One of our biggest focuses in the last 12 months has been quantifying the economic and social value that NorthEdge and our portfolio contributes to the economy from the UK regions.

We commissioned business economist Mark Gregory to undertake an independent review of our economic and social impact, which shows that in 2023 the activities of NorthEdge and our portfolio generated £844m of Gross Value Added (GVA) in the UK.

The review demonstrates the positive impact we have generated across the UK regions in 2023, summarising that, as a result of our investment and active ownership approach, our portfolio companies are more productive than average, pay higher wages than average and have a smaller gender pay gap.

As a significant investor in the North and Midlands initially, now expanded to the UK’s regions outside of London and the South East, we seek to generate value across a wide geography and large population.

Since inception, we have attracted £900 million of funds, over 90% from outside of the UK, and created over £1 billion of Enterprise Value. Across our portfolio, based on where NorthEdge is the lead investor⁽¹⁾, our portfolio generates turnover of £863 million and directly employs 6,843 people (FTEs) globally.

Economic and Social Impact

While most reporting of business activity focuses on financial measures such as profit and loss, the products sold, people employed and purchases made have a wider impact on economy and society nationally and at a local level. This economic and social impact assessment is an estimate of NorthEdge’s impact on: 

• Economic activity, measured by contribution to Gross Value Added, at the national and regional level in the UK
• The level of employment, number of full-time employees (FTEs), supported nationally and regionally
• Productivity, GVA per FTE, both within NorthEdge and with their portfolio
• The quality of work as demonstrated by wage levels, gender pay ratios and investment in training and apprenticeships
• Wider social impact measured by activity levels in areas with significant challenges, measured by the UK Index of Multiple Deprivation
• Additional impacts in communities through charitable giving and volunteering

Economic Impact

In 2023, the activities of NorthEdge and its portfolio generated a contribution of £844 million to Gross Value Added in the UK, comprised of £333 million of direct effect, an indirect contribution of £297 million and induced GVA to the value of £214 million.

Of this £844 million, 61% (£516 million) was generated in the North and Midlands of England and Scotland. With the North West alone accounting for 22% of the total UK impact and the Midlands 19%, a share of impact significantly greater than the 10% and 13% of overall national output accounted for by these geographies. 

In addition, exports of £231 million, just over a quarter of total revenue, are a good illustration of the competitiveness of companies in the portfolio, able to generate sales in the global market. NorthEdge and its portfolio also spent over £200 million with international suppliers, a share of which is likely to stimulate additional UK economic activity adding to the £844 million of GVA contribution. 

Employment Generated

The estimated employment supported by NorthEdge and its portfolio comprises the total number of jobs across the direct, indirect and induced economic activity. These jobs result from the activities of NorthEdge and its portfolio (the direct effect), the impact on supply chains from purchases from suppliers (the indirect effect), and from the additional spending in the economy both from NorthEdge’s own employees (and portfolio employees) and those employed by suppliers spending their wages (the induced effect).

In 2023, 11,453 UK jobs were supported: 4,488 through direct employment by NorthEdge and its portfolio, 4,015 FTEs due to indirect supplier activity, and 2,950 roles due to the consumer spending stimulated by the direct and indirect employment.

Reflecting NorthEdge’s regional focus, 6,979 FTEs were supported across the North and Midlands of England and Scotland (61% of the total), with 2,856 in the North West alone. Of the direct employees of companies in the NorthEdge portfolio in 2023, 81% lived in the North, Midlands or Scotland. 

Productivity

NorthEdge’s portfolio generated GVA of £74,000 per FTE in 2023, over 2% more than the UK average despite having only 4% of employees based in the high productivity London region and with a smaller share of activity than average in the UK’s highest productivity sectors.

Adjusting for the regional distribution of the NorthEdge portfolio, GVA per employee in 2023 was in line with the UK average. While on a sector adjusted basis, NorthEdge’s portfolio was 21% more productive than the UK average.

It is widely accepted that size is a significant influence on the productivity of UK companies. As an investor in companies at an earlier stage of their development, NorthEdge’s portfolio is biased towards smaller companies: only 4 of the 24 companies in the portfolio employ more than 250 employees in the UK and 9 have less than 100 FTEs.  On a size weighted basis, compared to UK average performance by company size, the NorthEdge portfolio was 27% more productive than the UK average in 2023.

Quality of Employment

Wage levels are an important measure of an employer’s commitment to their workforces.  NorthEdge’s average wage of £22.71 per hour was 13% higher than the average for Great Britain of £20.13 in 2023. Weighting pay by the home location of NorthEdge and its portfolio companies workforces, identified by a postcode mapping, male employees in NorthEdge’s portfolio were paid on average 17% more than their peers, with female employees receiving 15% on average more than females working in their areas.

NorthEdge and its portfolio companies also prioritise fair pay. In 2023, the gender pay gap across the NorthEdge portfolio was 9% vs. a UK average of 14.3%, with five companies having a gender pay gap in favour of women.

NorthEdge’s investment in employees goes beyond paying relatively high wages. The companies in the NorthEdge portfolio employed 55 apprentices and NorthEdge provided 488 hours of internships in 2023. The portfolio also spent over £1.3 million on training with 2,354 employees undertaking training or upskilling during the year. 

Wider impact in communities

In generating economic activity and jobs and paying wages above average, NorthEdge’s portfolio companies are significant contributors to levelling up across the UK’s regions. However, even though economic inequalities between regions are significant, there are even starker differences between areas within regions, with some places experiencing extremely high relative levels of deprivation. The Index of Multiple Deprivation (IMD) datasets provide small area measures of relative deprivation across each of the constituent nations and regions of the United Kingdom, dividing the population into deciles of deprivation from the 10% most deprived to the 10% least deprived.

By mapping the home postcode of the employees of the NorthEdge portfolio to IMD areas it is possible to identify the share of the workforce living in the more challenged areas of the country. 

Across NorthEdge’s portfolio in 2023, 28% of employees lived in the 30% most deprived areas in the United Kingdom. Eight companies, around one third of the portfolio, have more than 30% of their workforces coming from the 30% most deprived areas, with nearly three quarters of one company’s employees coming from the 30% most challenged areas in the country.

In particular, the company with the highest share of employees (73%) from the most 30% of deprived areas is providing significant employment to places where the level of unemployment is at least twice the national average, potentially much higher in practice (up to four times according to some estimates), and income levels are only 60% of the average level across the country.

You can read more about the economic and social impact of NorthEdge in our latest ESG Report.

⁽¹⁾ Based on companies where NorthEdge is the lead investor as at 31 December 2023