Three Big Ideas is our weekly roundup of ideas (and our takes on them) in entrepreneurship, innovation, science and technology, handpicked by the team.
In this week, Philip Salter digs into our latest report on nuclear reactors, Anastasia Bektimirova reports back on the need for bilingual science, and Eamonn Ives looks at new evidence on the sharing economy.
For our first interview in a new series, Anastasia Bektimirova sat down with Ben Johnson, former Adviser to the Science, Innovation and Technology Secretary, to chat about bridging government and innovation networks to seize the UK’s edge in science and technology.
They discussed:
What the new Government’s five missions mean for DSIT and its interaction with the sector
How to better deploy expertise and evidence into government
What needs to happen to make UK Research and Innovation (UKRI) as effective a delivery partner as possible
Stakeholder engagement beyond public consultations and roundtables
How the science and technology community can get the Government excited and compelled to invest resources
Moving from being comparatively good to objectively good at research commercialisation
Strategic advantage in science and technology beyond economic growth
This week we launched our United Growth report in partnership with Sumer. Based on a survey of entrepreneurs across every region of the UK, we got into the nitty-gritty of the challenges they face, their expectations about the future and their views on different policies that could make their lives easier.
As many of you will be acutely aware, it’s tough out there. By a ratio of more than six to one, business owners agree that economic inequality between the regions of the UK is a problem. And more agree than disagree that they’ve come close to closing in the previous six months. Nearly two in five are currently considering closing up.
With the Budget just around the corner, the Government will no doubt be interested to know that entrepreneurs feel that the tax burden is the single biggest obstacle holding back growth. Things could get worse.
On this, we know that the thousands of entrepreneurs in our network are worried about mooted changes to Capital Gains Tax (CGT). As our Research Director Eamonn Ives argues for CapX: “Though there is a logic to bringing rates of CGT and income tax closer together, nobody doubts that this would have harmful economic consequences – not least lowering the expected return to investment or company growth. If CGT is to rise, we urge the Chancellor to accompany such a move with paring measures such as base reform and targeted carve outs to ensure that genuine entrepreneurship does not get overly penalised in the process.”
The report was launched in our home away from home: the Cholmondeley Room in the House of Lords. After last week’s Labour-led launch, with Jonathan Reynolds and Lord McNicol, this week we crossed the floor of the House to host the Business Secretary’s opposite number, Kevin Hollinrake MP, and the Liberal Democrat MP Victoria Collins, a new Member who, like Kevin, used to be an entrepreneur. As I wrote for Forbes, concern over tax changes were echoed by Kevin, while Victoria expressed particular support for the calls in the report around extending devolution, which called for the granting ‘London-style’ powers to all metro mayors.
Victoria also backed the report’s call for business rates reform – suggesting a commercial landowner levy as an alternative – which aligns with the report’s recommendation for the adoption to tax in proportion to the value of the underlying land that premises sit on. This is an idea inspired by Andrew Dixon, one of our Advisers, who in 2018 commissioned a team to draw up a land value tax to reform business rates and support the struggling high street.
I expect you’ll be hearing a lot more from Sumer as they scale in their efforts to support small businesses. Read City A.M. recent profile of its founder Warren Mead to find out more.
What the Big Idea?
If you’re not already doing so, do give us a follow on Substack. This week we published our first Three Big Ideas, a new series where Eamonn, Anastasia and I share our thoughts on ideas that have captured our attention. The first covers self-driving cars, AI art, and measuring immigrant entrepreneurship. On the topic of visas, Eamonn has written the second deepdive into our Job Creators 2024 report, which is also on our Substack.
More Immigration?
There are few policy areas with as much chopping and changing as visa rules. Consultation after consultation, tweak after tweak, it’s beyond the wit of any business owner to keep on top of it.
I’m no expert, but I can’t tell you how many times I’ve given an overview of the visa routes open to perplexed entrepreneurs and their (wannabee) employees – before passing on to someone qualified to give legal advice. In a few weeks, we’ll be hosting an actual expert: Dr Madeleine Sumption, Director of the Migration Observatory at the University of Oxford and Member of the influential Migration Advisory Committee.
If you want to see things nudged in the right direction – come along to support us.
In the second post of our series on our recent research into Britain’s foreign-born founders, our Research Director Eamonn Ives explains how Britain can design a more startup-friendly immigration system.
Three Big Ideas is our weekly roundup of ideas (and our takes on them) in entrepreneurship, innovation, science and technology, handpicked by the team.
In this week, Eamonn Ives looks at autonomous vehicles, Anastasia Bektimirova weighs in on AI art, and Philip Salter discusses our latest immigration research.
Yesterday we hosted Jonathan Reynolds, Secretary of State for Business and Trade, for the launch of our Backing Breakthrough Businesses report at the House of Lords. It was great to see many of you there, but I know for a fact most of you weren’t as the Cholmondeley Terrace would need to be the size of the Kop to fit you all in. As such, I wanted to share an overview of the speeches.
Lord McNicol of West Kilbride – or Iain, as he prefers – spoke first. He was General Secretary of Labour Party from 2011-2018, which must have been a challenging a leadership role. But as an experienced entrepreneur in his own right he had the skills to flourish.
Iain co-founded and is Chair of Rewired Earth – a Community Interest Company aiming to transform the way financial markets value sustainability. It lends in the subprime unsecured market, using Open Banking instead of credit reference agencies. Reflecting on our report, he echoed the challenge of scaling in the UK: “Two years ago, we wanted to scale the business. Nobody would touch us in the UK. Not the banks, not the VCs. We had to go to America, where we got the £40m to scale the business.”
He agreed with Valentina Kristensen in her video for the Commission where she said “we need to move away from dividend paying to growth capital.” He thinks we have a great opportunity with the Investment Summit on the 14th of October.
Jonathan Reynolds took the stage with a sobering reminder: while Britain boasts incredible entrepreneurs, something fundamental has shifted since the global financial crisis. He made the important point that while his constituents don’t tell him they’re specifically worried about growth being below the post-war trend, they are worried that their children won’t have the kind of opportunities that they had.
This point matters because previous governments struggled with the fundamentals – something we explain in more detail in our Building Blocks report.
Reynolds argued that Labour can offer stability: “It is not just about stability in terms of the Prime Minister staying the same and what happens between elections. It’s about policy stability as well as part of that. I do now have a vested interest in it, but I think the Business Secretary should last more than one year.”
Finally, Steve Rigby spoke in his role as Chair of the Private Business Commission. Steve is Co-CEO of Rigby Group, and a Patron of The Entrepreneurs Network. It was an uplifting speech: “We’re a £2.3 trillion economy. We’re the sixth largest in the world. We should be proud of what we are,” he said.
But there are headwinds, with recent surveys suggesting that business sentiment is slipping. Given the Budget is coming up, Steve made the case for a tax system that is both a carrot and stick: “if you’re an entrepreneur, you’re trying to grow your business, we also need an environment that allows us to do that.”
Hear, hear!
Misfits Matter
If you care about economic growth, stop what you’re doing and read (or listen) to this interview with James Phillips, who helped develop the UK’s rapid COVID testing and create the Advanced Research and Invention Agency (ARIA).
It covers a lot of ground, including letting ‘weirdos and misfits’ inside the government, the civil service efficiency and how we can end economic stagnation with a renewed approach to R&D. Here’s a taster:
“There’s a great quote from Colonel Boyd, ‘People, ideas, machines — in that order!’ Boyd was one of the reformers in the Pentagon in the 1970s, and he’s famous for the OODA loop concept of how fighter jets should engage in combat. That quote contrasts with how almost everything else in government is set up; it’s machines, ideas, and people, in that order. In the UK government, you’ve got your processes, or machines: consultations, reviews, and setting up a bureaucracy. Then once you have this set of tools, you say, ‘Okay, what's the idea?’ ’Well, we're going to look at net zero,’ or, ‘We’re going to look at some issue in tax.’ And then at the end of that, once you’ve got this relatively developed plan, you go out and find the person to run it.”
And something for those with an entrepreneurial mindset:
“Instead of saying, “Let’s do more stakeholder consultations, let's do more reviews,” the brilliant people say, “Actually, it’s pretty obvious what the answer is. Let’s just get on and do it.”
If this has piqued your interest, stay tuned for an interview coming soon on our Substack – sign up here.
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This week we released Job Creators 2024 in partnership with Fragomen. The data, which Beauhurst provided and we analysed, is conclusive: 39% of the UK’s fastest-growing companies have at least one foreign-born founder.
The UK’s immigrant population is a lot less than this – under 15% at the last count (though it may well be a percent higher today), so we can be sure in stating that immigrants are integral for the UK’s entrepreneurial ecosystem.
Nadine Goldfoot, managing partner of Fragomen’s UK practice, said to City A.M.: “As the analysis highlights, foreign-born start-up founders have been and are integral to the success of the UK’s entrepreneurial ecosystem. Reforms to ensure we continue to attract the world’s brightest minds to the UK, to collaborate alongside homegrown innovators, is a recipe for continued and dynamic economic growth.”
So what should those reforms look like?
I’ll focus on three of the eight we made today.
First, fees need to be lowered for high-skilled immigrants in line with international competitors. Visa costs have increased by over 129% since 2019, with total upfront costs more than other peer countries. It costs nearly seven times as much for a skilled worker to come to the UK for five years with their spouse and a dependant compared to Australia, over 12 times as much compared to Canada and over 86 times as much compared to Germany.
Second, we should expand the High Potential Individual visa to more universities. It should be noted that this visa category was a groundbreaking success, with many around the world envying it, including the US. Its key feature is that unlike something like the H-1B visa, it’s not tied to an employer, which severely constrains the flexibility of beneficiaries, including to launch startups, UK HPI visa holders have the freedom to engage in entrepreneurship and costlessly change employment. We simply call for the expansion to the top 100 universities.
There are other ways it could be expanded (e.g. changing the methodology, expanding it to top business schools) but the key thing is expanding it in a way that ensures it targets more of the world’s best and brightest.
Third, and this is perhaps the most ambitious, we call for the introduction of the world’s first Global Talent Exam to actively recruit top talent. These should be open to anyone worldwide with the necessary language skills. Exams would assess applicants’ fundamental abilities like problem-solving, cognitive skills, and analytical thinking. High achievers on these exams would then be interviewed by designated ‘talent searchers,’ who would make the final decision on the candidates’ outcomes. This proactive approach would help identify and nurture talent, providing opportunities for them to succeed.
Politicians like to – perhaps even need to – “talk tough” on immigration, but we need to acknowledge that this comes at a cost. As our Research Director and co-author Eamonn Ives argues in CapX:
“We should be championing these wealth creators – doing all we can to attract more of them, and enable the next generation of trailblazers to build the future within Britain’s shores. The jobs, taxes and national prestige we’d accrue as a result are the prizes on offer, and we should be unstinting in designing an immigration architecture that provides people from abroad with pathways to make the UK their home.”
You can also read about the report in UKTN and Startups Magazine.
Substack
We’ve officially launched on Substack today with two articles. In the first, I share my thoughts on why The Entrepreneurs Network exists and how you can get involved in our Substack as a co-author or interviewee, while in the second we delve into why immigration must be a core part of Britain’s Industrial Strategy.
Give us a follow to receive our Substack posts straight into your inbox.
In the first post of a new series on our recent research into Britain’s foreign-born founders, our Research Director Eamonn Ives argues that immigration reform must form part of the Government’s focus on industrial strategy.
The Department of Science Innovation and Technology (DSIT) wants help understanding how they can support innovation in businesses. To that end, they’ve asked us to share a survey that aims to measure levels of technology diffusion across British business and understand what barriers they face in adopting and selling these technologies.
On the topic of innovation, our newest member of the team Anastasia Bektimirova has a paper out today with her former outfit Onward on how the UK can build strategic advantage in frontier technologies.
There’s some great stuff in there about how governments tend to spread investments too thinly across multiple projects, rather than focusing on specific areas of existing or potential leadership, as well as ideas for how to remove barriers to innovation. For example, last year the Medicines and Healthcare products Regulatory Agency (MHRA) assessed just 26% of clinical trial applications in 30 days, against a target of 98%. Read Meri Beckwith’s ‘Errors in Trials’ essay in our Operation Innovation collection for thoughts on how to fix that deadly failure.
The Government also often falls short of recognising opportunities and investing in critical infrastructure and facilities, with due seriousness and ambition to match our potential to capitalise on them. The report says the intersection of AI and engineering biology presents one such opportunity: biology research publications involving AI have grown by 50% year-on-year since 2018.
However, our research institutes, though excellent, are still struggling to match overseas leaders like the US-based Broad Institute in ambition, core facilities and resources; while a single corner in Massachusetts, the report argues, is beating Britain in biotech. Most recently, the Government’s decision to shelve £1.3 billion investment in compute which was supposed to power AI-driven research is another case in point. (Air Street Capital’s Alex Chalmers has a useful thread for anyone looking to get behind the headlines of this decision.)
One particularly refreshing thing in Allan Nixon’s and Anastasia’s report is their call for the new Government to stop trying to lead in areas where our allies are already leading. For example, our chances of catching up with advanced chip manufacturing leaders are very slim. Even with less advanced facilities, the UK has eight times fewer than Japan, six times fewer than Taiwan and the US, and less than half of Germany’s. Catching up would likely require a frontier company to establish a plant in the UK. Considering how much others are investing, it would require billions in public funding. The report suggests that chip design would be a better bet.
Future Frontiers suggests the new Government drops ‘future telecoms’, which was one of the last Government’s five priority technologies. After all, UK business telecoms R&D investment over 12 years is half of Samsung’s annual R&D spend, with the US, China, South Korea, Japan and Germany already well ahead.
As Warren Buffet said of people, but which could equally apply to governments: “The difference between successful people and really successful people is that really successful people say 'no' to almost everything.”
Breaking the US
Anastasia is now deep in the research stage of our forthcoming Special Relationship project report – looking at what’s stopping more UK businesses expanding into the US. Thanks to all the entrepreneurs and experts who have already talked to her. Drop her an email if you’re keen to share your insights.
A Thousand Flowers
On the back of my article in defence of Entrepreneurs’ Relief (well, Business Asset Disposal Relief), a journalist from a reputable publication has got in touch to see if any entrepreneurs in the network would like to talk with her about the tax breaks.
Perhaps you’ve benefited from Entrepreneurs’ Relief in the past and gone on to start and invest in more companies. Or maybe it helped convince you to start your business in the UK. If you’re happy to go on-the-record with your thoughts, drop me a message and I’ll make the intro.
Entrepreneurs, investors and others in our ecosystem are starting to get jittery about the upcoming Budget. It’s only natural. A new party is in power, and, while some assurances have been made, there are concerns that we will be blindsided by something unexpected.
You can have your say. You have until the 10th September to provide a written submission to HM Treasury ahead of the 30th October Budget. For our part, we’ll be drawing on our recent reports like Backing Breakthrough Businesses, Making Tax Simple, Funding to Flourish, and Access All Areas: Finance for our submission.
Enroly Polo
This week, Enroly, a web platform used by international students for managing enrolment, revealed (paywall) a 35% drop in deposits for places on UK university courses.
This is a massive deal for universities because – as we all know – international students' fees help to subsidise university operations, research, cover budget shortfalls, and have become essential for keeping them solvent. I’ll save the thorny issue of university funding for another day, but instead focus on what we’re missing out on.
British education exists in a competitive international market. Among other things, the drop in numbers is a result of the previous Government increasing the minimum earning threshold for the Skilled Worker visa, and making it harder for people to bring their families. This has put UK universities at a competitive disadvantage compared to our key competitors.
Bridget Phillipson, Labour’s Education Secretary, has refused to reverse these changes, but went on to talk a good rhetorical game, describing being open to international students as “a big part of our reach around the world, the impact that we can have as a country, the business links, the trading links, the opportunities and the bridges that we build between nations.”
Positive rhetoric is all to the good – vibes really do matter – but it will only get us so far. These young people are net contributors. As reported in The Economist this week: “A forthcoming research paper for the Migration Observatory finds that migrants from outside Europe who started working in 2021 earned 97% of the median British wage in the second year and 104% in the third year.”
So, on net, international graduates are paying more in taxes than the median Brit. At the same time, the very smartest are changing the world – many through entrepreneurship. MacroPolo think-tank in Chicago has the numbers to prove it, (paywall): “The smartest people are highly mobile. Only 3.6% of the world’s population are migrants. But of the 1,000 people with the highest scores in the entrance exam for India’s elite institutes of technology, 36% migrate after graduation. Among the top 100, 62% do. Among the top 20% of AI researchers in the world, 42% work abroad.”
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As the new Government is no doubt well aware, things can’t only get better. They can get worse. Labour didn’t even manage a minimoon let alone a honeymoon before the realities of governing became manifest.
For entrepreneurs, it’s not just the potential cuts to Entrepreneurs’ Relief (well, what’s left of it), or tax rises more broadly, but a whole plethora of hangovers from previous governments that still need fixing.
One of those, as reported in Sifted, is that the R&D tax credits regime is still a mess. They have spoken to five companies that are close to collapsing after being asked to repay tax rebates.
It’s worth reading in full, but one case stands out. The startup received a tax rebate for the 2022 financial year, but, a few months later, received a letter from HMRC saying the money had been sent in error and that it no longer qualified for the five-figure sum.
HMRC isn’t backing down, even though the company won an Innovate UK grant during the same period.
This is just the tip of a much larger iceberg.
Oli Kicks, investor at Concept Ventures, told Sifted that “no one knows what’s going on or what the process looks like. Our general view is do not factor [R&D tax credits] into the budget in its current format, as it’s a completely unreliable means to extend runway or de-risk cash flow. Some have decided that the current regime is simply too complex and costly to go through the process of making a claim.”
I’ve heard of many entrepreneurs running businesses that had previously claimed R&D tax credits deciding not to claim this year due to the increased risk and uncertainty. Their fear is that this could alert HMRC to previous years’ claims. Critically, they think their businesses should qualify for them, but they just don’t trust HMRC to make the right decision.
In addition, delays have created a market for loans. For 2020-21, we calculated this to be costing UK startups and small businesses in the order of £130 million.
This isn’t an easy nut to crack, but as we argued in Backing Breakthrough Businesses, it’s something that the new Government should prioritise.
Show Us The Money
Our friends at Tussell have crunched their procurement data, and there is plenty of room for improvement in the long-standing ambition to procure more from innovative small businesses.
Overall, public sector direct procurement spending with SMEs has grown each year over the last six, from £22.4bn in 2018 to £39.7bn in 2023. However, direct SME spending as a proportion of wider public sector procurement spending was only 20% in 2023, the same as the previous year (20%), and only slightly up on 2018 (18%).
Another question is how meaningful the government’s engagement with innovators actually is. Take defence procurement. Analysis of defence purchasing data from Air Street Capital shows that the largest awards to SMEs tend to be for routine activity, such as estate upgrades and equipment maintenance, rather than next-generation warfare capabilities.
To its credit, the previous Government recognised the need for change, with the new regime – following the passing of the Procurement Act 2023 – starting in October. But the new Government will need to make sure this is embedded across the public sector, which will be no mean feat.
Up Our Street
The Federation of Small Businesses has put out a chunky new report to help support and transform our high streets.
It’s impossible to write about high streets without mentioning the elephant on it: business rates. Among other things, the FSB recommends the government increases the frequency of business rates revaluations to take place annually, instead of the current three-year cycle. This would ensure that business rates more accurately reflect current market conditions and economic factors.
The FSB also recommends that the Valuation Office Agency and the Ministry of Housing, Communities and Local Government implement a national system which connects VOA and local government data to regularly and automatically contact high street businesses, proactively informing them of all business rate reliefs they may be entitled to.
Both would be significant steps forward.
In our paper with Enterprise Nation from last year we go a step further. We suggest scrapping and replacing the business rates system with a tax on the underlying land values. We also called for local authorities to have more responsibility over Business Rates reliefs and exemptions for small businesses, coworking spaces and charities, so that they could better respond to conditions on the ground.
Perhaps something for the Autumn Budget?
Message from our Partner
Beauhurst and Barclays recently partnered to publish Unlocking Investment – Insights into high-growth companies report, which was funded by the UK Government. This report provides an annual review of investment trends into UK based high-growth companies, and follows on from our previously published Unlocking Investment: Trends for high-growth companies, H1 2023 insight. Between January and May 2024, equity investment into high-growth UK companies amounted to £6.53bn via 2,423 deals. High-growth companies within the UK secured higher value deals in 2023, than those previously acquired in 2019 and 2020. Overall, equity investment into these organisations totalled £18.0bn across 2023.
If you would like to discuss how Beauhurst can use its proprietary data to help you develop research in order to understand and reach high-growth companies and sectors, contact their Managing Director of Research & Consultancy Henry Whorwood.
A few years ago, after we’d released our first Job Creators report, we invited the foreign-born founders of the UK’s fastest growing companies for a series of roundtables to talk about their decision behind choosing the UK to start and scale their business.
While they were an eclectic bunch, they had a few things in common. Notably, every single one of them was acutely aware before picking Britain to grow their business about the personal tax benefits of doing so, and cited it as a major contributing factor. At the time, we still had Entrepreneurs’ Relief and it didn’t look to be going anywhere. They were just stating facts: incentives matter.
Then, in 2020, Entrepreneurs’ Relief got downgraded to Business Asset Disposal Relief (BADR) with the lifetime limit reduced from £10 million to £1 million.
It’s Treasury orthodoxy that most people prior to starting their business don’t know about Entrepreneurs’ Relief. That might well be true on average, but what about extraordinary people? From those meetings I know for a fact that they know in detail what the UK’s offer is around personal taxation, and with the Chancellor on the lookout for £20 billion in cuts, there is a very real risk that even the diminished BADR could be under threat.
As The Economist argues (paywall), it was a mistake to rule out raising things like income tax and VAT, as these specific raids risk concentrating the pain: “The more levers Ms Reeves yanks, the higher the chance that she will experience what Lord Cameron faced with the Cornish pasty. Perhaps it will be farmers, dragged into inheritance tax for the first time. Maybe doctors, who now have a taste for striking, will not like their pensions being pilfered. Grumpy businessmen whacked by capital-gains tax may prove a formidable lobby group. Better to pick a larger tax – whether national insurance or vat – and make any outrage worth it. If a revolt is possible over a pasty, it is possible over a pension.”
Last time this was on the agenda, many entrepreneurs kicked off (paywall – The Times).
If I were the Chancellor I would do two things with BADR. First, I would change the rules so that it’s not available to those who are using it to disguise income tax. If you’re not a proper entrepreneur and taking proper risk, you shouldn’t be able to claim it.
Second, I would make BADR unlimited. Entrepreneurs who are building and selling companies for millions have an outsized impact on all our lives, and we should want as many of them in the UK as possible.
Finally, there are obviously ways of legitimately moving your company to a country with low or no Capital Gains Tax rates before sale. And while many entrepreneurs will prefer to exit in the UK and pay tax, don’t be surprised if more start to consider this option if we lose BADR. While I don’t think this negative argument is the one to lead on – the likely retort from the public is unlikely to be positive to people who are already rich – the Treasury should be alert to the fact that some entrepreneurs will feel justified with leaving given the risk that they’ve taken in choosing to be an entrepreneur.
Onward & Upwards
I’m delighted to share that Anastasia Bektimirova has joined us. She previously worked as a Senior Researcher in the Science and Technology team at Onward, focusing on emerging technologies, AI policy, and the UK’s R&D ecosystem. She was the lead researcher on a report exploring how the UK can build strategic advantage in the five priority technologies set out by the previous government: AI, engineering biology, quantum, semiconductors, and future telecoms.
Follow her on X or connect with her on LinkedIn. Her first project is focusing on how to bolster the special relationship between the UK and US. Drop her an email if you want to contribute to that or discuss any of the other areas she will be working on.
I’m also delighted to announce that Eamonn Ives has been promoted to Research Director. If you aren’t already doing so: follow him on X, connect with him on LinkedIn and drop him an email if you want to chat about our research agenda.
In addition, Cordelia Meacher, Founder of Fieldhouse Associates has become a Patron. As many of you will know, she is one of the most experienced and well-connected communications experts in the fast-growth tech ecosystem, with deep expertise in venture capital and investment. We’re going to be hosting some events together, so get in touch with me if you want to host us and our networks.
Finally, Anita Tiessen, CEO of Youth Business International (YBI) has joined us as an Adviser. Anita leads the only global network dedicated to youth entrepreneurship to develop and scale the most effective solutions to the critical challenges facing young entrepreneurs today. We’ve partnered with YBI on a number of reports, most recently Empowering the Future.
Tough enough
Are you an ambitious founder who can share your experience – potentially through a case study – on the mental toughness needed to build one or multiple companies? Or perhaps you’re an ecosystem influencer (for want of a better term) interested in contributing to a report on the topic? Or maybe you’re working in a corporate, VCs or accelerator with the power to act on the findings?
If so, we’re hosting Christina Richardson, Entrepreneurship Fellow at UCL, founder of entrepreneur-support community weare3Sixty, and Adviser to The Entrepreneurs Network to share preliminary insights from her latest research and give you the chance to get involved.
This week, the UK’s annual Global Entrepreneurship Monitor hit the press. The largest single study of entrepreneurial activity in the world has been running for 25 years, and for the first time 30% of working age individuals (well almost) either intend to start a business within the next three years, are actively trying to start a business, or already running their own business.
Driving this has been a remarkable threefold increase in the level of early-stage entrepreneurial activity by women in the UK since 2002 – from just over 3.5% to 10%. This is above France and Germany (both 8%), but lagging the US on 18%. More women now highlight the desire to build wealth as an important driver of their engagement in early-stage entrepreneurial activity. Well, to misquote Adam Smith, it is not from the benevolence of the female founder that we expect our innovation, but from their regard to their own interest. As the resort suggests, this may be attributable to shifts in society with old gender-based perspectives changing.
That said, as serial entrepreneur, Chair of the Invest in Women Taskforce and Member of our Female Founders Forum Debbie Wosskow notes in response: “these entrepreneurial efforts can only go so far if they don’t then receive the funding to scale. There is still significant gender disparity in accessing investment, with fully female founded teams receiving only 2% of total capital in the UK, and we need to break this decades-long cycle.”
The next generation is increasingly entrepreneurial too, with the entrepreneurial activity rate for 18-29 year olds, which was stable at around 5% for the decade until the global financial crisis, rising and more than doubling to just over 13%. And despite changes in the demographic composition of migration due to the post-Brexit overhaul of the immigration system, immigrant and non-white ethnic populations continue to be the most entrepreneurial groups in the UK. (Watch with space for an update to our influential Job Creators report for more on this.)
London increasingly dominates the entrepreneurial landscape. And while we shouldn’t do anything to dent our megacity – without which the country would be significantly poorer – the ecosystem is more than able to sustain other entrepreneurial hubs.
While the term levelling up is being unceremoniously dumped by the new Government, whatever rubric you put it under – rebalancing, regional development, bridging the North-South divide, industrial strategy, devolution – the challenge remains the same (as do the overarching solutions).
As luck would have it, we’ll have a new report out soon to offer fresh insights on what entrepreneurs across the UK say they need to succeed – including where they agree and where they diverge. We’ll be launching it in the House of Lords.
What’s Up?
We’re trialling out a public WhatsApp group to share updates on our reports and events. Anyone can join – sign up here.
In addition, Patrons, Advisers, Supporters, Partners, and long-term sponsors, partners and collaborators who want to join our “friends” Slack channel, drop me an email and I’ll send you an invite.
Coming to America
Are you the leader of a high-growth firm that exports to the US? Or are scaling fast but reticent about expanding to the US? Or perhaps you’re a leading investor or someone who provides professional services for businesses working across both jurisdictions? Or a past or present policymaker with expertise on international growth? Or are you a trade expert or in a leadership role facilitating UK-US relations?
If you’re any of the above – or something else relevant – we would love to interview you for an upcoming report delving into the special relationship. Your insights will form the backbone for the report, and with your agreement some interviews will be turned into case studies and shared with the media.
Drop Eamonn Ives an email to share your interest and we will be in touch.
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This week’s King’s Speech contained no fewer than 40 Bills as the new Labour Government seeks to make its mark on the country. So what’s in it for entrepreneurs? Well, quite a lot depending on your sector, but today I’ll just focus on three that caught my eye – all of which will impact most businesses.
Skills England Bill (page 66): “My Government will establish Skills England which will have a new partnership with employers at its heart, and my Ministers will reform the apprenticeship levy.”
Businesses will be brought in to try to ensure that we have “the highly trained workforce that England needs.” The key challenge here will be ensuring that the employers promised to sit at the heart of the partnership are not limited to our current crop of large corporates. Of course they should be in the room, but sooner or later they will be the relics of our economy as they get displaced by innovation. To that end, we need to ensure that the entrepreneurs and innovators are involved. This isn’t the same as big tech – though they should be in the room too.
On the second point, we’ve long argued for the replacement of the apprenticeship levy with a skills levy – most recently with Enterprise Nation in Access All Areas: People. It’s good to see things potentially moving in this direction.
Digital Information and Smart Data Bill (page 39): This Bill establishes Digital Verification Services which supports the creation and adoption of secure and trusted digital identity products and services, and sets up Smart Data schemes, allowing the secure sharing of a customer’s data upon their request, with authorised third-party providers.
As I argued last week, the former has the potential to massively reduce and ultimately end bureaucracy for individuals and businesses. The latter builds on the success of Open Banking, and brings to mind From Open Banking to Open Everything, a short paper by John Fingelton from 2018. Proof, perhaps, that good ideas find a way.
Employment Rights Bill (page 20): “My Government is committed to making work pay and will legislate to introduce a new deal for working people to ban exploitative practices and enhance employment rights.”
This Bill promises to do a lot. It will ban zero-hour contracts, ends ‘Fire and Rehire’ and ‘Fire and Replace’, make parental leave, flexible working (within reason), sick pay and protection from unfair dismissal available from day-one on the job for all workers, strengthen protections for new mothers, establishes a new Single Enforcement Body (also known as a Fair Work Agency), and updates trade union legislation.
Alongside potential changes to capital gains tax, this is probably the area of policy that entrepreneurs are most concerned about with the new Government. As noted in the background briefing, the UK benefits from labour market flexibility – not least when it comes to startups at the cutting edge of innovation. While it’s too early to know how this Bill will play out in practice, we shouldn’t kid ourselves – some of its provisions will add to the burden on employers when it comes to taking on more staff.
Local Matters
We’re writing a research paper on the contrasts – and similarities – entrepreneurs experience between the different regions of the UK. If you’re a business owner, we want to hear from you about the challenges you face on a local level. Perhaps it’s poor transport connectivity, difficulties finding the right skills, or something else entirely. If you’d like to feature in the research, let us know by getting in touch here.
Here’s Jonathan
Jonathan Reynolds MP, the new Secretary of State for Business and Trade wants to hear from you. It doesn’t matter if your business has one or one thousand employees, he wants you to tell him: how we should use our Industrial Strategy to kickstart Britain’s economy; how you have supported your teams while also growing your business so we can take forward the best examples to inform our work; what’s stopping you growing if you’re a small business owner; and how we should use our trade strategy to drive up exports and sell more British-designed, British-made products and services to markets around the world? Drop him an email with the answers.
You Better Not Miss
The Department for Business and Trade have also asked us to share an online event taking place on Thursday 25th July between 2pm-3.30pm to encourage applications to the King’s Awards for Enterprise. You can request a place by emailing them with your name and company.
Merci, De(rien)
After a year on the coalface of policy, our researcher Derin Kocer is leaving us. He was mightily productive: kicking off with Job Creators: 2023, then delivering his magnum opus Passport to Progress, before co-authoring the Risk Readiness Report 2023, Entrepreneurs Unwrapped, Building Blocks, and most recently Backing Breakthrough Businesses. Appropriately enough, his last report for us will be the forthcoming Job Creators: 2024. Beyond the reports, Derin’s smarts and joie de vivre have left a mark. As our latest Adviser he will continue to have a positive influence.
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Growing the size of the economy was a central promise from the Labour Party during the election campaign. This week, they hit the ground running, with Chancellor Rachel Reeves announcing the creation of a National Wealth Fund (NWF). It will align the UK Infrastructure Bank and the British Business Bank to invest £7.3bn in the ‘new industries of the future’, aiming to attract £3 of private cash for every £1 of public funding put in via the NWF, which, if successful, would take total investments to around £29bn.
In theory, all very nice. But the devil, as always, will be in the detail.
The NWF isn’t a Sovereign Wealth Fund, which I’ve previously cautioned against in the case of the UK. Nevertheless, as Emma Duncan warns in The Times (paywalled), even this isn’t without risk. Germany, for example, channelled around €200bn of subsidies into the solar panel industry, only for China to outflank them. China’s largesse has been good for consumers outside of China who are being subsidised by Beijing, but less good for the German government (or, rather, German taxpayers).
When it comes to government-backed investments, we need to ensure the right governance structures, talent and incentives are in place. Singapore’s GIC is proof that this is eminently possible, but this interview with Managing Director Lim Chow Kiat shows how disciplined we would need to be: “The unique thing is not what most people see. The most unique thing is the governance arrangement. The government makes it very clear and is very disciplined about that – to leave GIC alone to just focus on making money. It is hard for a lot of governments to do that.”
(One of our ten recommendations in Backing Breakthrough Businesses was to bolster the independence of the British Business Bank to enable it to act in the best possible way and over a longer time horizon.)
Last week, UK Finance and Global Counsel argued that the government should consider ways to force early-stage growth companies to repay tax breaks if they leave the UK. This would have the unintended (though obvious) consequence of making the UK less attractive for entrepreneurs and investors, as well as set a bad international precedent for protectionism.
The rise of economic protectionism is also something that The Economist raised this week around UK pension funds. It can see the case for removing barriers that prevent funds from investing in domestic assets (for example, we think Stamp Duty Reserve Tax should be abolished), or the consolidation of small private-pension plans to give them economies of scale to invest in private markets as we saw in France, but it warns against increasing calls to limit their ability to invest outside the UK.
Protectionism, even if not explicitly badged as such, is one of those ideas that often sounds like common sense for many people. There’s a reason why, centuries after economists first exposed its folly, politicians of all stripes are attracted to it. But something making for a good sound bite doesn’t necessarily mean it makes for good policy. It’s heartening to see our leaders so focused on the pursuit of growth – but that focus can’t be a substitute for rational decision making.
On the Cards
After an intervention from Tony Blair, Business Secretary Jonathan Reynolds has ruled out introducing digital ID cards.
First and foremost, we don’t need cards (digital or otherwise). We already have lots of digital identities – i.e. unique identifiers, attributes, and credentials that represent us in digital interactions. Currently, those associated with the government are fragmented – e.g. GOV.UK Verify, NHS Login, HMRC Government Gateway, your Council Tax account etc. We just need to bring some order to it by giving each person (and business) a singular digital identity that sits above all this.
Blair framed this around controlling immigration, but I respectfully disagree with this approach. As I argued in an essay collection for which he wrote the foreword, the prize of getting this right is much more appealing: the end of bureaucracy. To name just a few: health check-ups based on age and medical history automatically scheduled; tax forms automatically filled in; benefits paid automatically; training offered based on individual skills and trends. Things could only get better.
Great Minds
As reported in The Guardian, Rachel Reeves is poised to announce an economic advisory council to boost UK growth. It will be headed by innovation expert John Van Reenen, who is a strong pick. His work on Lost Einsteins shows why we need to take seriously our failure to support the best and brightest born into low-income families. Meanwhile, he was a (all too rare) level head during Brexit debates on EU immigration. Great hire.
Maestro, please
BBC Maestro has asked us to share an opportunity. They are working with a (as yet unnamed) major entrepreneur on a new course and are looking for entrepreneurs at different stages of their journey who would like to have the opportunity to speak to this person about a particular challenge or decision they are facing. This won’t be a pitch so much as a chance to get insight and advice from a serial entrepreneur who built a $250 million dollar business in four years.
They are looking for a mix of entrepreneurs at different stages. Drop them an email to find out more.
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Launched in 2015 and founded by entrepreneurs, OakNorth is a digital bank focused on serving and empowering businesses with £1m-£100m in turnover, that are seeking to scale but are routinely underserved or overlooked by traditional banks.
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In his first speech as Prime Minister, Keir Starmer acknowledged that now is the time for action: “Our work is urgent, and we begin it today.” So here are three action points aligned with Labour’s manifesto promises.
Chip Off
As we set out in Building Blocks, the UK needs its most successful towns and cities to expand – delivering growth by boosting the scale at which we operate.
Nobody could accuse Labour of ignoring this agenda. As their manifesto stated: “Britain is hampered by a planning regime that means we struggle to build either the infrastructure or housing the country needs.” The slogan “get Britain building again” has been emblazoned across everything. Investors are betting on Labour being true to their word. Yesterday, the shares in housebuilding companies rallied in response to news of the Labour landslide.
Labour has even promised to build on Green Belts, something that once felt impossible under the Conservatives as they had too many MPs with their constituencies there. (Incidentally, our Green Belts aren’t very green – hence the useful new term: Grey Belts.) Labour has also promised new towns, but if new towns are going to be successful they need to be built close to existing cities with suppressed demand – as was the case with Edinburgh New Town – or connected by fast, frequent and reliable rail services.
Regulating Innovation
Labour’s manifesto stated that: “Regulators are currently ill-equipped to deal with the dramatic development of new technologies, which often cut across traditional industries and sectors. Labour will create a new Regulatory Innovation Office.”
There are good and bad ways to do this. David Stallibrass, now Deputy Chief Economist of the FCA, and regulation supremo John Fingleton CBE have some ideas on how to do this properly (as they wrote for us on this very topic).
Whatever the structure, we need to ensure the objectives of outcome-focused regulation are clear and unambiguous; reduce the number of each regulators’ objectives; increase use of sandboxes to inject bounded and targeted discretion into otherwise rigid regulatory regimes; and increase the use of block-exemptions to inject clarity into more discretionary regulatory regimes. Simple.
Our NHS
According to their manifesto: “Labour’s reforms will shift our NHS away from a model geared towards late diagnosis and treatment, to a model where more services are delivered in local communities. We will harness the power of technologies like AI to transform the speed and accuracy of diagnostic services, saving potentially thousands of lives.”
Delivering on this would near enough guarantee a second term. The Tony Blair Institute has undertaken a lot of important work on this, and Blair himself raised the role of technology – specifically AI – in a recent podcast interview:
“This is a huge agenda for a government and a really exciting one. I keep saying this to people that are in politics today. Sometimes people get a bit depressed about being in politics because you have all this criticism. Certainly people in the West feel that society’s not changing fast enough and well enough. I say no, it’s a really exciting time to be in politics because you’ve got this massive revolution that you’ve got to come to terms with.”
The Politics Bit
While the Government is our primary target for policy recommendations, the opposition still matters.
Despite all the seats, the turnout looks to be just shy of 60%, the lowest in 20 years, and Labour got around 34% share compared to 24% for the Conservatives. It has been argued that this means “Starmer is in the same position as Boris in 2019, but even more so. Massive majority, world at his feet, but incredibly hard in longer term to see how he can cling on to voters on both left and right at once.”
It’s a fair point. The lesson to learn here for Starmer is don’t obsess over constant polling and pandering to new voters (e.g. the so-called Red Wall, which is unsurprisingly once again red).
Applying this to housing, journalist Lewis Goodall suggested: “Labour winning all over the south. RIP planning reform.” Dan Tomlinson – new MP for Chipping Barnet – was quick to offer hope: “No. We won a landslide majority on a mandate of solving the housing crisis and growing our economy. People voted for change, for prosperity and for a party that was honest about what needed to be done. Now is the time to do, not duck, the hard choices.”
For Starmer, the political battle has been won – now is the time for policies.
On Thursday the nation goes to the polls. Regular readers will know we aren’t going to tell you where to put your cross – but we will be informing whoever enters Downing Street what policies would help the UK’s entrepreneurs.
Access to talent is key. Talk to the founders of Britain’s startups and scaleups and they will tell you getting the right people in to help them grow is their number one issue. Part of the solution is education and training – which we covered last week – but there is no getting away from the fact that we need to be welcoming to talented individuals who want to come to our country and contribute to our economy. In Passport to Progress we set out in detail how to do this.
The competition for talent will only get more intense, which is why Germany has just launched the Opportunity Card. It allows those who qualify to live in the country for up to one year while looking for work, rather than requiring an employer to sponsor them beforehand. If Trump returns to the White House, we need policies ready to roll to pinch any of their disaffected coastal entrepreneurial talent who have had enough. Not least because Trump has revealed that he wants to let more top international graduates stay in the US.
Money matters too. In Backing Breakthrough Businesses we sought to tackle the challenge of why some companies aren’t able to scale to their full potential in the UK. It had a number of recommendations, including bolstering the independence of the British Business Bank to enable it to act in the best possible way and over a longer time horizon, which was covered in The Times. There is a playbook on how to do this (and how not to) that should be required reading for everyone in government: Josh Lerner’s Boulevard of Broken Dreams.
In The Way of the Future we covered other areas where state capacity could be increased, including in my essay on the (digital) future of the state with Kirsty Innes. There is much to write – and I will – about improving the functioning of the state. (Some of which I picked up at today’s Civic Future conference, where Lord Adonis and Dominic Cummings spoke, agreeing on a lot more than you might expect.)
A new government also needs to get Britain building. In Strong Foundations we made the case for policies like liberalising Green Belt rules and community land auctions to get housing and office space in places and at prices businesses and employees can afford. Also, watch this space for an upcoming report with ideas that would significantly boost the UK’s clean energy capacity.
Finally, we need responsive regulators. As Andrew Bennett argued in our Operation Innovation essay collection it’s time to properly fund and empower the regulators. As he wrote at the time (though it's risen up the agenda since), this might be one of today’s most neglected policy levers, but one which has a disproportionately high return on investment. As Sir Patrick Vallance told Andrew this week: “If you're a regulator, the incentive to take risks is virtually zero.” We’ll also continue to make the case for turning the UK into a ‘testbed nation’.
All this is a rather long-winded way of saying there are lots of ways to make the UK better. As our Patron Steve Rigby wrote in the The Times this week: “there is plenty of hope out there. The economy is heading to better times, inflation has been largely tamed, interest rates will fall and we will see political stability for the first time in half a decade. Now is the time to gain a head start on the global stage and take this fight out to the world.”
Magic Number
We’re advertising for three roles: a researcher; someone to run our events and head of our Female Founders Forum; and we’ve launched an internship programme. Please share far and wide.
We obviously hope that people stay forever, but anyone joining will be following in some impressive footsteps. Our alumni have gone on to advise Prime Ministers, become a senior editor on a national newspaper, work within government, and much else besides.
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Yesterday we launched Empowering the Future: a punchy briefing paper setting out ten policies that the next government should adopt to help inspire the next generation of entrepreneurs.
With support from Youth Business International (YBI), it was launched with Lord Mawson and over 100 entrepreneurs (and those supporting them) in the House of Commons yesterday evening.
In my speech, I went through the ten policies we think would go a long way to making the UK more entrepreneurial. Here’s a taster of three.
First, following calls by Young Enterprise and others, we think under-18s should be able to open business bank accounts – without credit facilities – so they can separate personal and business finances from a young age.
The latest Global Entrepreneurship Monitor UK Report shows that youth entrepreneurship has been increasing over the last 20 years in the UK – as it has across most of the world – with technology making starting and growing a business relatively easy. A business bank account is essential for running a business – not least to pay taxes, which is something that you would think HMRC would be lobbying for.
Second, we need to give innovative edtech entrepreneurs more and better opportunities to pitch to government and schools. Back in 2008, Clayton M. Christensen’s Disrupting Class was published. In it, he and his co-authors argued that online learning and other technological innovations would disrupt the traditional classroom model by providing personalised, student-centric education to the benefit of all. Not only does technology have the potential to better build essential skills, but it can also free up teachers’ time, crucially enabling them to offer additional pastoral support in the process. However, we haven’t seen the promised revolution (at least not in formal education).
As we argued in Procurement and Innovation, we need more ‘meet the buyer’ roadshows. These would allow buyers to see what is possible and enable innovators to tailor or contextualise their offers to better match buyers’ needs. Also, the format of these events needs to change – even when these events take place, innovators aren’t always given a chance to pitch their products.
Third, the incoming government should ensure that the essential skills necessary to be entrepreneurial are embedded across the curriculum from primary school. This is something we explored in a detailed report for the APPG for Entrepreneurship.
If the polls are right, and Labour wins power next month, they’re committed to reviewing the national curriculum. The briefing paper references the Skills Builder Partnership, whose Universal Framework is already used by over 500 schools. We need to make sure that the new curriculum design draws on the rigorous research like this.
This paper is an opening salvo. Soon we’ll build a forum of entrepreneurs and experts to help put these policy ideas – and others – into practice. Watch this space for how you can be involved.
Join the Team
Would you like to work with us, or know someone who does? Now is the time, as we’ve opened up three positions you can apply for on the new jobs section of our website.
We are looking for a researcher, someone to lead our Female Founders Forum and coordinate events, and we’ve formalised our internships process.
Relatedly, if you are looking to get into the world of public policy, Tom Westgarth of the Tony Blair Institute and co-founder of the excellent TxP community has some timely advice for those near the start of their policy careers.
This is an edited version of a speech I gave at the launch of Empowering the Future.
Sit down with any group of entrepreneurs and ask them ‘how can we make the UK the best place in the world to start and grow a business?’ and soon enough, we’ll be talking about education and skills.
That’s why over the decade we’ve been championing Britain’s entrepreneurs, we’ve produced half a dozen substantial reports on enterprise and entrepreneurship education.
A big thank you to Youth Business International (YBI) for supporting this latest briefing paper, which came about because we identified a window of opportunity after the election for policy changes.
I’m going to blitz through the papers’ ten policy recommendations now, but the coming weeks, months and years will be all about making them a reality. I hope many of you will be a part of that.
First: Now is the time to bring back the Enterprise Allowance Scheme and ensure it is more generous than other out-of-work benefits.
The Enterprise Allowance worked. Nearly two thirds of participants continued to run their businesses 18 months after enrolling, and one fifth of these businesses employed at least one additional person. It supported well-known entrepreneurs like Superdry’s Julian Dunkerton, Creation Records’ Alan McGee, and artists like Tracey Emin.
Second: The incoming government needs to clarify the future of the UK Shared Prosperity Fund for Enterprise Support Organisations. Uncertainty is a cost on doing business – in this case supporting entrepreneurs. And the lack of clarity is damaging.
Third: Enterprise Support Organisations should be brought in at an early stage to advise on the desired outputs and measurements of national and local government interventions. Positive impact is often curtailed by being measured on outcomes which aren’t always the right metrics to deliver the most value for young people. National and local government needs to get better at tapping into this expertise.
Fourth: We need to fund rigorous trials to allow charities and the private sector to test out new ways of supporting young entrepreneurs. This could be modelled on the Business Basics Fund. From this we can all learn from the successes – and just as importantly, failures – of interventions. Interventions that have been particularly successful can then be copied by others.
Fifth: Following calls by Young Enterprise and others, we think under-18s should be able to open business bank accounts – without credit facilities – so they can separate personal and business finances from a young age.
Sixth: And this is a big one! An incoming government should ensure that the essential skills necessary to be entrepreneurial are embedded across the curriculum from primary school. If the polls are right, and Labour wins, they’re committed to reviewing the national curriculum. Our paper references the Skills Builder Partnership, whose Universal Framework is already used by over 500 schools. We need to make sure that the new curriculum design draws on the most rigorous research like this.
Seventh: We call on the government to invest in further long-term research into the educational, social and economic impact of what works in practice.
Eighth: We need to give innovative edtech entrepreneurs more and better opportunities to pitch to government and schools. Back in 2008, a book was published that had a big influence on me: Clayton Christensen’s Disrupting Class. He argued online learning and other technological innovations would disrupt the traditional classroom model by providing personalised, student-centric education. Crucially, this wasn’t about replacing teachers, but freeing up their time.
Ninth: We need to undertake a mapping exercise to determine the extent to which young people across different ages and locations are being exposed to entrepreneurship. We already know we are missing out on many people with huge entrepreneurial potential. We know that exposure to innovation activities in childhood is a primary predictor of individuals becoming entrepreneurs in adulthood, so we should double down on ensuring as many young children from different backgrounds get that exposure they need. Crucially a lot of research on this shows that much of the most impactful work here is done outside of formal education.
Tenth: We think we should incentivise young people to solve big problems by funding challenge prizes From previous research we carried out with YBI, we know that entrepreneurs under the age of 35 are more than twice as likely to say their business’ primary aim is to solve a social or environmental problem than older entrepreneurs. We also know that this isn’t incompatible with pursuing growth. In fact, we found with YBI that the more a business turned over the more likely they were to agree that their business’s primary aim was to tackle a social or environmental problem.
So what next? This paper will be a springboard for us doing a lot more work in this area. We’re going to build a forum to take these policy ideas – and perhaps a few more – into legislation. I look forward to working with you on this.
We recently hosted an event at the House of Lords in collaboration with MDRx, a technology consultancy, on what a future Labour government’s potential approach to artificial intelligence (AI) might look like, and what its implications for productivity in both the private and public sectors could be. Attendees included top entrepreneurs innovating in AI, venture capital investors and policy experts.
