Green Entrepreneurship Forum: Funding

On 21st October we hosted the second instalment in our series of roundtables for the Green Entrepreneurship Forum: a new policy initiative we are running with Mishcon de Reya that brings together the UK’s most successful sustainability driven entrepreneurs to help support their growth and inform us on the policies they need to flourish.

Great ideas should not cost the earth. Many traditional funding routes focus on the monetary value, which can make it challenging for sustainability-focused businesses to raise the funds needed to grow. However, there are ways to raise the necessary capital. At this online roundtable we discussed how sustainable businesses and businesses working for social good can scale through debt and equity fundraising. We also considered whether any additional government support should be offered to the UK’s sustainability driven startups. 

To open the discussion Simon Daniel from Moixa shared his experiences and learnings from raising capital over the last 15 years. He shared a fantastic analogy using an hourglass - the early stages of fundraising can be quite easy - it becomes much harder as companies try to raise Stage A and B funding because of the high risk, and then becomes much easier once the company seed Stage C and D funding or reaches an international level. He shared an experience where he went to find investment for a new technology invention and was told by the  CEO of a large computer company that he would rather buy it for $50m once it had been proven than buy it for $1 mil when it had no traction. He also highlighted the importance of timing - his company developed a smart battery and tried to raise funding, but it was only after Tesla had proven the importance of the technology. He finished off by explaining the importance of carefully managing share options, as getting this right in the early stages can influence the ability to raise more money later on. 

Next we heard some thoughts from the investment side of the table from Vish Srivastava, Managing Partner of Future Business Partnership, a new investment fund with the overarching goal to use traditional investment discipline can be used to make the world a better place. He shared that his investors are looking for businesses that have proven their profitability model and scalability, with the infrastructure and experience to scale a business. Investors who are committed to investing in companies with environmental and social advantages want to see solid KPIs, measurements and targets around their impact. They want to see the same level of commitment to the social benefits as well as the business growth. 

We then asked Mischon de Reya to provide a few words of advice from their legal experience. Alison Keyse and Emma Miller from the Private Equity department spoke about the importance of getting the right investors involved who can bring money but also sector expertise and strategic thinking, and being careful not to have too many investors with different priorities. For green entrepreneurs it is important to allow for longer lead times into businesses becoming revenue generating, as well as choosing the right partners who are prepared to help on that journey. There is also an opportunity for policy to increase support for green entrepreneurship through changes to schemes such as SEIS and EIS , for example investors could be rewarded for holding onto their investments for longer. Sarah Spurling from the Finance department focuses on domestic and cross-border debt financings.  She shared the importance of collecting KPI’s and sustainable evidence about the impact of the business to help not only secure the right lenders but also satisfy the regulatory requirements. 

A number of ideas were shared during the ongoing discussion, including the following:

• If the Treasury were to increase the current threshold for international investment from €8m to €20m during the current Prospectus Regime review, it would unlock additional international investments. The current threshold is stopping businesses from gaining the support because many platforms are looking to work with sums between 8 - 20 million. The Prospectus Regime review may open a number of other opportunities.

• Getting good evidence of sustainability is a huge challenge when businesses are part of a supply chain, so making sure you are clear on your own performance and work with organisations with equally rigorous reporting will help in securing funding.

• The short term nature of private equity and treating companies as commodities is fundamentally incompatible with long term purpose driven businesses. One way to address this is moving to a stewarding structure which separates out control and economics. This is more prevalent in North West Europe and is emerging in the UK.

• Some investment funds are moving in the direction of providing financial incentives to investors by linking their profits to successfully achieving the social benefit promised to long term investors. 

• Certain industries, particularly within the industrial sector, do not currently qualify for EIS support. If the scheme was revised to prioritise decarbonisation it would allow more heavy industry companies to focus on this goal. 

• Private debt financing can often come with crippling terms - a return of 18% per annum is not viable to company growth. Even in an asset holding company there is still a requirement for some level of director liability. There are very few people who can absorb this level of risk. One idea raised was that the government could provide the guarantee rather than the individual to make debt access more favourable.

• The Loan Market Association is currently developing a structure for Green Loan Principles and sustainability linked loans where there are benefits linked to evidencing sustainability, but this is mainly for larger scale businesses. 

• While putting figures on impact reporting can be challenging, it can be easier to tell stories and provide case studies. In some instances this can be enough evidence, particularly with crowdfunding rather than going through traditional funding routes. This also allows the company to keep its managerial control. 

• The US and Europe are easier places to raise money for green technologies. For scalable businesses it is a good idea to think internationally from the beginning.  

Our next roundtable is on 18th November, where we will be exploring ‘ Ecosystem Economics - how natural resources are the future of capitalism’ . If you would like to get involved in the Green Entrepreneurship Forum and contribute to this roundtable please email katrina@tenentrepreneurs.org.

Green Entrepreneurship Forum: Launch Event

In October, we hosted the launch event for the Green Entrepreneurship Forum: a new policy initiative we are running with Mishcon de Reya that brings together the UK’s most successful sustainability driven entrepreneurs to help support their growth and inform us on the policies they need to flourish.

We were joined by Danny Kruger, MP for Devizes, who shared a few opening thoughts about the opportunities presented by COP26 to position the UK as a global leader of businesses driven by social purpose. He championed the many large and small businesses in the UK which are making a significant contribution to sustainability.

The discussion covered a lot of ground, spanning a number of topics, including: 

• The challenges entrepreneurs face when trying to access grant funding and international investment, and the disconnect between the national recognition of the need for innovation versus the support offered to those who are creating new businesses.

• The importance of looking at the global picture. With 70% of emissions coming from households, can the UK do more to encourage UK and global citizens to do more personally to reduce their footprint, and can we alter our export finance rules so sustainable solutions can be taken to emerging markets where credit worthiness is poor but carbon emissions are high?

• The need for clarification of terms such as ‘Net Zero’ – for example the Science Based Target Initiative has clarified it is not going to include offsetting.

• Rather than increasing tax, the government could rebalance taxation in favour of sustainable solutions, for example by reducing tax on electricity but increasing it on gas. 

• The need to focus not only on carbon emission, but increase awareness about the other pressing environmental issues.

• The challenges of waste and emissions in the food production industry, and the opportunities created by new technologies which create food without the land or waste of traditional farming methods.

• Our funding and policies to match the EU investments in green energy. 

• The challenges of gaining procurement from larger businesses and choosing suppliers with sustainable credentials, but also the opportunity presented by aligning your product with the sustainable goals of potential clients, particularly those going through the B-Corp framework. 

• The lack of transparency around the 2050 targets and goals and dates makes it hard for innovations to prepare and develop their products.

• The need to invest in specialist STEM teachers to ensure we have the talent for green businesses in the future.

Key Points raised:

Jim Laird, CEO of Enough raised the point that, given that 15% of carbon emissions are from animal farming, does the government see a genuine path to net zero, or is it a political soundbite?

Danny Kruger MP recognised the huge opportunity of the development of new sustainable proteins, but said we need to find a balance in the laws around agriculture. Quality farming can be a positive for carbon reduction due to the grasslands creating a carbon sink, but battery farming is a contributor to the problem so we do need to insist on quality farming. 

Andy Chen, Founder and CEO of Graphene Composites shared his experience over the past 6 years of his company has applying to various Innovate UK and Export Support programmes, and without exception they’ve commended the ideas but suggested a larger, more established company would be better placed to take the idea and turn it into reality. He asked if there is a will in government to sponsor that key stage of growing entrepreneurs from seed rather than encouraging them to hand them over?

Danny Kruger MP said he was very conscious of the problem, the UK is very good at innovation but less good at holding on to them. His view was the UK needs a more patient long-term sense of what value looks like, and not have a system that seeks a quick return. He knows the Chancellor is conscious of it and it’s part of the strategy to keep innovation in this country.

Bruce Davies, Co-Founder and joint Managing Director of Abundance Investment shared his experience of how his company backs businesses as they go into scale-up mode, and has seen how regulation is a big barrier for green businesses, even though there are some positive movements on the capital market side. He thinks if we can simplify the way we look at capital raising through a review of the prospectus directive to say, 20 to 30 million euros rather than eight million euros, this would be game changing and would open up a whole market of finance which is currently stagnating.

Tom Parkinson, Managing Director of SteamaCo raised concerns that all the efforts made by UK businesses and individuals to reduce our environmental impact will be swamped if developing countries with growing populations continue to burn fossil fuels, and the importance of taking a global view on changing behaviours. 

Jo Hand, Co-Founder of Giki Zero echoed the importance of global behaviour change, identifying that 70% of carbon emissions can be attributed to household emissions, and unless consumers change the way they do things across the world we are not going to reach our targets.

Will Richardson, Founder and CEO of Green Element and Compare your Footprint raised the point that definitions around green terminology are currently unclear. He also stressed the need for the government to offer a clear strategy on what constitutes Net Zero. 

Nick Gibbins,  Co-Founder and Director of New Resource Partners, shared his observation that there is considerable support for green businesses out there, but it takes persistence. BEIS and Innovate UK can be clunky but there are some very good people involved. He suggested the government could do better at supporting businesses as they transition from public funding and grant programmes through to private investment. He also identified that adjusting the tax system to prioritise green energy would make a valuable contribution.

Alex Fisher, CEO of Saturn Bioponics shared that, as a food producer he has seen the imposed waste created at the retail end of the food supply line, and reducing the waste in the food supply chain is something the government could very quickly and cost effectively do to make a huge impact on the sustainability of food production. He also observed that there is a lot of talk about carbon, but there are other significant environmental issues which are also very pressing and need to be incorporated into discourse. 

Professor Xiongwei Liu, Managing Director of Entrust Microgrid talked about the need to promote passive behaviour change in consumers. He suggested the government could help by promoting technologies which encourage small changes, such as limiting the temperature people can heat their homes and businesses, which most consumers would barely notice.

Dinesh Dharmija, serial entrepreneur, ex-MEP and currently promoting Ruserio Solar observed that the EU is providing significant funding to transition to green energy. They have put up 750 billion euros immediately for the 27 countries, and have committed a further trillion euros over the next 20 years, mainly to close down fossil fuel plants across Europe. He raised the question of how much finance the UK government has committed to green energy, and what the strategy is for spending it, recognising the UK would have different priorities and opportunities – for example, in wind energy rather than solar energy.

Andy Aitken, CEO and Co-Founder of Honest Mobile, shared the challenges his business had in gaining corporate clients as a relatively small and new supplier. He raised the point that this must affect a number of green businesses who are just starting out and sparked a wider conversation about how to persuade corporations to employ more innovative businesses as part of their sustainability drives. 

Simon Daniel, Founder and CEO of Moixa, shared his experiences in choosing strategic investors who then become clients as they have an incentive to use your technology. This also enables suppliers to act as change leaders from the inside. He raised the challenge faced by innovators in future planning, and suggested that the government should provide a long-term roadmap setting out dates and goals to hit the 2050 Net Zero target so companies can adapt their products to future needs.

Jarmila Yu, Founder of YUnique Marketing. observed that while there has been an increase of interest in STEM, there are not enough teachers of these subjects. This is a problem for green businesses looking to attract talent as they scale, and more should be done to train more STEM teachers or encourage retired teachers to return to work.

Sofia Belcadi, Founder and CEO of 1001 Remedies, discussed how from her company's creation they set out to only work with truly sustainable suppliers, but the lack of quantifiable metrics made it challenging to choose the right companies to work with, particularly regarding logistics. She also raised the current pressing challenge in choosing sustainable logistic companies as the costs have soared during the pandemic, so companies are being forced to forgo sustainability to fulfil their orders. 

Tom Bourne, Founder of Greenheart Consulting championed the B-Corp framework, and shared that part of their system encourages companies to create policies on engaging with sustainable suppliers, choosing new suppliers and engaging with existing suppliers on impact data. This could provide an opportunity for new suppliers who are already aligned with the corporation's impact goals. 

Alexander Rhodes, Partner and Head of Purpose at Mishcon de Reyadiscussed how the law firm has helped over 100 companies go through the legal changes required to qualify and recently achieved B Corp Certification itself. He shared how valuable the B Corp framework is in making organisations look at aspects of the business which wouldn’t have been looked at otherwise.

Inspiring Innovation

It’s been a packed week. On Tuesday we released our annual Female Founders Forum report, Inspiring Innovation, which features a foreword by the Chair of the Women and Equalities Committee Rt Hon Caroline Nokes MP, and was launched in the House of Lords with Baroness Susan Greenfield.

The report, produced in partnership with Barclays, focuses on high-growth sectors of the economy. While the overall funding gap remains stubbornly high, with just 15% of all equity finance going to female-founded businesses, this year we reveal some interesting differences between sectors.

For example, GreenTech businesses – ie. companies using technology to bring us closer to net zero and other environmental goals – have closed the gap the most, with female-founded GreenTech companies making up 34% of the sector and raising 42% of all equity funding. In contrast, female founders in AI receive a paltry 2% of the funding.

These findings, based on Beauhurst data, are important. Drilling down into differences can focus policy responses and wider government activity. It can also help investors and others who care about equality of opportunity in under-performing sectors target action, and worse performing sectors can all learn from successful sectors about what they're doing to copy them.

As the Head of the Female Founders Forum and author of the report Aria Babu states in this cracking Twitter thread: ”The success of FemTech shows what happens when we have female founders in the Life Sciences. We now have products made by women, for women and companies making millions of pounds doing this.”

The prize is significant. If we can narrow the gender entrepreneurship gap to match similar countries like the US, Canada, Australia and the Netherlands, we would unleash an extra £200bn per year. We have plenty of policy ideas in the report, which could add up to significant change.

The Female Founders Forum is our longest-running project. We started it back in 2016 with Barclays and since then have produced, a series of briefing papers (2016), Untapped Unicorns (2017), Mentoring Matters (2018), Here and Now (2019), Resilience and Recovery (2020), and now Inspiring Innovation (2021).

We’ve still got our regional roundtables to go, with events planned at Barclays Eagle Labs from London to Edinburgh, Manchester, Leeds, Newcastle, Southampton, Cardiff and Birmingham, and are busy thinking about plans for next year. Sign up to the Female Founders Forum newsletter to be kept updated.

Budge it
On Wednesday, Rishi Sunak stood up to deliver his Budget. In short: growth expectations up; spending up; taxes up.

Our influential Job Creators report even got a mention when the Chancellor said: “Half of our fastest growing companies have a foreign-born founder.” It was used to launch another approach that we’ve been pushing for: promigration.

Our Head of Innovation Research, Dr Anton Howes, came up with the term and it refers to countries actively seeking out top talent rather than just having the right rules (which are also really important) – we have a rich history of doing exactly this. In fact, without it, Isambard Kingdom Brunel might have become a famous Russian engineer.

Along these lines, the Government is launching the Global Talent Network. Starting in the Bay Area and Boston in the US, and Bengaluru in India, it aims to find and bring talented people to the UK to work in key science and technology sectors.

The government also set out details for the Scale-up visa, which will be available to fast growing businesses (an average annualised return of at least 20% in the past 3 years) employing someone on a salary of at least £33,000. While I welcome this in our Budget Response, as well as the High Potential Individual visa and Global Business Mobility visa, the devilish detail might be visa fees, which are increasingly exorbitant.

Our response also welcomed the news that the R&D Tax Credit will include spending on data and cloud costs, which is something that we called for with Coadec in our Startup Manifesto, and which many of you backed. We also welcomed and pressed home the need to get more pension money into startups. After all, pension funds contribute 65% of the capital in the US VC market, but just 12% in the UK.

You can read our full Budget response here.

Aria also responded to the plan to consult on an online sales tax in City AM. We’re firmly against the idea, and have been consistently every time it’s mooted: “It is all well and good arguing that we should tax tech giants, but designing a fair system is easier said than done. Why should an independent dressmaker on Etsy pay more tax, so Mike Ashley can pay less?”

The Old Normal
As in-person events come back, we’ll be inviting our Advisers, then Supporters, then Members. It’s free to become a Member, but you’ll need to fill in a short form. From this we’ll know your interests, and so, what to invite you to.

For example, we’re busy planning: a physical breakfast considering the policy implications of crypto; a virtual meeting on the impact of planning rules on cost of housing/office space/labs; six breakfast meetings on further immigration/visa reforms. Some of these will be added to future newsletters, but most will be nearly full by the time you hear about it here. You can also drop me an email to events@tenentrepreneurs.org if any are of particular interest.

It is Easy
Our good friends at FieldHouse have written to the Prime Minister and Rt Hon Alok Sharma MP calling for Green Standards, Green Tax Credits and a Green Tax.

You can read the full letter here. They’ve also published a brief article here, have a Twitter thread here and a LinkedIn post here. It’s backed by a number of notable founders and investors from the UK ecosystem. Drop Iain a message if you’re interested in getting involved.

Sign up to Philip’s weekly newsletter here.

The Entrepreneurs Network's Budget Reaction

This Budget saw the Chancellor cite The Entrepreneurs Network’s research into immigrant founders, make long-awaited changes to R&D Tax Reliefs, and commit to consulting on boosting institutional investment into tech.

These are our initial expert reactions.

Responding to the expansion of the R&D Tax Credit to include spending on data and cloud costs, The Entrepreneurs Network’s Research Director Sam Dumitriu, said:

This is a necessary and overdue change. While generous by international standards, the R&D Tax Credit has become outdated and out-of-touch with the way innovation works in tech. Research and development in AI and machine learning is reliant on access to data and cloud computing power. If startups can’t claim these costs as R&D spending, they are put at a disadvantage relative to tech giants who have masses of user data and large servers.

When we first called for reform in our Startup Manifesto written in partnership with startup lobby group Coadec in 2019, over 250 of Britain’s leading entrepreneurs backed our call. I suspect many won’t be waiting till the alcohol duty reforms come in next April to uncork the bubbly.

Responding to the Chancellor quoting The Entrepreneurs Network research into immigrant entrepreneurs, The Entrepreneurs Network’s Founder Philip Salter, said:

The Chancellor said it himself: half of our fastest growing businesses are founded by people born overseas. Attracting the best and brightest entrepreneurial talent from across the globe will be key to our economic success. The new Scale-Up visa, set out in today's budget is a step in the right direction. Coming with the High Potential Individual visa and Global Business Mobility visa, next year could be a stellar year for high-skilled immigration reform.

The salary threshold of £33,000 is reasonable, but failure or success will rest with fees or hidden bureaucracy. Exorbitant visa fees need addressing and any bureaucracy must be reduced to an absolute minimum – after all, that’s why we were able to attract the best and brightest entrepreneurs from the EU.

The new Global Talent Network will also be a boon for innovation. Having liberal immigration rules only get you so far, but we also need promigration policies like this to proactively identify and persuade the world’s most talented people to settle in the UK.

Responding to the Chancellor’s commitment to consult and work to remove barriers to institutional investment in tech, The Entrepreneurs Network’s Research Director Sam Dumitriu, said:

By the end of the decade, DC pension schemes will have £1tn under management. If just 3% more of that funding went to venture capital, it would amount to a £30bn increase in equity investment available for startups. Pension funds contribute 65% of the capital in the US VC market, but just 12% in the UK.

Yet, at the moment, there are major regulatory and cultural barriers preventing pension funds from investing in venture capital. The Pension Charge Cap may protect savers, but it's too rigid and incompatible with VC fee structures. Modest reforms, such as spreading the fee cap over a number of years, and relaxing valuation regulations on illiquid assets, could unlock massive investments in innovative tech businesses.

Image Credit: HM Treasury.

Drone On

This week we released a briefing paper on the huge potential of the UK’s nascent drone industry, setting out reforms to unlock the sector’s £42bn forecast contribution to GDP.

You can read it here, read Dr Anton Howes’s article on it here, check out coverage in City AM here, sUAS News here, and ADS Advance here. And for the particularly time-pressed, read Anton’s Twitter thread here or our Twitter thread here.

I think this report is testament to the open mind with which we undertake our research. Going into it, I was expecting it would call for less regulation – after all, that’s the standard narrative you would get from an organisation whose job it is to represent entrepreneurs. However, after extensive conversations with entrepreneurs and investors in the space, Dr Anton Howes and Sam Dumitriu worked out that we actually need government intervention to make all recreational aircraft electronically visible to drones.

Drones and commercial manned aircraft are made visible to each other and to novel traffic control systems by small electronic devices that communicate their location to minimise the risk of collision. But the UK’s 20,000 recreational aircraft, which typically operate in the same airspace as drones, are not required to be electronically conspicuous. This is making the mass rollout of ‘beyond visual line of sight’ commercial drone applications unviable on safety grounds.

The cost of these devices is only £500 each, but current owners of recreational aircraft will understandably oppose this new regulation. Therefore, given the economic returns of drones taking off, we think the Government should foot the one-off £10 million bill to equip the UK’s recreational aircraft with electronic conspicuity devices.

On a Budget
On Wednesday, Rishi Sunak will deliver the Budget. We will be watching closely and have our analysis in a Policy Update about the impact it will have on entrepreneurs (sign up for our occasional ad hoc Policy Updates here).

Sam Dumitriu, our Research Director, has listed our top three budget asks. It could be a lot longer. After all, he has written two influential reports on Tax Reform – first for the APPG for Entrepreneurship and the second for the Adam Smith Institute on fixing the bias in the tax system against investment, with another on the way.

These two reports influenced the creation of the super-deduction, which allows entrepreneurs to write-off 120% of their investment costs as a corporate tax expense. However, the super-deduction will expire in 2023 at the same time Corporation Tax leaps to 25%. A long-term solution is needed. That’s why we call for the Chancellor to announce the creation of a permanent unlimited investment allowance – a policy known as full expensing.

We are also calling for the reform and replacement of business rates, with a shift to a Business Land Tax levied on commercial landlords: “This strengthens investment incentives while accelerating the adoption of greener tech. Like the Unlimited Investment Allowance, it would benefit capital-intensive businesses which are disproportionately outside London and the South East.” We are also calling for the modernisation of Enterprise Management Incentives (EMI) and R&D Tax Credits.

We also have also some thoughts on what we don’t want to see:

“At the past two budgets, there has been talk about hiking Capital Gains Tax to fund new spending. This would be a mistake and would undermine the UK’s startups. Entrepreneurs have already been hit by sharp restrictions on Entrepreneurs Relief. Further hikes risk chasing away international entrepreneurs, which is a problem when half of the UK’s fastest growing companies were founded by entrepreneurs born overseas.

It’d also be a mistake to create new taxes on online sales. This wouldn’t be levelling the playing field, but punishing SMEs who have used e-commerce to survive the pandemic. Selling goods online is one area where the UK is a leader, instead of penalising success the Government should look at how it can help even more businesses selling online.”

​​Given that the UK is already ranked just 22nd out of 37 OECD countries in the International Tax Competitiveness Index and set to fall even further, the pressure is on the Chancellor for a pro-growth Budget.

Hope of Land
Do you think the cost of housing and office space is holding back entrepreneurship? We do. To that end, we’ve just kicked off a new project to investigate this in more detail. The first step is a small roundtable in a few weeks to discuss this in more detail. If you’re an entrepreneur, investor or expert and want to get involved, drop me an email to find out more.

Female Founders Forum
On Tuesday afternoon we will launch our latest Female Founders Forum report in the House of Lords, which we partner on with Barclays. If a brand new report wasn't enough, we also have the scientist, writer and broadcaster, Baroness Susan Greenfield, CBE, FRCP, along to say a few words at the launch.

Advisers and Supporters will have already been invited, but can still just drop an email to events@tenentrepreneurs.org to confirm their attendance. Everyone else can request a place here, although places are very limited at this stage so apologies in advance if there isn’t room.

Sign up to Philip’s Friday Newsletter here.

What we want to see at the Budget

This budget is an opportunity to reset and repair relations with entrepreneurs. Every single one of the Government’s priorities depend upon business investment and innovation. Yet the incentives for entrepreneurs to invest and innovate have been cut at successive budgets. Entrepreneurs’ relief was cut, corporation tax went up by 6pp, and now taxes on employment are set to rise. 

The Chancellor’s support for business during the pandemic was vital, but now higher taxes risk crushing a fledgling recovery already threatened by a global supply chain crisis, labour shortages, and debt overhangs.

At Budget 2021, the focus should be on removing long-term barriers to investment and modernising the tax system to support innovative businesses.

Create a Permanent Unlimited Investment Allowance

If we are to lift sluggish productivity and transition to a Net Zero economy, then we will need a step-change in investment. The super-deduction showed the Government’s intent, allowing businesses to write off 120% of their spending on new productivity enhancing-equipment. But the measure was temporary, it will expire in 2023 and at the same time Corporation Tax will jump to 25%. When that happens, the independent Office for Budget Responsibility forecasts investment to decline substantially. In terms of competitiveness, the UK will fall from 18th to 31st on the Tax Foundation’s International Tax Competitiveness Index.

If we’re to become a high wage, high productivity economy then we need a long-term pro-investment solution. The Government should allow businesses to write-off all investments in plants and machinery immediately. Super-deduction aside, Corporation Tax creates a bias in favour of current spending and against long-term investment. This change would eliminate that bias for most types of investment. 

The Government should also look at how tax reform could green our industrial buildings and accelerate the transition to Net Zero. As Eamonn Ives, who wrote our Green Entrepreneurship report notes, almost all old capital is worse for the environment in terms of energy efficiency than new capital - “On average, today’s light bulbs, televisions, kitchen appliances, computers – you name it – are now all markedly more frugal in terms of the power they need to run. If we are to drive emissions down further, uptake of newer, cleaner, greener goods will need to accelerate.”

To supercharge investment in greener infrastructure, they could create a Green Structures and Buildings Allowance set at a higher rate than the Structures and Buildings Allowance (3%), or even 100%.

Reform and Replace Business Rates

Businesses have waited a long time for the Government to fix a Business Rates system that almost everyone agrees is broken. There are rumours they will be forced to wait longer as the Chancellor is set to merely announce sticking plasters and put off fundamental reforms for another year.

The key problem with rates is that they act as a deterrent to investment. Businesses that invest in solar panels, wind turbines, or energy efficiency are hit with higher bills. When Tata Steel rebuilt the blast furnace at Port Talbot their rates bill increased by £400,000 per year.

In the short-term, the Government should exempt all plants and machinery (e.g. blast furnaces, turbines and generators, and silos) from rateable values.

In the long-term however, the Chancellor should announce a shift to a Business Land Tax levied on commercial landlords. This strengthens investment incentives while accelerating the adoption of greener tech. Like the Unlimited Investment Allowance, it would benefit capital-intensive businesses which are disproportionately outside London and the South East.

Modernise EMI and R&D Tax Credit

Innovative startups will drive growth in the years to come, but nurturing their development will require modernising the tax system. EMI, a targeted tax break for stock options, is popular among startups and widely seen as essential to the UK’s tech ecosystem. But it is becoming increasingly uncompetitive compared to what’s offered in the EU and the US. The limits have not increased since 2000 and many early-stage businesses are now ruled out. Increasing the asset capitalisation limit from £30m to £100m would allow more UK scaleups to access the relief and compete for talent internationally.

Similarly, the UK needs to dramatically increase private sector investment in R&D if we are to meet our 2.4% GDP target, but at the moment many business expenses on research are not covered by the R&D Tax Credit. For instance, purchasing data sets or using cloud computing (instead of server rooms) isn’t covered. As a result, the relief has fallen out with the way the modern economy works. It’s time to fix that.

The Government has consulted and commissioned reviews on both these measures, it’s now time to be bold and act.

What not to do: Tax Capital Gains or Online Sales

At the past two budgets, there has been talk about hiking Capital Gains Tax to fund new spending. This would be a mistake and would undermine the UK’s startups. Entrepreneurs have already been hit by sharp restrictions on Entrepreneurs Relief. Further hikes risk chasing away international entrepreneurs, which is a problem when half of the UK’s fastest growing companies were founded by entrepreneurs born overseas.

It’d also be a mistake to create new taxes on online sales. This wouldn’t be levelling the playing field, but punishing SMEs who have used e-commerce to survive the pandemic. Selling goods online is one area where the UK is a leader, instead of penalising success the Government should look at how it can help even more businesses selling online.

Image Credit: HM Treasury.

Un-Truman

Harry Truman wasn’t a fan of nuance: “Give me a one-handed economist. All my economists say ‘on the one hand...’, then ‘but on the other...” The President was being unfair as his economists were presumably just pointing out the trade-offs that exist in every policy decision. But he was also wrong. Some policies have near-universal agreement among economists.

One such policy is a carbon tax. 

We agree with the experts on this one, which is why our Adviser Eamonn Ives pushed it in our influential Green Entrepreneurship report last year. Today, Eamonn makes the case for a carbon tax in more detail in his Pricing Pollution Properly report for the CPS, arguing that market mechanisms such as carbon pricing are most successful at delivering decarbonisation cost effectively.

The reasoning is simple enough: “​​A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.” This doesn’t require anyone to know or predict which particular technology will work best. Instead, price signals tell entrepreneurs where to invest their efforts.

The UK already has a hodgepodge of policies that put a price on carbon. For example, carbon pricing has already played a role in decarbonising the UK, with the collapse in coal-fired power generation explained in large part by the adoption of the Carbon Price Support. However, these should be rationalised. We should price emissions at their source – a flat tax per tonne of emissions from a barrel of oil or unit of gas. This would lead to fewer distortions, such as the fact that while we currently tax household electricity consumption, household gas consumption is effectively subsidised as a result of a VAT discount on electric bills.

One common objection to the idea of a carbon tax is that we would simply offshore our emissions, with the tax displacing industries abroad. The solution to this is a carbon border adjustment mechanism (CBAM) to prevent carbon leakage and retain a level playing field between domestic and foreign goods. It’s something that the EU is phasing in.

The government could raise a lot from a carbon tax. Eamonn’s paper recommends the government rebates the revenue raised from a comprehensive carbon tax back to individuals on an equal basis, through a system of ‘carbon dividends’. But there are other options. Austria, which recently announced it’s implementing a carbon levy of 30 euros per tonne (by 2025 it will be 55 euros per tonne), will put the revenue towards radically overhauling its tax system: corporate tax rates will be cut from 25% to 23%; income tax will be cut for some; family "bonus" allowances will rise from 1,500 to 2,000 euros per child; and health insurance contributions for people on lower incomes will be cut.

A carbon tax isn’t the whole solution for all environmental challenges – and it probably shouldn’t be the only lever for reducing carbon emissions. Eamonn, for example, argues for continued support for British innovators who are researching and developing the clean technological solutions. But one thing is for sure: a carbon tax should be the main policy lever.

We care a lot about this ensuring that Britain’s entrepreneurs are at the forefront of fighting climate change and wider environmental and social challenges. That’s why we’ve recently set up the Green Entrepreneurship Forum with Mischon de Reya, which was launched with Danny Kruger MP earlier this week. Our next event is on how to raise next stage funding for green business and we have more events you might be keen to attend on our website.

  
Funding the Future
How to Raise Next Stage Funding for Green Businesses
21 October 2021
10am to 11am
Complimentary
Find out more
Great ideas should not cost the earth. During this Roundtable we will explore how sustainable businesses and businesses working for social good can scale through debt and equity fundraising.
 

Sir David Amess

“All our hearts are full of shock and sadness today at the loss of Sir David Amess, killed in his constituency surgery in a church after almost 40 years of continuous service to the people of Essex and the UK.” – Boris Johnson

"David and I came into parliament together in 1983. Though on opposite political sides, I always found him a courteous, decent and thoroughly likeable colleague who was respected across the house. This is a terrible and sad day for our democracy." – Tony Blair

"This news is a punch in the face. I worked with David on  maternity safety & mental health for young people about which he was passionate. He was kind and fun – & you always left him with a smile on your face. Today we are left with nothing but grief. RIP dear friend." – Jeremy Hunt

More tributes here.

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Seeing is Believing

We often promote networking and mentoring opportunities here at the Female Founders Forum so it is important that we regularly reflect upon this and make sure the evidence supports what we do. After all, sometimes well-intentioned interventions can be counterproductive.

It seems as though entrepreneurialism is something that needs to be inspired in some people. I’m sure there are some natural-born entrepreneurs who started bake-sales and lemonade stands as children, but these are few and far between. The children of entrepreneurs are more likely to start businesses but this does not seem to be for mostly genetic reasons. Children whose biological parents are entrepreneurs, but are adopted by non-entrepreneurs are half as likely to start a business as children whose biological parents are non-entrepreneurs, but are adopted by entrepreneurs.

This makes sense. Starting a business is daunting. There’s a lot to learn and if you don’t know anyone who has done it, you might not know quite how difficult it may be. People who work with or live in the same neighbourhoods as entrepreneurs are more likely to become entrepreneurs themselves.

The evidence that entrepreneurship has to be inspired is clear but what about female entrepreneurs?

It seems that the degree to which entrepreneurship is contagious depends on how similar one is to the entrepreneur inspiring them. If to start a business you need to see someone else make a success of it, it follows that that person should be relatable in some way.

Girls appear to be more susceptible to this effect than boys. Boys can see male entrepreneurs in the news all the time; Mark Zuckerberg, Sir Alan Sugar and Jeff Bezos are household names. They know that their gender will not hold them back. So if their aunt starts a business that may feel relatable to them. But, more often than not, the profiles of female entrepreneurs are not raised to the same degree as male entrepreneurs. In fact, four out of five teenage girls can’t name any female entrepreneurs. So if their uncle starts a business, that may not feel like something they can do too, but it instead may feel like something that men do.

This shows up in the adoption study I mentioned earlier. If you look at the ungendered data the simple story is that children adopted by entrepreneurs are more likely to pursue entrepreneurship. But if you dig deeper, girls are only more likely to become entrepreneurs if their adopted mother was one. If their adopted father was an entrepreneur this had no impact. Boys were more likely to become entrepreneurs regardless of which parent was an entrepreneur.

Similarly it is not as simple as “people who work with entrepreneurs are more likely to become entrepreneurs.” This effect is stronger the more similar people are to each other. This is true if they are the same gender, of similar ages, if they are both parents or both not parents, if they have the same educational background, or if they grew up in the same place.

This means there is a negative feedback loop, with there being fewer female entrepreneurs and therefore fewer opportunities to inspire women to become entrepreneurs.

Mentorship is one way to avoid this vicious circle. Students who were randomly assigned a mentor who was an entrepreneur were 9% more likely to start a business than those assigned a non-entrepreneur mentor.

We also need to do more to raise the profile of potential role-models who are entrepreneurs. We should celebrate female founders in the news, in films and television, and in schools. This means that everyone has a role to play in supporting female entrepreneurs. It cannot be driven by government policy alone.

This is just one of the topics we discuss in our upcoming thought-leadership report which will be launched at the House of Lords on 26 October.

We will be sending invitations out soon, so if you are interested in joining us, you can sign up to become a member of The Entrepreneurs Network. It’s free to join.

What was in the AI Strategy?

Earlier this year, I wrote about what the UK could do in order to truly lead in AI policy. Six months later, after running out of Reviews, Roadmaps,  and Sector Deals, the UK Government finally released their AI Strategy. And it’s actually not bad at all.

Our first recommendation was to create a pool of cloud compute credits for the UK R&D ecosystem, based on the US National Research Cloud proposal. Encouragingly, the strategy requires the Office for AI and UKRI to evaluate the UK’s computing capacity; this is a positive step, but they should also reach out to the policymakers behind the US NRC and the EU’s Gaia-X to explore interoperability and alignment. 

We also called for lower barriers to immigration; the reformed visa regime is welcome but predates the strategy. More could be done to proactively attract foreign talent generally.

On intellectual property and exemptions for data mining, the Government separately committed to looking into this in their response to a call for views on AI and IP. While on regulation and public sector oversight, we will be able to make a clearer assessment once the Office for AI releases their White Paper on AI regulation in 2022. But it’s encouraging that the strategy explicitly considers societal and long-term risk; it’s also positive that the consultation on GDPR proposes to introduce “compulsory transparency reporting on the use of algorithms in decision-making for public authorities, government departments and government contractors using public data”.

Overall, the Government’s strategy is encouraging: it’s pro-innovation, outward looking and leverages the UK’s leading position in research and innovation. But it’s also too early to celebrate: these are only high-level commitments and it’s the delivery that actually matters. The Spending Review should be a good opportunity for a temperature check and to evaluate which commitments the Government will prioritise. 

Does leaving the EU present a unique opportunity for deregulation?

Does leaving the EU present a unique opportunity for deregulation? In a word: yes; but with some serious caveats.

In the short term though, our post-Brexit transition is leading to more rather than less bureaucracy for business owners.

Most obviously in the need for additional paperwork – export and import declarations – and inspections on trade between Great Britain and both the EU and Northern Ireland.

And just because there are areas where we could diverge from the EU, it might not be in our best interest to do so. There are costs to moving away from EU standards – as there are from moving away from US or global standards. There are trade offs.

For example, if there was a straight choice between getting rid of GDPR entirely and losing our data adequacy agreement with the EU, entrepreneurs would undoubtedly prefer to put up with GDPR rather than cut the flow of data between the EU and UK.

And not everything can be blamed on the EU.

Consider the Online Harms Bill proposals. These will require companies to prevent illegal content and activity online, and ensure children are not exposed to harmful content. Many campaigners don’t think they will be effective, but they will also damage tech startups with sanctions for non-compliance set to be as high as £18 million or 10% of global annual turnover.

Tech startups and investors are also very concerned about government plans to lower the burden of proof needed by the Competition and Markets Authority (CMA) to block mergers and acquisitions involving large tech companies that are deemed as having strategic market status.

Many might not like it, but getting acquired by a Big Tech company is an important way for startup entrepreneurs and their investors to ‘exit’ their firms and make a return. 

Consider Alex Chesterman. In 2001 he started Lovefilm and sold it to Amazon in 2011. But that was just the start of his journey. He has since founded and exited two billion dollar companies: Zoopla and Cazoo. How different would his story be if there was no opportunity to exit his first company? 

When polled by Coadec, half of the UK investors said they would significantly curb the amount they invested if these come into force. If we crack down on M&A activity we will have a lot fewer tech startups – at least in the UK..

And I’ll briefly mention the housing shortage we have in places where people want to live. It is perhaps the most egregious regulatory issue. And once again, it’s not got anything to do with the EU. We need more homes and office space in entrepreneurial hubs, where agglomeration drives innovation, but planning regulations are pricing people and companies out.

That said, there are important areas where we can diverge from the EU. And it’s being driven by innovators – many of whom are already in the UK, and many of whom could be attracted here with the right regulatory teamwork.

The work of TIGRR and the Regulatory Horizons Council is critical here.

Consider the recent success on gene-edited crops.

Recommendations were made in the TIGRR and then the Regulatory Horizons Council reports this year.

Now we are easing requirements for field research on gene-edited crops. This uses gene editing that could be found in nature – not gene modification. 

While the recommendations stopped short of waving these products through to supermarket shelves, or changing the regulations on gene-edited livestock, requirements around commercialisation will be eased.

In the US, we’ve already seen soya-bean oil that has a longer shelf life; in Japan, a gene-edited tomato comes with higher amino acids, and a herbicide-resistant soya bean on its way. EU regulation was clearly holding us back here. 

Technological innovation has the potential to radically transform our lives – everything from drones, autonomous vehicles, ​​cannabinoid clinical research, lab grown meat. TIGRR’s 130-page report is testament to what could be achieved.

But there is one idea I’m less optimistic about. TIGRR’s call for the One-in, two-out rule to be reimposed.

The numbers were fudged in the past, with the most costly new regulations simply not counted.

A National Audit Office report showed that many departments are simply unaware of the costs imposed as a result of their existing regulations. The government of the time had a target of reducing £10 billion in regulatory costs to business over the course of the Parliament. But though they were claiming to have saved £0.9 billion, the report revealed that they had actually increased the net cost to business of regulatory decisions by £8.3bn.

This speech was given at an event of regulation at the Conservative Party Conference.

Toeing Decline

On the back of the Prime Minister’s Conference speech, the self-styled “party of business” came in for a barrage of criticism.

As well as individual challenges from the likes of Next’s Lord Wolfson and Wetherspoon’s Tim Martin, organisations that lobby on behalf of businesses of all sizes and sectors hit out hard. This is no small thing as business groups tend to shy away from being overly critical of politicians in public so they can maintain good relationships and influence. That they’ve unanimously come out so strongly against the Government is significant.

Most interpreted the speech, and Boris’s subsequent comments, as putting the blame on business for what he euphemistically described in his speech as “the present stresses and strains”.

Right-leaning think tanks weren’t happy either. Ryan Shorthouse, chief executive of the think tank Bright Blue, said: “The public will soon tire of Boris’s banter if the government does not get a grip of mounting crises: price rises, tax rises, fuel shortages, labour shortages. There was nothing new in this speech, no inspiring new vision or policy.” While the Adam Smith Institute slammed it for being “economically illiterate”.

In his speech, Boris said: “We are not going back to the same old broken model with low wages, low growth, low skills, and low productivity. All of it enabled and assisted by uncontrolled immigration.” Later he doubled down on this position: “Businesses have been able to mainline low-cost migration for a very long time.”

Ministers are falling in line, with a cabinet minister telling the Financial Times: “Of course they don’t like it, because they’ve had it too easy with cheap foreign labour. But they need to stop whingeing.”

But as the Adam Smith Institute’s Daniel Pryor explains: “Sector-specific, and in many cases temporary, wage hikes do not translate into a broader shift towards a high-wage economy, nor do they necessarily boost productivity. At best, they are a particularly inefficient form of redistribution. Employers are likely to pass on these increased input costs to consumers, pushing up prices and leaving average real wages unchanged, or simply cut jobs.”

Or, as Giles Wilkes puts it: “You can’t make people prosperous when shrinking the pie.”

Or, as ​​Tony Danker, director-general of the CBI, said in response to Johnson’s speech: “Ambition on wages without action on investment and productivity is ultimately just a pathway for higher prices.”

Or, as Danny Finkelstein (inspired by Margaret Thatcher) writes: “As a country, you can’t buy what you can’t pay for. And you can’t — for long, anyway — pay for things with money you don’t earn.”

Or, as our research director tweeted: “You can't increase real wages without increasing productivity. You can't increase productivity by creating shortages.”

You get the idea.

If blaming businesses is the strategy for dealing with the widely predicted new winter of discontent, then it will come at a cost. Most obviously in the short term by turning business owners against the Government. But eventually, we will all bear the cost of treating shortages as some sort of a master plan. And at some point, one would think, the party will bear the cost by being less electable.

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Better Together

In our regular meetings with government, it’s not uncommon to be asked: why haven’t we produced a Google, Facebook, Apple, or Amazon, and how can we get one in the UK? It’s a question that everyone outside of Silicon Valley asks – including in other US states – so the answer has less to do with anything particular to the UK, and a lot to do with the particular story of the Valley.

A more interesting question might be why the UK has managed to build its own incredibly successful blessing (yes, that’s the right term) of unicorns. We have billion-dollar startups spanning a range of sectors, “from fintech and artificial intelligence, to cybersecurity and healthcare, each with vastly different business models and methods of growth.”

Whether we’re talking about unicorns ($1bn), decacorns ($10b) or hectocorns ($100b), acquisitions are an important way for businesses to scale, with 1 in 3 UK unicorns having made at least one acquisition prior to reaching their billion-dollar valuations. For example, The Hut Group, the Manchester based e-commerce company, made six acquisitions prior to becoming a unicorn and has since made 15 more.

While acquisitions are a fundamental part of a flourishing entrepreneurial ecosystem, regulators around the world are increasingly concerned about the competition implications of them. Facebook’s acquisition of Instagram is seen by many as a mistake – even though at the time the standard view was that Facebook’s purchase of the social media site for $1bn was evidence enough that a tech bubble was about to burst.

Nevertheless, this and other perceived post hoc failures have left regulators around the world feeling like something must be done. None is proposing to go further than the UK Government, informed by the Competition and Markets Authority (CMA), which would target the likes of Google, Facebook, Apple, and Amazon with the threat of blocking acquisitions that have a ‘realistic prospect’ of reducing competition – defined in law as being “greater than fanciful, but less than 50%.”

We think this is a bad idea. In a new paper out today with ICLE – to coincide with the Government’s consultation on competition in digital markets which we’ve responded to – Sam Dumitriu and Sam Bowman argue how the proposal risks damaging the startup ecosystem.

First, from a competition perspective, it risks protecting Big Tech incumbents from each other, as Sam Bowman argues in an article for CapX. For example (and there are plenty more), “Google bought Android in 2005, and used it to build an open source alternative to iOS. Without Google’s entry into the market, it could have been years before the iPhone had a serious competitor, allowing Apple to charge higher prices and work less hard to improve its own offering.”

Second, “getting acquired by a Big Tech company is an important way for startup entrepreneurs and their investors to ‘exit’ their firms and actually make a return,” writes Bowman. London’s investors aren’t keen either. When polled by Coadec, half said they would significantly curb the amount they invested.

Over recent years, nearly as many UK startups were bought by Microsoft, Google, Facebook, Amazon, and Apple as listed on the stock market. If the Government were threatening regulation to stymie IPOs there would rightly be an uproar (in fact, they’re rightly trying to reinvigorate IPOs by deregulating corporate governance and allowing dual-class shares).

The sale of a company isn’t the end of the story. Consider Alex Chesterman. In 2001 he started Lovefilm and sold it to Amazon in 2011. But that was just the start of his journey. He has since founded and exited two unicorns: Zoopla and Cazoo. How different would his story be if there was no opportunity to exit his first company?

I don’t know where the next Google, Facebook, Apple, or Amazon will be born. We have dozens of ideas for policies that increase the chances of it happening in the UK, but we shouldn’t lose sight of the fact we’re one of best places in the world to start and grow a business and remember what got us to where we are.

Join Us
Our Supporters and Advisers are vital for supporting our work – you might well be one of them, for which I thank you. For the rest of you, now’s the time to consider getting more involved.

First, we’re increasingly having to turn people away from events as they fill up quickly. Even virtual roundtables have to be capped so everyone can have their say. Of course, we will always host events and webinars that are open to everyone – for example, the Late Payments Task Force Webinar with the Small Business Commissioner – but with a growing network, demand is increasingly outstripping supply.

Second, next year we’re going to put the price up from £50 and £500, to £100 and £1,000. This won’t be the case for Supporters and Advisers who are already signed up. All subscriptions are frozen in time – the cost for us in inflation will be a deserved reward for your early support and loyalty.

Third, and most importantly, I think what we do really makes a difference to the state of entrepreneurship in the UK. A lot of our polices have gone on to become law. We don’t (and wouldn’t) take funding from government, and your support helps us undertake our independent research. If you want to know why we do what we do, read about it on our website.

You can easily join us here. Please feel free to drop me an email if you have any questions, or book a 15-minute Zoom call in my diary here.

First Resort

Being an MP can be a bit of a thankless job – actually, worse than thankless given the abuse they get on social media. And they’re underpaid compared to what their peers earn in the private sector; or even the public sector: 667 people at local authorities across Britain earn more than the Prime Minister.

So whether or not you agree with any MP's particular vision, a major reason many are in the job is to try to make the country – or at least their constituency – a better place. (Like all of us, no doubt prestige and power also play a role).

As part of their public service, most MPs spend a lot of time engaging with organisations like ours. We’re just one of many think tanks, but an email to the office of an MP almost always leads to a meeting or event – the latter sometimes during unsociable hours. There is nothing in their contract that says they have to do this, and they could quite easily slip below the radar and just decline invitations.

This public service is reflected in a new format for engaging with MPs that we’re trialling – convening entrepreneurs and experts to discuss with MPs how to support their entrepreneurial ambitions in their constituencies. We do this already on a national level, but haven’t done this on a local level. Until now.

The idea came from a chat with Robin Millar, Conservative MP for Aberconwy. The main urban centre in his constituency is Llandudno, and on Wednesday we’re having a virtual roundtable discussion on how to promote entrepreneurship in both this seaside town and the wider region.

No doubt some of the discussion will be focused on it being a North Wales coastal resort, but there are also general lessons that can be applied from other places on how to create an environment that nurtures growth, fosters ambition, and attracts new industries and businesses.

Robin is particularly keen to have entrepreneurs from across the country around the virtual table. Local councillors will also be on the call, so your ideas could feed into local policies like how the £4.8bn Levelling Up Fund is spent.

So even if you don’t have any ties to Llandudno, or even Wales, this is a chance for your own bit of public service, to help spread prosperity throughout the UK. And, like all our events, it will also be a chance to meet others with a similar ethos. Just drop me an email if you want to join.

Street Supply 
Britain suffers from a shortage of buildings where people want to live and work. As our Senior Researcher Aria Babu writes, fixing this needs to be a top priority for the Government.

While the growing discontent understandably focuses on housing and the fact that people can’t afford to buy or rent a home where they want, the impact on businesses and the economy is neglected. Compare this to the debate in and around Silicon Valley, where the impact of high housing costs on startups has been a hot-button issue for a while.

Some of this is understandable. We know that agglomeration effects result in more innovation when people and businesses are able to cluster, but we don’t really consider the marginal person that isn’t able to move to an entrepreneurial hub, or the marginal business that isn’t created. It’s a mistake to ignore what is not seen, but it’s the way of the world.

But I can’t fathom how the obvious impacts of this dearth of buildings on businesses is underreported. As Aria writes: “We have some of the highest office rents. In fact, the most expensive office in the world is in London, charging £277.50 per sq ft. The shortage of office space costs businesses an extra £32 per sqm. For a firm of 200 office workers, this would cost them an extra £48,000 per year.”

Building more isn’t easy because people understandably don’t want more buildings where they live. Aria raises the policy of Street Votes, which might be added to the Planning Bill, and allows streets to control their own development. She also raises the prospect of a votes-based system beyond housing, making it easier to turn shops into offices, homes into labs, and cafes into co-working spaces, where there is local demand. 

This is a policy area that we’ll continue to investigate. Please get in touch with Aria if you want to get involved in supporting our efforts on this.

Housing and Entrepreneurship

Britain is suffering from a major building shortage. We often think of it as a “housing crisis” because the most obvious signs of it are the eye-watering rents and house prices in our towns and cities. But the problem is much wider reaching than that: there are not enough buildings, of any kind, in places where people want to live and work.

As a general rule in the UK, the more people earn in a city, the less space they have per person. London has 353 sq ft per person, New York, one of America’s most expensive and desirable cities, has 531 sq ft. This is more than Blackpool (480 sq ft), which is Britain’s city with the most space per person.

The UK also has some of the highest office rents. In fact, the most expensive office in the world is in London, charging £277.50 per sq ft. The shortage of office space costs businesses an extra £32 per sqm. For a firm of 200 office workers, this would cost them an extra £48,000 per year.

Additionally, the UK seriously lacks the lab space it needs to grow its research base and analysis of planning data show that there are few plans to build many new labs anywhere in the country. To put the scarcity in perspective, London has only 90,000 sq ft of lab space in total while New York has 1.36 million square feet available.

In most markets, if demand exceeds supply then prices rise and the market attracts more producers and sellers. Property prices far outstrip construction costs, and yet, developers aren’t rushing in and closing the gap. Why?

The answer is the Town and Country Planning Act. Local governments have almost complete control over what can be built in their jurisdictions. Decisions are not driven by supply and demand - instead they are driven primarily by local politics and there are powerful incentives that make approving new housing difficult. Local residents have an active interest in limiting construction near them. They think that new homes can decrease the value of their homes, increase the strain on local services, the building work will be noisy, and the new buildings are often uglier and less attractive than what they replace. They are often right on all of these counts.

So when developers want to build anything, they have to battle the council. This is an expensive process and Section 106 means that councils can extract expensive commitments from the developers, who will, in the process of building new houses to sell, also have to build new roads and affordable (subsidised) housing.

This makes it very difficult for small builders to succeed. While development can be very profitable when a project is successfully approved, it is such a high risk endeavour that developers need to spread this risk over multiple projects, meaning that it is more difficult for smaller SME builders to compete. This is bad for innovation and competition in the sector.

Some argue that the problem is not scarcity. Sometimes people will blame high costs on the price of land or on interest rates. A piece of land in Oxfordshire without planning permission granted to it sells for 1% of what an identical piece of land with planning permission granted can sell for. The value of the land itself makes up 1/100th the cost of the sale price. The planning permission is the valuable thing. Others argue that high prices are caused by low interest rates. They are failing to understand why interest rates would have a direct impact on the value of houses: in the absence of supply, cheaper finance and lower returns on other assets push house prices up so house prices are primarily driven by how much people are able to borrow and save rather than by how much such homes cost to build. In the North, where supply is more elastic, house prices are less impacted by interest rates. Borrowers in Doncaster face the same interest rate as borrowers in Cambridge. In cities where planning is much more liberal, this relationship barely exists.

A lack of buildings causes a number of wide-ranging knock-on problems for the economy by damaging entrepreneurship.

People have less money. High housing costs are potentially the greatest squeeze on the cost of living. Both rents and house prices have continued to rise faster than wages and 66% of households either pay rent or have a mortgage. This money is generally a transfer of money from poorer people to richer people. This money doesn’t disappear, it goes to landlords or the former owners of homes who may spend or invest it but it would be better if more of it stayed with younger people.

If people are living paycheck to paycheck or putting all of their savings towards a deposit for a house, they aren’t going to have the money to start a business. Especially because home equity is often used to fund early-stage businesses.

There is even greater damage than this being done to the UK’s entrepreneurial dynamism. People are less able to relocate to where they are most productive. If we want more successful entrepreneurs in the UK, we have to be capable of building a hub like Silicon Valley, where people can meet, found businesses together and hire each other.

Take Los Angeles for an example. Everyone knows that LA is where a person goes to make films and this makes films cheaper to run. Aspiring actors move to the city which means there is a wealth of talent to draw upon, people who want to make costumes or sets move there, and filmmakers move there. These people then go to the same parties and meet in the same coffee shops and come up with ideas for new projects to embark on together.

Silicon Valley, and to a lesser extent London, is like that for tech. And Oxford and Cambridge are like that for Life Sciences. But high housing costs dampens innovation by pushing up the cost of living in these places, meaning that fewer would-be entrepreneurs, tech workers, and researchers are able to live side by side and start new projects together.

This makes it less likely that people will start companies and more expensive for them when they do. Because high housing costs discourage people from moving to productive cities, startups find it harder to hire people. Because offices and labs are expensive, entrepreneurs have to pay more for space. As a result, entrepreneurs are punished for wanting to start companies in the UK.

This then has a devastating impact on the economy as a whole. Academics in the US estimate that lowering building constraints in their most productive cities to the limit imposed on median cities would increase US GDP by 9.5%. No such studies have been done for the UK, but because the UK has an even more restrictive system it has been estimated that solving the housing crisis could boost GDP by as much as 30%. 

As part of the “science superpower” agenda, the government should make solving this issue a priority. Lab-space is a low-hanging fruit and we should immediately embark on a scheme to make it easier to build labs across the country. But that would only be the start and would do nothing about housing or office costs.

One way of reforming the system would be to liberalise the planning system completely and allow anyone who owns a piece of land to do whatever they like with it. That would be politically untenable and would, in any case, be an overcorrection, because it would create a market which fails to price the externalities of building. 

Attempts at liberalisation have faced stiff opposition because reforms are win-lose and people fiercely want to protect their house prices and what they see as their rights. A viable solution needs to balance two things: it needs to bring market forces into planning, so that housing is built in places where it is most expensive, and it needs the popular consent of the people who will be affected by it. If we can get this right the gains are so large that everyone can be a winner.

For example, a street of 26 bungalows in Barnet, if redeveloped to terraced housing could make about £54m, when the building costs and the cost of rehousing the current occupants is taken into account. This is enough money to compensate everyone if the rules governing such a system were properly drawn up.

This sort of win-win proposal is set out in Policy Exchange’s Street Votes:

Residents of a street should be able to agree by a high majority on new strict rules for designs to make better use of their plots. A street of suburban bungalows, for example, could agree on the right to create Georgian-style terraces. In many cases, an adopted ‘street plan’ would greatly increase the value of residents’ homes, giving them strong reasons to agree on it.

These proposals will foster gentle intensification within about half a mile of existing transport and town centres, creating better and greener places with more customers to support struggling local high streets. More people will be able to live in neighbourhoods that pass the ‘pint of milk test’, living in walking distance of somewhere they can buy a pint of milk, along with other essential social infrastructure.

These ideas were put forward in a presentation bill to parliament last week. Before Wednesday’s reshuffle, the then Secretary of State for Housing, Communities and Local Government Robert Jenrick, supported these reforms and was going to put them into the upcoming planning bill. Micheal Gove may be keen, and has indicated in the past that he is in favour of ideas like this.

Of course, street level democracy cannot be the only way new buildings are created. It is best suited to urban and suburban areas which already have public transport links and low density housing. 

There are many villages in the UK which will also need new homes, and it may not be viable to make street-by-street design codes. There may also be places in the country where we want to build entirely new garden villages, for example, along the HS2 and Crossrail lines. The government should conduct pilots of how the core principles of fixing the broken incentives and transaction costs in the planning system can also be applied to those, for example by giving local people more power to bargain for greater benefits from such schemes.

Poundbury is a popular housing development in the South West. It was built as a project by the Prince of Wales. It was created to be walkable and sustainable and it borrows from traditional forms of architecture. It is incredibly popular and homes in Poundbury are worth 43% more than those in neighbouring villages. If we can work out how to build new, beautiful, and sustainable villages then this should be encouraged.

And on top of these reforms it should be easy to convert properties between different types of use. The economy is fast-moving and dynamic. We have seen regions that used to be full of factories turn to wastelands as the economy has moved on. While people bemoan the death of the high-street, calls to allow commercial property to turn into other uses of building space are scarce.

With a similar votes-based system, we should make it easy to turn shops into offices, homes into labs, cafes into co-working spaces, and we should make it easy to turn them back again.

When looking at the system as a whole, it is obvious that making it easier to build in the UK would solve a whole host of problems. It would make the country more dynamic, productive, entrepreneurial and a much nicer place to live.

Lost in the Reshuffle

Being a Government Minister can be a wild ride. Just take Nadhim Zahawi as an example. Having spent the last 10 months or so focusing day and night on all things vaccines, he’s been promoted to Secretary of State for Education and will now be doing a radically different job. While he and his successor, Maggie Throup, will have advisers and the civil service to help with the continuity, this sort of disruption would be a bad way to run a business and when you take a step back it’s a rather odd way to run a country.

As well as reshuffling people, governments sometimes reshuffle whole departments – normally after an election. For example, the Department for Business, Energy and Industrial Strategy (BEIS) came about after Theresa May merged the Department for Business, Innovation and Skills (BIS) and the Department of Energy and Climate Change (DECC). These departments had been created from the previous merger of the Department for Innovation, Universities and Skills (DIUS) and the Department for Business, Enterprise and Regulatory Reform (BERR), which took the place of the Department of Trade and Industry (DTI) which somehow managed to survive without a rebrand from 1970 to 2007. They probably should have just stuck with the name DTI all along, or just changed it once to the Department for Business – it would have at least saved money on new signs.

This isn’t to say all departments should remain ossified in the 1970s – particularly when changes in the world demand new things from the government. Tech is the most obvious example here, but its ever-growing importance is at odds with it sitting alongside culture, media and sport in the Department for Digital, Culture, Media & Sport (DCMS). Digital/tech used to sit across BIS too, which came with its own challenges, but when they decided to place it in one department they probably picked the wrong one.

Tech policy would fit better within BEIS (or whatever they decide to call it next). This isn’t about who is in charge. Whether you’re more a fan of new minister Nadine Dorries or her predecessor Oliver Dowden (or neither), they shouldn’t have to juggle digital policy with culture, media and sport.

To some extent, this will be mitigated by junior ministers. Chris Philp, as Parliamentary Under-Secretary of State for Digital Economy, will take the lead on a lot of tech policy. But you would be hard pressed to convince me that ultimately the responsibility is more at home with the person tasked with thinking about museums and galleries than the person whose job it is to "ensure the UK remains at the leading edge of science, research and innovation."

Exit Strategy
Our friends at Coadec have a report out on the potential impact of the Digital Markets Unit (DMU) from the perspective of tech startups and investors.

It’s a punchy report, built around a survey of investors and echoes some of the concerns touched on in our Conflicting Missions report about the significant risks that the DMU poses to competition, innovation, and entrepreneurship.

The report finds that there is concern among investors for tackling anti-competitive behaviour, with 80% of investors surveyed either concerned or very concerned about incumbent companies making it harder for new entrants to break into markets. But investors are particularly concerned with barriers to entering markets dominated by incumbent non-digital companies, rather than other tech companies.

With 90% of investors agreeing that the ability to be acquired was very important to the health of the startup ecosystem (not sure what the other 10% think, as exits are how they make their money), it should be hugely concerning that half of investors would significantly reduce the amount they invested in UK startups if the ability to exit was restricted, while 22.5% said they would stop investing in UK startups completely.

The report suggests a real lack of trust between UK investors, regulators and government, with 80% of investors feeling that the government has only a basic understanding of the startup market; 60% think that UK regulators only have a basic understanding of the startup market; and 70% of investors believe that UK regulators only think about large incumbent firms when designing competition rules, rather than startups or future innovation.

Part of the challenge for Government and regulators is that entrepreneurs rarely want to speak publicly about their concerns around regulation. For example, they understandably don’t want to alert the regulators to the fact that they might one day hope to exit their business (even though this is a completely reasonable thing to aspire to do). We had an event with the DMU not long ago and for the first time since starting the think tank, the majority of entrepreneurs on the call were more happy to listen than talk about their concerns despite being very vocal about them in private.

Investors can speak more openly, which is what makes Coadec’s report really important. While the interests of entrepreneurs and investors aren’t always aligned, those that have taken VC money will be eyeing up some sort of exit at some point, so the views of investors are a useful proxy for entrepreneurs' opinions on this matter. The evidence here confirms what is being said in private conversations – there are growing concerns from startups about competition policy.

Cookies Crumble

Ever since Brexit (as well as during the campaign), we’ve been promised regulatory divergence from the EU. Yesterday evening we got a glimpse of what this could look like, as the Government announced plans for a new data regime.

Yesterday’s announcement was trailed in a recent Telegraph interview with Oliver Dowden MP, the Secretary of State for Digital, Culture, Media and Sport. The plans aim to iron out some of the deficiencies that the government sees with GDPR. But while the Telegraph article focused on us being subjected to fewer cookie popups – after all, that’s what your average man/woman on their smartphone cares about – the most interesting idea could be around removing barriers to responsible data use.

An example of what's possible can bee seen from researchers from Moorfields Eye Hospital and the University College London Institute of Ophthalmology. They made a breakthrough in patient care using AI, training machine learning technology on thousands of historic de-personalised eye scans to identify signs of eye disease and recommend how patients should be referred for care. The expectation is that identifying and clarifying lawful grounds for research processes would lead to more innovations like this and AI outperforming doctors’ diagnosis of breast cancer.

There will be concerns about privacy. But people seem to care about data privacy less than you might think. One study found that “86% of respondents express no willingness to pay for additional privacy when interacting with Google. Among the remaining 14%, the average expressed willingness to pay is low.”

Nevertheless, as the plans acknowledge, there are differences in how large tech firms and small hairdressing businesses should be regulated, which is why they are planning to tweak GDPR rules to move away from the “one-size-fits-all” approach. (Hence the focus on fewer cookie popups.)

The plans also consider ​​bias in algorithmic systems. This is clearly a legitimate concern, but it’s also an opportunity. As Caleb Watney writes on that fallibility of humans: “We judge people based on how traditionally African American their facial features look, we penalize overweight defendants, we let unrelated factors like football games affect our decision making, and more fundamentally, we can’t systematically update our priors in light of new evidence. All this means that we can gain a lot by partnering with AI, which can offset some of our flaws.” (Read Sam Dumitriu’s article from 2019 for a thoughtful consideration of the evidence.)

We’ll respond to the consultation around these plans, so if you want to feed into our response, send over your thoughts to Sam via email.

Queen’s club
Everyone wants to be appreciated. From the twisted olive branches for victors in the Olympic Games, to chalices in the Middle Ages, through to the numerous awards of the modern world, being recognised incentivises us. That’s why we called for a new order of chivalry so that entrepreneurs and innovators are properly appreciated.

And while we think they fall short of our proposal, entrepreneurs may want to consider applying now for the Queen’s Awards for Enterprise. You can apply in the categories of innovation, international trade, sustainable development or promoting opportunity through social mobility.

Winners will be: invited to a Royal reception; presented with the award at your company by a Lord-Lieutenant; able to fly The Queen’s Awards flag at your main office, and use the emblem on your marketing materials; and be given an official certificate and a commemorative crystal trophy.

The deadline for entries is midday on 22nd September 2021. Find out more here.

Hidden Gems

The Global Entrepreneurship Monitor (GEM) is hot off the press. As the world’s most authoritative comparative study of entrepreneurial activity, it’s a vital source for understanding the state of entrepreneurship in the UK.

The survey of close to 10,000 adults found that in 2020 total early-stage Entrepreneurial Activity (TEA), ie. the percentage of the population involved in nascent entrepreneurship, dropped to 7.9%. This is significantly lower than 2019, when it stood at 9.9%, but not too dissimilar from 2018, when it was 7.9%. For context, this puts us behind the US (15.4%), but ahead of Germany (4.8%).

This shouldn’t come as a surprise. While many great businesses are started during crises, it’s understandable that many wannabe entrepreneurs are holding fire. After all, larger companies are more able to survive pandemics and other shocks than are smaller businesses. And people will have been reticent to leave stable work where they can receive furlough payments, and start something higher risk.

However, with the climate improving, brace yourself for a resurgence in entrepreneurship: 16.2% of working age adults expected to start a business within the next 3 years. This is up from 11% in 2019. Once again, we sit between the US (18.6%) and Germany (12.7%)

The British public is optimistic, with the share of those agreeing that starting a business would be a good career choice jumping significantly from 58% to 75%. So while the pandemic has given wannabe entrepreneurs pause for thought, if we could fast forward to next year’s report I expect we’ll see that many will have taken the leap.

Cookie Monster
On the blog, Sam Dumitriu has written about the news that the Government is looking at reforming our data laws. While he welcomes the opportunity to diverge from some of the sillier aspects of EU data protection law, he thinks the government should instead prioritise no longer bringing in the bad regulations.

After all, many startups prefer to tolerate the excesses of GDPR in exchange for our data adequacy agreement with the EU. And the damaging aspects of GDPR have already been realised, with compliance practices already standardised.

Sam raises the example of the age-appropriate design code, which aims to protect children from harmful content online. While its aims are laudable, it would severely tilt the playing field against startups and towards incumbents, as consumers will understandably be reluctant to hand over personal information such as their passport details to new businesses.

Ain’t No Party
Many of us will be at the upcoming Party Conferences in Brighton and Manchester, speaking on panels inside the secure zone.

We often host our own events outside the secure zone, so we can ensure entrepreneurs who don’t have a conference pass are still able to attend. Anyone working with an organisation that wants to partner on an event should get in touch with me to discuss what we could do. Also, if you’re attending either conference, let me know if you would like to arrange to catch up with me and the team over a coffee (or perhaps something stronger) – either inside or outside the secure zone.

Better than deregulation

Last week, we heard that the Government is looking at reforming our data laws. Outside of the European Union, there is the opportunity to diverge from some of the sillier aspects of EU data protection law. It seems likely that ineffective and irritating cookie notices will disappear (n.b. If you really hate cookie notices, there are dozens of browser extensions that automatically remove them).

On the face of it, this is welcome news. There’s evidence that GDPR reduced investment in European startups and entrenched market power in the digital advertising markets.

But I’m not holding my breath for two reasons. First, any real divergence risks undermining our data adequacy agreement with the EU. I suspect most startups would tolerate the inconveniences and problems of GDPR if it was the price of admission to trading with the EU.

Second, the harms of badly designed regulations often can’t be unpicked by deregulation. Implementing GDPR was expensive for SMEs as in some cases it meant rebuilding email marketing lists that had taken years to build. But moving forward, most email marketing services have GDPR compliant practices as standard. In some cases, they have become international norms as US firms seek access to the EU market. Of course, there are still ongoing costs. The fact that many newspapers geoblock content for the EU and UK is proof of this. But in general, the biggest costs of regulation are in transition. Redesigning your website so it has a Cookie Notice was expensive, but once you have it the costs are insignificant.

The truth is deregulation is an inadequate substitute for not passing bad laws. If policymakers care about eliminating burdensome requirements and growing the UK’s tech sector they should spend less time deregulating and more time blocking bad new regulations. It’s easier to make omelette out of an egg than an egg out of an omelette.

Take the age appropriate design code, which aims to protect children from harmful content online. Its aims are laudable but it will carry major costs. As Coadec argues it could tilt the playing field against startups and towards incumbents.

Tech companies may have to build multiple versions of their products, one for adults and one for kids, which will inevitably favour tech giants over startups and SMEs. Alternatively, they could apply the rules to all users but that would force significant business model change that will be hard to unpick later.

The biggest problem is the requirement for age assurance. If you want to avoid the onerous restrictions of the age appropriate design code, as most businesses that operate online services will, then you will have to implement an age gate collecting personal information about all of its users. As the FT notes, this will be concerning to retailers and newspapers as well as social media platforms. The News Media Association warn that:

“In practice, the draft Code would undermine commercial news media publishers’ business models, as audience and advertising would disappear. Adults will be deterred from visiting newspaper websites if they first have to provide age verification details. Traffic and audience will also be reduced if social media and other third parties were deterred from distributing or promoting or linking titles’ lawful, code compliant, content for fear of being accused of promoting content detrimental to some age group in contravention of the Code.

Ahead of the code’s implementation, we have seen many tech firms implement new global changes aimed at protecting children on their platform. However, as the NSPCC’s Andy Burrows points out “The code is going to require age assurance, and so far we haven’t seen publicly many, or indeed any, of the big players set out how they’re going to comply with that, which clearly is a significant challenge.”

It is worth considering how onerous this requirement is. As Open Rights Group’s Heather Burns writes:

“To implement the age gate, all businesses within the Code’s scope will be required to collect age verification data, such as a passport or credit card, for all users, and to process and retain it in full accordance with GDPR. This age gating will render all internet usage access in the UK personally identifiable to an individual, creating massive private databases of personal internet access.”

This is technically very hard. But as The Guardian’s Alex Hern states:“very soon UK law isn’t going to take ‘it’s hard’ as a sufficient excuse.”

This move could tilt the balance against startups as consumers are understandably reluctant to hand over personal information such as their passport or credit card details to new businesses. 

It is ironic that the Government is discussing eliminating inconvenient cookie notices while simultaneously proposing to age gate the internet – a much, much more inconvenient requirement.

Attempts to eliminate poorly functioning regulations should be welcomed, but in many cases the damage is already done. To really ease the regulatory burden on the UK’s startups, the Government should focus on blocking bad new laws.

Brooke Knows Argument

The Chief Business Commentator at the FT, Brooke Masters, has an excellent article in the FT on what we can learn from Cambridge’s pandemic-fuelled tech success.

With a record £1bn raised in the past 12 months, Cambridge is flourishing. So what are the lessons?

First, success has been a long time in the making, with Masters tracing it back to the decision in 1970 to set up the first UK science park there, and of course we could go back even further, to the founding of the university in 1209. Whatever the key date, the obvious lesson for politicians is to think long term, beyond the election cycle.

Second, according to Masters a liberal approach to foreign ownership has helped. Even after selling, entrepreneurs have stayed in Cambridge to start, advise and invest in new companies. This is a very timely observation. As discussed in our Conflicting Missions report (and in more detail in a forthcoming report), the remit of the UK’s new Digital Markets Unit risks severely hampering the ability of founders to sell their businesses, and so reinvest their time, expertise and money back into the innovation ecosystem.

Third, Masters lauds the role of Cambridge Enterprise, linking through to this Air Street Capital article that champions the practice for student researchers to own the rights to their IP: “If they wish to patent their inventions and start a business based on this IP, they must license it from the University for a fee. However, the University is not automatically granted shares in the spinout. Instead, the University and Cambridge Enterprise (its TTO) manage an investment fund that spinout founders may pitch to raise capital in exchange for shares.” Again, watch this space for a report on how to reform TTOs.

But while Cambridge has become “a safe place to do risky things”, there are headwinds. Masters emphasises the cost of good housing and the complexity of planning rules as critical to keeping Cambridge’s entrepreneurial ecosystem competitive: “the UK needs to act now or risk strangling the Silicon Fen just as it comes into its own.” (In this respect it’s not so different to Silicon Valley.) New neighbourhoods like Eddington are all to the good, but I think the killer policy would be introducing Street Votes, allowing homeowners to vote on upgrading their streets while making them more beautiful in the process (which seems particularly relevant for Cambridge).

However, not everywhere in the UK has a world-class university an hour from a metropolis in which to build an entrepreneurial ecosystem. But that doesn’t mean one can’t be developed – it will just be at a different scale and not look much like Cambridge. The town of Boulder, Colorado is the oft-cited example of what can be built in seemingly unlikely locations.

That’s why we’re in the process of planning a virtual event with Robin Millar, MP for Aberconwy, in which experts, entrepreneurs, or anyone with a well-evidenced idea can pitch to Millar and the council on how to make ​​Llandudno – the so-called “queen of the Welsh Resorts” – more entrepreneurial.

Nobody is expecting a Silicon Valley, Fen, or Roundabout, overnight – or at all. But we think that with the right policies for a town, city or region, a real difference can be made at the margin. If you have an idea you would like to pitch, drop me an email. And if you’re an MP who wants to do something similar, also get in touch.

Digit-all
Our good friends at Coadec are campaigning to expand the Help to Grow: Digital scheme. Coadec is concerned that the scheme might not reach its full potential – and we agree.

The scheme incentivises small businesses to use productivity-enhancing software. But as it’s currently designed, small businesses must have at least 5 employees to be eligible and businesses can only access limited types of software.

Software is limited to CRM, accounting and e-commerce, but Coadec thinks it should be widened to include additional software like cloud compute, ERP, project management tools, payments software, and HR software.

Coadec wants the support of companies that would currently fall through the cracks. So if you’re involved in a business with fewer than 5 employees (not sole traders), a business that would benefit from access to software not currently in scope, or a business that could offer software not currently in scope, get in touch with Charlie from Coadec to see how you can get involved in the campaign.

Going Green
I’ll have more information next week, but I’m delighted to announce that we will be kicking off a new Forum: the Green Entrepreneurship Forum. It is supported by our long-time partners, Mishcon de Reya, and will be built around virtual roundtables with the founders of some of the UK’s most ambitious green businesses. If you are the founder of one of these businesses, or want to nominate someone who is, get in touch with Katrina Sale.

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Taasiseseisvumispäev

You don’t need to be a libertarian to believe that too many of life’s most tedious and infuriating moments involve the government. Perhaps because of our relative powerlessness, these frustrations can feel inevitable. But they aren’t.

I came back yesterday from Estonia. As well as (arguably) having the highest number of unicorns per capita in the world, it also has one the most advanced digital states. These two things aren't a coincidence.

I met President Kersti Kaljulaid and Prime Minister Kaja Kallas – both of whom talked eloquently and candidly about the country's limitations and strengths, with the latter born out of the former. Central to the country's identity is being an advanced digital state, which was built following their post-Soviet restoration of independence exactly 30 years ago today.

In the UK, there is a gap in the market of political ideas for politicians and parties to adopt the sort of techno-progressive policies that have come to define Estonia. Technological innovation offers the best prospect of meeting the progressive goals that all major British political parties now claim to want – but increasingly seem at a loss to achieve.

In healthcare, technology could reduce the substandard care poorer patients receive by putting them on a par with richer, more demanding patients. While in education, each student could receive more personalised learning (alongside traditional human-led support), as the late, great Clayton M. Christensen predicted in his 2008 book Disrupting Class, narrowing the difference between state and non-state schooling.

The UK party that delivers pre-filled out tax returns so they can be completed in a few clicks would get votes; the party that automatically directs welfare, training and job opportunities to the unemployed would get votes; the party that doesn’t require patients to fill in gaps in their medical history when talking to their doctor would get votes; and, the party that saves the UK equivalent of the 1,345 years of entrepreneurs’ time Estonia escapes in bureaucracy would get votes.

Estonia is also welcoming start-ups – including those from abroad – into the heart of government through Accelerate Estonia, “a test bed for moonshot ideas”. It’s different to the UK's Industrial Strategy Challenge Fund (which entrepreneurs may also want to check out), with successful applicants getting more active support from the public sector. There are currently challenges open in green entrepreneurship, mental health and wild card ideas.

I’ve written before about the digital future the government should be delivering. Much of the failure to emulate Estonia is down to a lack of political will. That’s one reason why we’re in the very early stages of planning a project to link up businesses and governments from the two countries. The other reason is that the UK is also an incredibly successful country for entrepreneurship – after all, 319 of the 1,000 most valuable tech start-ups created since 2000 were British, compared to 149 for Germany and 143 for France – so while we have a lot to learn about their digital state, there is a thing or two that we can teach them in return.

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