For his most recent Forbes column, our director Philip Salter speaks to TransferWise co-founder Taavet Hinrikus about disrupting the banking industry, bitcoin, and how his innovative company is leading the way in London’s flourishing fintech scene. The interview can be read in full here.
Our new report, Made in the UK: Unlocking the door to international entrepreneurs, conducted with the National Union of Students, shows the benefits of retaining international talent.
Research from University College London has revealed that, between 2001 and 2011, non-EU migrants contributed more than their fair share to our tax and welfare systems. But while our study found as many as 42 per cent of current international (non-EU) students intend to set up their own businesses following graduation, there is a worrying disconnect between potential and policy. Just a third of these graduates want to set up their companies in the UK, and a mere 18 per cent think that the processes in place for post-study work in the UK are better than in other countries.
As our programmes director Annabel Denham wrote in City AM yesterday:
More must be done to encourage these students to start up companies in Britain when they finish their studies, and to this end the government needs to reform the graduate entrepreneur visa, introduced in 2012 to try to plug the gap left by ending the post-study option.
The take-up of the graduate entrepreneur visa has been disappointing and the sentiment expressed by graduates in our survey suggests this won’t change any time order ativan online usa soon. Just 2 per cent of respondents who intend to start a business following graduation applied for the UK graduate entrepreneur visa, with almost two thirds (62 per cent) saying they didn’t even consider it. In fact, nearly half of respondents don’t know whether their institution is certified to endorse them for the visa.
Part of the problem lies in universities being reluctant to take on the risk of endorsing students. To counteract this, official Home Office guidance needs to make it clear that universities aren’t risking their Tier 4 licence – which allows universities to accept students from outside the EU – in the process. Also, allowing UK Trade & Investment-approved accelerators to endorse students would help identify the best entrepreneurs. The report puts forward a slew of further recommendations, but perhaps none would be more effective than reinstating a post-study work visa, letting graduates work in the UK for at least a year after completing their studies.
And as I have written in my Forbes column, despite the anti-immigration rhetoric in the UK’s political debate, the public here actually supports international graduate entrepreneurs. So we just need politicians with the nerve to implement the necessary reforms.
The Entrepreneurs Network has just released a new report. Based on a survey of 1,599 international students, Made in the UK: Unlocking the Door to International Entrepreneurs reveals how the UK’s visa system is failing international graduate entrepreneurs who want to start a business in the UK.
Undertaken with support from the Adam Smith Institute and in partnership with the National Union of Students (NUS), we find that a significant proportion of international students – that is students coming from outside the EU – have entrepreneurial ambitions. In fact, 42% of international students intend to start their own business following graduation. However, only 33% of these students, or 14% of the total, want to do so in the UK. Clearly we are doing something wrong.
The Tier 1 (Graduate Entrepreneur) visa was set up in 2012 to encourage international graduates to start their businesses when post-study routes were taken away. However, uptake has been woeful and the results of the survey suggest this isn’t likely to change any time soon:
- Just 2% of respondents intending to start a business following graduation applied for the UK Tier 1 (Graduate Entrepreneur) visa, with almost two thirds, 62%, saying they didn’t even consider it.
- Nearly half, 43%, of respondents think their institution is certified to endorse them for a Tier 1 (Graduate Entrepreneur) visa.
- Only 18% think that the UK has better post-study processes in place for international students than other countries; 32% think it is worse than other countries.
Based on these and further findings, the report puts forward nine recommendations for government, including:
- Removing the Tier 4 ban on self-employment for those working within an institutional programme (curricular or co-curricular) or other accelerator.
- Allowing UKTI-approved accelerators to endorse international students in their programmes under the Tier 1 (Graduate Entrepreneur) scheme.
- De-coupling the risk for educational institutions in endorsing international graduates for Tier 1 (Graduate Entrepreneur) visas from institutions’ Tier 4 license. This should be made explicit in the official Home Office guidance and in the way the Home Office applies its audit procedures for institutions.
- Reinstating a post-study work visa, de-coupled from the sponsor system, to allow international students to explore markets and industry before finalising their business idea for the Tier 1 (Graduate Entrepreneur) application. In fact, 81% of the respondents considering starting their own business are interested in the possibility of permanent residency under the Tier 1 (Graduate Entrepreneur) visa.
Our visa system isn’t supporting the entrepreneurial ambitions of international graduates. As things stand, we are training some of the world’s best and brightest young people at our world-class universities only to push them to set up their businesses overseas.
The celebrated entrepreneur, investor and adviser Sherry Coutu CBE has just released a detailed report on scale-up businesses. Scale-ups are defined as enterprises with average annualised growth in employees or turnover greater than 20 per cent per annum over a three-year period, and with more than 10 employees at the beginning of the observation period.
The Scale-Up Report explains how “a boost of just one per cent to our scale-up population should drive an additional 238,000 jobs and £38 billion to GVA within three years”…“[I]n the medium-term, assuming we address the skills-gap, we stand to benefit by £96 billion per annum and in the long-run, if we close the scale-up gap, then we stand to gain 150,000 net jobs and £225 billion additional GVA by 2034.”
The report identifies key issues for helping these companies grow:
- Finding employees to hire who have the skills they need
- Building their leadership capability
- Accessing customers in other markets / home market
- Accessing the right combination of finance
- Navigating infrastructure
Twelve recommendations are put forward, but the first (arguably) offers the biggest bang for its buck:
Recommendation 1. National data sets should be made available so that local public and private sector organisations can identify, target and evaluate their support to scale-up companies, and evaluate their impact on UK economic growth.
The specific data required includes:
- Company registration number
- Revenue (UK and export)
- Location of headquarters and plant
- R&D tax credit (recipients and amount)
- Employment data (number of pay slips issued in a given month)
It is suggested that data “should be made available on a real-time basis openly or to a cross-departmental scale-up support unit within government. This would allow both public and private sector organisations to target scale-ups accurately to make sure support is offered at right time to the right leaders.”
Releasing this data wouldn’t add to the bureaucracy faced by entrepreneurs. As the report explains, companies are already required to submit turnover data annually to Companies House, report on PAYE in real-time, file quarterly VAT returns, and report on the amount the spend on R&D (if claim R&D Tax Credits). However, as the report acknowledges, releasing this data raises questions around data privacy. To counter this criticism, the report uses the example of the Cambridge Cluster Map, where this sort of data is already collated, and 59 companies have asked to be included in it since its initial launch.
Also, following a YouGov survey, the report reveals: “83% of scale-ups were in favour of the government sharing information on their company growth with other government departments or agencies, and 72% were in favour of government sharing this externally.”
But this leaves a minority of companies unwilling to open up their data willy nilly. The report doesn’t offer any guidance on how to deal with these concerns but there should be a way for companies to opt out. If, as the report reasonably suggests, these companies are then better targeted for support, those that have opted out will surely be all too ready to release their data too.
Marianna Mazzucato’s 2013 The Entrepreneurial State is the most influential book on innovation. Although Mazzucato’s arguments in the book and beyond are many and varied – for example, I’m particularly sympathetic to her scepticism of the uncritical financial support for small businesses – the arguments gaining the most traction are the least convincing and potentially most damaging.
In short, Mazzucato’s thesis is that the state has been the key driver of “innovation” and should therefore take a more active role than they currently do. Central to this, is the policy suggestion that government agencies that fund this innovation should take a cut of the profits from the inventions. Two writers have convincingly unpicked this – the Adam Smith Institute’s Tim Worstall and Nesta’s Stian Westlake.
First, on the point about states driving innovation, Worstall cites William Baumol, who makes the crucial distinction between innovation and inventions. In reference to Mazzucato’s observation that the key technologies that went into making the iPhone were state funded Worstall explains: “Baumol’s point is that the private sector could have come up with these technologies, even though it was the state that did. But only the private, or market, sector could have come up with the iPhone.”
To put it another way, the iPhone is more than the sum of its parts. In an excellent article (worth reading in full), Westlake cites the work of Jonathan Haskel, which “suggests that for every £1 that British businesses spend on R&D, they spend £8 on other intangible investments of the sort that Apple used to make the iPod a success: design, new business models, marketing and software development.”
But perhaps Mazzucato’s biggest mistake is one of policy. As Westlake explains elsewhere, in The Entrepreneurial State Mazzucato suggests that “the state should find ways to share directly in the profits of companies that benefit from government innovation spending. A repayment system needs to ‘reward [the government for] the wins when they happen so that the returns can cover the losses from the inevitable failures.’”
Westlake outline three convincing reasons why this wouldn’t work: “it would be nightmarish to administer; it imposes costs on exactly the wrong businesses, creating both a presentational and a practical problem; and it’s worse than an already existing option – funding innovation from general taxation.” Westlake’s last point cuts to heart of the problem. As Worstall has pointed out in a response to Mazzucato’s response to his criticism of her work:
That governments sometimes produce public goods should not be a surprise. That’s what governments are for in fact. To provide collectively those things that cannot be provided through voluntary cooperation. To then complain that government doesn’t get extra rewards for doing the very thing we institute it for seems most odd. That’s why we pay our taxes in the first place: in order to get those public goods. Why should there then be some extra appropriation when all government is doing is what we asked it to and paid for it to do in the first place?
A new report from Octopus Investments and the Centre for Economics and Business Research uncovers the economic value of the UK’s fastest growing small companies. The report can be found here, and our director Philip Salter’s analysis of its findings – and its policy recommendations – can be found in his Forbes column here.
In the wake of the “This is what a feminist looks like” 62p-an-hour t-shirts scandal, our director, Philip Salter, considers the words of noted economist Paul Krugman in his 1997 essay, “In Praise of Cheap Labor”.
The revelation that the t-shirts created by The Fawcett Society as part of a campaign for women’s equality were in fact manufactured in a Mauritian sweatshop has been described as a monumental own goal.
As Salter points out in his Forbes column, the t-shirts on sale are expected to be recalled and production moved to Britain. But what about the sweatshop workers, he asks? Was Krugman right to make the case, back in 1997, that bad jobs at bad wages are better than no jobs at all? Read more here.
Victoria Beckham has topped a list of Britain’s top entrepreneurs by Management Today magazine.
The former Spice Girl certainly deserves praise for expanding her fashion empire into a business with a £30m turnover and a staff of 100. But, asks The Entrepreneurs Network’s director Philip Salter in a Forbes column, does this make her the country’s top entrepreneur?
In his column, Salter rightly raises an eyebrow at one criterion in the ranking: the entrepreneurs’ wealth. “They are ranked by their own or their immediate family asset wealth, which we identify from their holdings in private or public companies, share sales, dividends, salaries, plus any other assets that they have revealed to us,” the report says.
It means that the designer’s entrepreneurial success owes much to her husband David’s right foot and chiselled abs. But, Salter says, we should not deny Victoria Beckham’s status as a top entrepreneur. It’s just a shame the list wasn’t compiled with a little more care.
History suggests that it’s never too late to innovate, a forthcoming thesis will say.
According to Anton Howes (pictured), who is undertaking a PhD in Political Economy at King’s College London, many of the world’s great innovations have come buy brand ativan from the mature mind.
For his Forbes column, The Entrepreneurs Network director Philip Salter has been given a sneak preview of the research, and has spoken to Howes about the findings of his thesis. Read more about age and innovation here.
When it comes to evaluating the results of this year’s World Bank Doing Business report, the devil is in the detail – says The Entrepreneurs Network director Philip Salter.
As the World Bank’s Kaushik Basu notes in his foreword:
The laws that determine how easily a business can be started and closed, the efficiency with which contracts are enforced, the rules of administration pertaining to a variety of activities—such as getting permits for electricity and doing the paperwork for exports and imports—are all examples of the nuts and bolts that are rarely visible and in the limelight but play a critical role.
Find out more about which countries have shot up the rankings, and why, in Philip’s most recent Forbes column.