This week, Labour’s much-anticipated Start-Up, Scale-Up Review was released. It’s a solid piece of policy work – although we might be biased, having hosted two of the eight roundtables for dozens of entrepreneurs and experts who all fed into it.
First, I’ll shamelessly share our reference in it:
“It is clear from responses to the review that procurement can play an important part in supporting innovation. One of the main ways in which the Government can support start-ups and small businesses to gain access to a market is by being an anchor customer of their goods and services at an early stage.
“However, evidence suggests that the proportion of public sector procurement spending going to small businesses has decreased since 2016, from 25% to 21% in 2021. Evidence from Tussell for The Entrepreneurs Network also captured the variation across government. The Department for Culture, Media and Sport devotes 37% of its budget to small businesses, whilst the Department for Transport devotes just 2%.”
The report being referenced is Access All Areas: Government, which we worked on with Enterprise Nation.
The Review also suggests that Labour “assess the case for making pre-market engagement mandatory for all government buyers.” As we argued in Procurement and Innovation, “procurement regulations in the US require agencies to employ pre-market engagement to identify and acquire potentially useful commercial off-the-shelf solutions. While in Canada, procurement managers are encouraged to use off-the-shelf products unless a bespoke solution is operationally necessary.
“The government should adopt the same approach here by creating a requirement for public bodies to explain why they have sought a bespoke solution over off-the-shelf solutions. This must not become a box-ticking exercise, but rather be part of a long-term shift to greater pre-market engagement. Data on the share of bespoke solutions, relative to off-the shelf solutions, should be published on an agency-by-agency basis and the worst offenders should be required to invest in greater pre-market engagement.”
It should be noted, however, that this isn’t a significant break from Conservative Party policy. In fact, the Procurement Bill is slowly making its way through the sausage factory that is Parliament.
Another area where Labour are aligned with the Government is on tax breaks for investing in startups. As stated: “Through the call for evidence for this review, and the various roundtables that we have held, it is clear that there is strong evidence as to the benefits of both the SEIS and the EIS schemes in stimulating investment and entrepreneurship. Labour should commit to maintaining the incentives provided by those schemes and should commit to continuing the EIS and VCT incentives beyond their 2025 sunset.”
But it goes further, recommending that Labour reviews the “scope, scale, and design of both EIS and SEIS to ensure they are providing adequate incentives.” That means that limits, caps and the qualifying period could all be on the table.
This review also recommends that Labour ensures that the “R&D tax credit system continues to adequately incentivise investment and innovation by high growth firms, including SMEs.” The review is also live to our (and others’) complaints about delays: “One response noted that they had received numerous reports that R&D Tax Credits had become increasingly hard to access with payments often taking months to come through, resulting in some eligible businesses not applying.”
On the issue of female founders, it was good to see the report acknowledge that “a prominent factor cited for many women was the affordability and availability of childcare.” It’s something that my colleague Aria Babu has been leading on – both in our latest Female Founders Forum report with Barclays, and in many other places, including to the Work and Pensions Select Committee.
Finally, the All-Party Parliamentary Group (APPG) for Entrepreneurship gets a shout out, through Erika Brodnock, who is one the group’s Advisers: “Her journey in trying to fundraise for her previous start-up between 2012 and 2019 was so challenging that she reached the conclusion she would need to install a white male CEO to ever raise funding. Furthermore, from many conversations she has had, and the research generated through Extend Ventures, it has become clear to her that Black founders seeking investment face an uphill battle.”
We will continue to undertake work on this policy agenda through the Inclusive Innovation Forum we launched this year with Morgan Stanley, who run a really impressive Multicultural Innovation Lab. You can read the write-up of our latest newsletter here, and we will be holding an event to discuss some of the themes of the review in a virtual roundtable on 24th January at 3pm. Drop us an email if you’re keen to get involved.
There is a lot more in the report. Check out the proposed ‘founder-track’ option for spinouts where universities would only take a share of equity at or below 10%; the call to give the British Business Bank more independence; the call for a British ‘Tibi’ scheme to bring together institutional investors and VCs; and to explore ways to foster the provision of Long Term Asset Fund (LTAF) products for ISA investors.
Well done to Julie Devonshire, Tom Adeyoola, Alex Depledge and Lord Jim O’Neill for keeping all this to a pithy 28 pages. We would really value your thoughts on anything in the document, as we’ll continue to be engaging with Labour – as we do with all major parties.
Supporting SMEs Successfully
This week we launched a new APPG for Entrepreneurship report in the House of Lords in partnership with Virgin Money: Supporting SMEs Successfully. The foreword was penned by Bill Esterson MP, Shadow Minister for Business and Industry, with Selaine Saxby MP, Officer of the APPG for Entrepreneurship and Chi Onwurah MP, Shadow Minister for Science, Research & Digital speaking at the launch.
It focused on the flagship Help to Grow schemes, which, following a call for evidence, Eamonn Ives – our Head of Research, and the report’s author – found could do with some changes. On ‘Help to Grow: Digital’ Eamonn makes the case for cutting bureaucracy to get more innovative software on the platform. On ‘Help to Grow: Management’ the call is for more flexibility and experimentation.
Check out the APPG’s Twitter thread for a succinct summary of the findings, read Eamonn’s article in CapX, or read my article in Forbes.