Wednesday January 1st 2020
Digest of news, trends and innovation in the GRID marketplace, December 2015:
Enterprise growth drives jobs | Government enterprise support focuses on LEPs and Catapults | Battery Power | Manufacturers scale back | Streaming services struggle | Top Tech table
ENTERPRISE GROWTH DRIVES JOBS
New year’s resolution? Grow fast, go global / Kiki Loizou, Sunday Times. 27 Dec.
A survey carried out by EY, the professional services, found that more than 70% of entrepreneurs had experienced profit growth this year; 40% had increased earnings by more than 10%.
More than 90% had added to their workforce, with in excess of 40% creating 20 jobs or more in the past 12 months. …More than six in ten of those surveyed cited difficulties finding talent to fill new roles. .. most said they planned to create more jobs next year and expected profit growth for the next three years.
Jobs created at fastest rate for 20 years / Andrew Bounds, Enterprise Editor, FT. 16 Dec.
… analysis of job creation and destruction in the private sector in the 12 months to March 2015 by the Enterprise Research Centre … strip(ping) out sole traders and other enterprises that do not employ anybody. The total number of private sector employees hit a record 20.3m. Some 1m jobs were created by the 300,000 businesses created over the year. …the highest number of start-ups in a single year since comparable records began in 1997.
Another 1.5m jobs were created by existing companies expanding. But subtract the 1.8m lost over the same period and companies more than a year old actually shed jobs.
The total number of employer enterprises across the UK rose to just under 1.8m, also a record. These firms account for approximately one-third of all businesses in the UK, the remaining two-thirds (3.6m) include the self-employed, partnerships and enterprises with zero employees.
Prof Mark Hart, deputy director of the ERC, said … only New Zealand of OECD members had a worse record for getting companies from employing 1-9 people to 10 or more.
Research has found that beginning to export encourages companies to expand. But ONS figures show the number of exporters fell in 2014 to 221,300. The trade deficit hit £4.1bn in October.
GOVERNMENT ENTERPRISE SUPPORT FOCUSES ON LEPs & CATAPULTS
Osborne cuts supplies to march of little makers / Kiki Loizou, Sunday Times. 13 Dec.
The chancellor … had announced spending cuts that mean the death of the Business Growth Service (BGS), which has provided mentors and funds for small companies. Two of its popular schemes, the Growth Accelerator and the Manufacturing Advisory Service (MAS), are already being wound down following the cuts announced in the autumn statement. ...BGS created 110,000 jobs and helped almost 30,000 companies over the past three years. The MAS started in 2002, while the Growth Accelerator followed 10 years later.
Growth hubs … many companies are sceptical that they will fill the hole left by the Business Growth Service. Growth hubs are attached to the 39 national local enterprise partnerships in England and aim to help businesses secure advice and funds. By next April, the government expects them all to be up and running.
Innovate UK delivers support programmes, grants and competitions for science and technology innovators. Its catapult centres, in England and Scotland, are research hubs for ventures large and small in 10 sectors, including: high-value manufacturing, future cities, digital, cell therapy, satellite applications, medicines technologies, offshore renewable energy and transport systems.
For companies seeking growth through overseas expansion, Exporting is Great will run for five years. It will present export opportunities to businesses of all sizes.
Key part of Cable’s industrial strategy scrapped / Jim Pickard, FT. 9 Dec.
The business department ...said the Business Growth Service closure would save the government £84m a year. It said that “local growth hubs”, led by Local Enterprise Partnership, would receive £12m of extra money. …working out as just £300,000 per LEP.
Terry Scuoler, chief executive of the EEF manufacturers group, told the Financial Times “… it must be seen against the equally important and substantial funding which was safeguarded for other valuable and successful programmes which support innovation, research and development, in particular the high value Catapult centres,” he said.
Commodities: Material revolution / Henry Sanderson, FT. 8 Dec.
Changes in the battery market are no less dramatic, with costs set to halve over the next decade, according to Goldman Sachs. It forecasts that electric vehicles will account for 25 per cent of car sales by 2025 from under 3 per cent today.
The technology is changing so quickly that it is difficult to predict which materials will be required and which will be discarded. High prices for any single metal are likely to spur a market for substitutes. For example, growing battery demand is expected to boost prices of cobalt, which is already expensive. That could result in its replacement in batteries by other materials after 2025, according to consultancy CRU. Battery developers are also working on replacing graphite with other materials such as silicon, which could be capable of storing more energy.
MANUFACTURERS SCALE BACK
Manufacturers rein in spending plans in face of slowing trade / Sarah O’Connor, FT. 7 Dec.
Manufacturers are scaling back their hiring and investment plans for the first time in almost six years as their confidence buckles in the face of slower global trade. … latest quarterly survey - of 407 companies - from the EEF manufacturers’ association .
Britain’s economy has continued to recover in spite of the manufacturers’ troubles: economists predict growth of about 2.5 per cent this year and 2.4 per cent next year. That is because manufacturing only accounts for about 10 per cent of the economy, down from about 36 per cent in 1948.
The services sector is now 11 per cent bigger than before the 2008 financial crisis, while the manufacturing sector is 6.5 per cent smaller.
Not every manufacturing sector is struggling: those most closely linked to consumer spending, such as food and drink and cars, continue to do well. The chemical and pharmaceuticals sectors are also set for a better year, according to the EEF.
STREAMING SERVICES STRUGGLE
Losses point to bleak future for music streaming services / Robert Cookson, FT. 3 Dec.
Streaming may be growing rapidly, but it still accounts for a small portion of the $15bn global record industry. In 2014, streaming services represented just 15 per cent of record labels’ revenues, who earned $2.2bn from services such as Spotify, Deezer and Pandora last year — a figure that has quintupled in five years. Sony Music Entertainment, Vivendi’s Universal Music Group, and Warner Music Group. … control about three-quarters of the $15bn-a-year global recorded music market.
But for the streaming services themselves, survival is a struggle. None of the most popular services has ever turned a profit and some people doubt any of them ever will. ....Rdio, a US-based streaming start-up launched in 2010 .. filed for bankruptcy ...Deezer aborted an initial public offering … Spotify, the market leader …is heavily lossmaking
TOP TECH TABLE
The fall and rise of technology juggernauts / Michael Moritz, chairman of Sequoia Capital. FT. 3 Dec.
San Francisco-based buyout firm Francisco Partners analysis…
The 15 technology companies with the largest market capitalisations in 2000 have lost roughly 60 per cent of their combined market value...about $1.35tn … Only one, Microsoft, has a market capitalisation that is higher than in 2000. ….Nortel sported a market value of $209bn …has since gone bankrupt. Cisco’s market value has faded from $403bn to $144bn; Intel’s from $288bn to $161bn; and EMC’s from $218bn to $51bn. …the sharpest declines have been in of systems, hardware and semiconductors. This is because of the continuing decline in the cost of computing, the rise of open-source software, the move to the “cloud” and the emergence of huge datacentres where companies such as Amazon, Google and Facebook are designing their own approaches.
Fifteen companies that were together worth less than $10bn in 2000 are now among the world’s 50 top technology companies as measured by market capitalisation, with a combined worth of $2.1tn. (Had Amazon been included, rather than being classified as a retailer, this number would have swollen by another $250bn). Apple, which even in 2000 was viewed as little more than a curiosity, has risen in value from $6bn to $659bn.
Several of today’s most valuable technology companies did not even exist in 2000. Facebook, LinkedIn and Twitter ... Even Google and Salesforce were barely smudges on the horizon in 2000. These companies now have a combined value of about $850bn. …They have thrived from the artful deployment of software, in particular the “cloud based” variant, and — for Facebook, LinkedIn, Twitter (and Google’s YouTube service) — organising and collating the contributions of their users.
… the fourth, fifth and sixth most valuable technology companies of the day are Alibaba, Tencent and Baidu. … now worth $409bn — testament not just to how much China has progressed in a decade and a half but a harbinger of the next several decades as the country places increasing emphasis on spawning its own technology.
Most investors in technology companies squander vast sums by reacting to short-term jitters or global jolts rather than concentrating on the staying power of those emerging enterprises on the right side of history.
And for the founders and chief executives of all of the current billion-dollar “unicorns” there is another abiding message. Almost all of today’s technology juggernauts formed before about 2008 required smallish amounts of capital. Google, for example, consumed only $8m before turning profitable. Maybe this means that sooner or later a new class of company will come into vogue — a rare species known as the profitable unicorn.