A successful, globally outward-facing Britain is the best way to mitigate the disruption of Brexit. Though there are limits to reforms as they are unlikely to offset the damage of ending free movement with the European Union, this only makes liberalising reforms more vital.
On asylum seekers The Entrepreneurs Network has backed the #LiftTheBan campaign, which focuses on the politically feasible goal of restoring the right to work for people seeking asylum six months after arriving in the UK. There are strong economic reasons to support this. Recently published research suggests that taxpayers would be £42.4m a year better off under this policy due to lower benefit costs and higher income tax receipts. Many entrepreneurs — including Google’s Sergey Brin and WhatsApp’s Jan Koum — were refugees. The UK wouldn’t have Marks & Spencer, had Michael Marks not fled Russia. If the economic case is strong, the moral case is stronger. We all want to feel useful and appreciated. Of course, this doesn’t just come through work, but most of us get a great deal of meaning from what we do for a living. Those seeking asylum are denied this dignity.
In 2015, we undertook a report with the NUS on the aspirations of international graduates towards entrepreneurship. Made in the UK was based on a unique survey of international students and found that the Tier 1 (Graduate Entrepreneur) Visa wasn’t fit for purpose. In short, despite strong entrepreneurial ambitions, international students were being underserved by their universities. Higher education institutions aren’t to blame, as they are rarely the ideal institutions to judge and support entrepreneurial ambitions and they fear losing their Tier 4 licence (which allows them to accept and make a lot of money from international students) if turns out endorsed graduates aren’t actually running their business. We concluded that other organisations besides universities should be able to endorse graduates who want to build their business in the UK.
This led to us hosting roundables with and responding to the Migration Advisory Committee’s (MAC) consultation in which we recommended that the Graduate Entrepreneur Visa be converted into a Start-Up Visa, and that the power to endorse graduates should be extended from universities to accelerators, venture capital firms and other respected organisations, which have better knowledge and stronger incentives to ensure that we are giving visas to graduates with the highest potential to succeed. Our recommendations are exactly what the Home Secretary announced.
When the Start-Up Visa visa is up and functioning the government should roll the Tier 1 (Entrepreneur) Visa into it, which doesn’t work as intended. The Entrepreneur Visa requires £50,000 from a venture capital firm registered with the Financial Conduct Authority (FCA) or £200,000 of other funds. This doesn’t work well as a proxy for assessing the entrepreneurial skills of a migrant and creates an unnecessary hurdle for bootstrapping entrepreneurs. It is also seen by migrants as a “cheap” investor visa and therefore receives many unsuitable applications. The introduction of a Genuine Entrepreneur Test was an attempt to try to cut down on bogus applications, but this has made the system overly bureaucratic and many genuine entrepreneurs are put off or wrongly rejected, necessitating costly legal advice.
Rolling the Entrepreneur Visa into the Start-Up Visa would cut out unsuitable applications and unwieldy bureaucracy. Immigrant entrepreneurs will then gain endorsement from government-approved third parties — whether accelerators, venture capital firms or other respected organisations. These sorts of organisations would be regulated by the Home Office to avoid fraud, but they will have skin in the game and the expertise and incentives to evaluate entrepreneurs’ potential. They will also invest in marketing the scheme abroad so people better understand our visa regime.
The Investor Visa is for immigrants who invest £2 million in the UK in exchange for the right to live and work here, and the ability to apply for permanent residency after five years (or sooner if they invest more). In the past, a lot of this so-called investment went into government bonds, but this wasn’t doing the UK much good. As Sir David Metcalf noted in 2014: “the annual aggregate loan via the investor route is equivalent to less than two days of our budget deficit”.
Alongside many others, The Entrepreneurs Network pushed for the government to ensure that the Investment Visa funds don’t just go into gilts. As my colleague Sam Dumitriu has written: “If the aim of the investor visa is to promote job and wage growth in the UK then a better system would target investment towards the UK start-ups and scale-ups that need capital the most. SMEs often struggle to prove their viability to investors as they lack collateral or a track record. While fintech innovations such as crowdfunding are helping to solve this problem, there is still an equity gap affecting firms seeking equity investments of between £250,000 and £5 million.” We suggest restricting access to the Tier 1 Investor Visa to EIS or VCT qualifying investments so that cash flows to the firms best able to create new jobs and grow the economy.
Of course, increased investment risk will make the Investor Visa less attractive. As such, we should lower the threshold. Individuals with £500,000 or even £100,000 to tie up in investments will have high disposable incomes. They aren’t going to claim welfare, will on average be limited users of public services and will stimulate demand and create jobs through high spending. The threshold should reflect the direct and indirect benefits these people bring to the country rather than a random number plucked from the air.
Britain’s FTSE 100 has dozens of businesses set up by first and second immigrants, and our flourishing tech scene is run and staffed by foreign talent. We have some of the best universities in the world and investors want to build a life here. Britain is one the best places in the world to start and grow a business. Brexit is a challenge to that. Now is the time to fix our immigration system to attract entrepreneurial talent to Britain.