue-chip firms, it is ill-suited to help SMEs, entrepreneurs and high-growth potential companies.”

But today around 80% of UK SME lending is still in the form of debt. And, small companies taking on a bank loan must prioritize managing that debt – or risk default – rather than using all their human and financial capital to innovate and grow.