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, Anastasia Bektimirova writes about thinking boldly, Eamonn Ives looks at the productivity of British ports, and Philip Salter discusses what defines a great founder.
On Wednesday, Keir Starmer will have his first meeting as Prime Minister with Ursula von der Leyen, the President of the European Commission. Top of the President’s agenda is negotiating a youth mobility scheme between the UK and EU. It’s top, not necessarily because it’s the most important thing, but because it’s an obvious win-win and a test to prod Starmer on his commitment to building a closer relationship.
Immigration has been top of my own mind over the last few weeks too. I spoke on the topic at both the Labour and Conservatives Party Conferences.
As well as my familiar schtick about immigrants being behind 39% of the UK’s fastest-growing businesses and our suite of policy recommendations, I argued that while immigration and upskilling the domestic workforce are two sides of the same coin, they require very different policy levers to get right.
On skills, while the Government is more or less on the correct track in announcing an expert-led review of curriculum and assessment and it’s commitment to replace the apprenticeship levy with a more flexible Growth and Skills Levy (with the caveat that there will be a higher potential for deadweight costs), its reliance on trying to plug skills gaps from the centre through the Migration Advisory Committee (MAC) and Skills England is destined to fail.
The data simply isn’t there to make accurate decisions, nor are any of the functions of the state anywhere near quick enough to respond. This is Hayek’s local knowledge problem writ large, and it’s why free movement – even if limited to the young – beats central planning.
It was Margaret Thatcher who famously grabbed her copy of Hayek’s Constitution of Liberty from her handbag, slammed it down on the table and declared, “This is what we believe.” Those on the other side of politics can learn a thing or two from the Nobel Prize winner without subscribing to everything he believed. After all, Hayek literally wrote a paper called Why I Am Not a Conservative.
It was only four years ago that Keir Starmer said: “We welcome migrants, we don’t scapegoat them. Low wages, poor housing, poor public services, are not the fault of people who come here: they’re political failure. So we have to make the case for the benefits of migration; for the benefits of free movement.”
While times change, economic truths don’t.
SHAPE of Things
Over on our Substack, Anastasia has written up a fascinating interview with ARC Accelerator Co-Founder and Director Chris Fellingham on the commercialisation potential of social sciences, arts and humanities – or what The British Academy calls SHAPE (Social sciences, Humanities and Arts for People and the Economy).
ARC was founded in 2020 and now supports over 45 universities in an ICURe-like commercialisation programme specifically for researchers in social science, arts and humanities. There are lots of great examples cited, but as someone who studied history I’ll point you towards HistoryCity, which was founded by historians from the University of Exeter. They offer immersive trails in European cities and have partnered with organisations like the National Trust and museums to bring the past very much into the present.
For those interested, I would recommend reading the article in full, or at least skimming Anastasia’s X thread. As she says: “Social scientists have deep insights and answers to many pressing issues. If that can’t be translated into solutions, something must be broken or underbuilt.”
Also, in case you missed it, we put out another issue of our weekly Three Big Ideas roundup – on the demise of coal, priorities for growth, and letting a thousand Beatles bloom.
Join Us
As you’ll see, we have a lot coming up. While a fair amount of it is open to anyone – e.g. if you’re an angel investor in Scotland you’ll be accepted onto next week’s Edinburgh roundtable, others will be filled by those who go above and beyond in their support for us.
The more support we get, the more we are able to help entrepreneurs in the UK – including more events that are open for everyone. Now is the time to get on board. Sign up here or book a call with me to find out more.
For our latest interview, Anastasia Bektimirova sat down with Chris Fellingham, Co-Founder of ARC Accelerator, to chat about the commercialisation potential of research by academics in social sciences, arts and humanities.
They discussed:
How ARC Accelerator came about and what gaps in research commercialisation landscape it fills
Challenges of telling the impact story of SHAPE-based ventures
The differences between STEM and SHAPE commercialisation
SHAPE-based company archetypes, business models, and success stories
Commercialisation potential of pure versus computational social science and digital humanities
What it would take for SHAPE ventures to become VC-backable, and what high-risk high-reward work looks like in this space
How we can get more SHAPE commercialisation, and with greater impact
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 explains how coal-fired power was phased out in Britain, Philip Salter writes about the importance of empowering youth entrepreneurship, and guest contributor David Lawrence discusses the results of a survey on priorities for economic growth run by UK Day One.
This week I’m opening with a request. If you’re an angel investor who backs female founders, or you’re actively interested in becoming an angel investor, or a female entrepreneur backed by angels, we have a unique opportunity for you to feed into the Government’s Invest in Women Taskforce, co-chaired by multi-exit entrepreneur Debbie Wosskow and Barclays’ Business CEO Hannah Bernard, and backed by the Chancellor Rachel Reeves.
Over the next few weeks, we’re hosting roundtables with Barclays in Newcastle, Edinburgh, Birmingham, Belfast and London. This really is a chance to have your say on policy, get quoted in the report or feature as a case study (or input off-the-record if you prefer), as well as meet like-minded people in your area.
We want to share this opportunity far and wide so we get the very best and diverse insights. Therefore, before you read any further, sign up for an event or forward this email to anyone in your network who might be interested – the more the merrier. Additionally, you can reshare my LinkedIn post, our tweet, or get it out to the great and good through your channels.
We take this topic very seriously. We were the first organisation in Britain to reveal the equity funding gap; we helped launch the Rose Review; and alongside Barclays have been campaigning for policies to support female entrepreneurship through the Female Founders Forum for over a decade.
We’re also scoping out doing something in Wales (either in person or virtually), so if you’re interested in that or have any questions about these events, drop us an email.
Pepper Questions
Another week, another three big ideas landed on our Substack. While Eamonn wrote about the lessons of US overregulation of Sichuan Pepper and Anastasia opined on the UN’s AI governance efforts, I pointed people towards what might well be this year’s most influential essay on British politics: Foundations.
It’s worth amplifying the alarm raised in the essay that by making it so hard to build, Britain is sabotaging its leadership in the technologies of the new industrial revolution (sorry, despite claims to the contrary, this will be the second not fourth).
But it’s not just AI and biotech. As Foundations states: “Britain’s strongest industries are creative and intangible, and yet we blocked a £750 million film studio by a dual carriageway, right by the UK’s strongest film cluster. Britain is the most advanced country, per capita, in artificial intelligence, but we blocked a £2.5 billion ‘super hub’ data centre site by the M25. Top talent from around the world flocks to work in biotech in Cambridge, yet we have starved the sector of lab space – under one percent of Cambridge lab space is vacant. Prime city centre office space and labs there are renting for even more than residential property.”
RIO ROI
Adviser to the network Ben Greenstone has co-written an excellent report on how regulation is suffocating startups. Igniting Innovation makes for brutal reading. As Ben’s thread on X explains, the Food Standards Agency has approved just 14% of requests since 2021, the Financial Conduct Authority hit just two-thirds of its targets, while the Civil Aviation Authority has yet to authorise out-of-sight drone flights, even though the US and Japan did so two years ago.
There is a great deal of ruin in our regulatory state: Space Forge, the British aerospace manufacturing company headquartered in Cardiff, had to consult eleven different regulators to launch, while an AI legal startup must navigate at least six different regulators to get approval.
The new Regulatory Innovation Office (RIO) might help with some of the regulatory burden. We’re certainly keeping an eye on it. The report recommends it should be given powers to compel regulators to coordinate on emerging technologies, which would certainly be a step in the right direction. I’d be minded to go a step further, and follow John Fingleton’s suggestion to create an N+1 regulator that could give licences to disruptive entrants across the entire economy.
Well Spent
Labour done. Just the Conservative Party conference to go. If you’re there on Monday, I’ll be on a panel with Karim Fatehi MBE (London Chamber of Commerce and Industry), Shuyeb Muquit (Fragomen), Jonathan Thomas (Social Market Foundation) and Heather Rolfe (British Future). We’ll be chatting about the UK’s current immigration system. I’ll be drawing on much of our recent work, including Eamonn’s latest article on the case for increasing youth mobility.
To conclude our three part series digging into our recent report on Britain’s foreign-born founders, our Research Director Eamonn Ives makes the case for increasing global youth mobility, and how to go about it.
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 writes about Sichuan peppercorns and how regulations can shape our economic possibilities in quite unexpected ways, Anastasia Bektimirova discusses the UN’s approach to AI safety, and Philip Salter examines the essay on economic growth that everyone’s talking about.
Together with Barclays, we are currently undertaking research for our next Female Founders Forum report. In this year’s report, we are exploring the opportunities and challenges for female angel investors in the UK. The report and its policy recommendations will contribute to the Government-backed Invest in Women Taskforce.
This research will be informed by a series of roundtables across the UK. There will be opportunities for attendees to be quoted in the report and featured as a case study.
We’ll cover:
Regional challenges in angel investing
The impact of angel syndicates, groups, and co-investment funds in supporting female entrepreneurs and investors across different regions.
Strategies to increase women's participation in angel investing through improved support programs and policy changes
Bridging the gap between entrepreneurs and investors
The roundtables are open to both male and female angel investors, female entrepreneurs who have been backed by angels, and those actively interested in becoming angel investors.
You are invited to join us, and feel free to share with your network!
Newcastle
Monday, 7 October 2024
1.30pm to 3.30pm
Maybrook House, Newcastle upon Tyne
Request a place
Edinburgh
Tuesday, 8 October 2024
1.30pm to 3.30pm
CodeBase, Edinburgh
Request a place
Birmingham
Tuesday, 15 October 2024
1.30pm to 3.30pm
6 Brindley Pl, Birmingham
Request a place
London
Tuesday, 22 October 2024
1.30pm to 3.30pm
1 Churchill Place, London
Request a place
Belfast
Tuesday, 29 October 2024
1.30pm to 3.30pm
Ormeau Baths, Belfast
Request a place
Ensuring the UK has cheap, clean energy is critical for any entrepreneur looking to build – or power – anything. When energy prices soar, businesses suffer or go bust. That’s why, in Small Wonders, we argue that Small Modular Reactors (SMRs) – developers of which include a host of innovative startups – should play a role in meeting this challenge.
For those unfamiliar with SMRs, these reactors have capacities of around 300 megawatts or less and are modular by design, meaning they are manufactured off-site and then assembled at their intended location. “The potential of SMRs is huge,” explains Will Murray in CapX. “Their modular nature allows for iterative learning and improvement, which means less risk of cost overruns. There is also export potential for SMRs made in the UK.”
As I discussed on Substack, energy is the cornerstone of progress: “Artificial intelligence will demand vast amounts of energy. The International Energy Agency forecasts that by 2026, electricity consumption will exceed 1,000 TWh. Just this week it was announced that Oracle is scoping out using three small nuclear reactors to power a new 1 GW AI data centre. That’s why our report advocates for the co-location of data centres with SMRs, aligning with two of the new Government’s core missions: stimulating economic growth and positioning Britain as a clean energy leader.”
The report, kindly supported by Bradshaw Advisory, is written by our Research Director Eamonn Ives, an expert on energy and environment matters, and who was a Special Adviser to a Cabinet Minister on energy and climate policy prior to joining us. Among other things, we call for the Government to open up more sites for SMR development, allow local authorities approving new nuclear power stations to retain a greater share of the business rates developers would pay, and for Britain to recognise the work of nuclear regulators in allied countries. Eamonn has a cracking thread on X that explains this better than I can.
Some people reading this might have concerns about the mere mention of the word “nuclear.” I won’t waste your time busting every myth about it, but I will point you in the direction of the remarkable work of Dr Hannah Ritchie – specifically this article on Our World in Data, but also more broadly her Sustainability by Numbers Substack.
Mission Possible
This week, my colleague Anastasia Bektimirova interviewed former DSIT policy adviser Ben Johnson on how bridging government and innovation networks can enhance the UK’s competitive edge in science and technology. The interview has made waves across Westminster and is a must-read for anyone invested in these areas. You can read it here.
Reach for the Stars
With party conference season in full swing, if you’re in Liverpool for Labour’s, head to the Main ACC, Auditorium 1C at 9am on Tuesday to hear my thoughts on how Labour should think about aligning policies for work with its skills agenda.
I’ll be speaking alongside a stellar panel, including Seema Malhotra MP, Parliamentary Under-Secretary at Home Office, as well as representatives from British Future, London Chamber of Commerce and Industry, the National Federation of Builders, and the Social Market Foundation.
If you’re based in or near London and can’t wait until Tuesday, feel free to attend our event on Monday morning.
Time to Join
On 24 October Rathbones is hosting us for a private dinner for our Patrons and Advisers. This will be a valuable opportunity to learn about our policy initiatives and to share your thoughts on the issues entrepreneurs face in relation to government policy. If you’re interested in becoming an Adviser, don’t hesitate to get in touch.
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.
Message from our partner
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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.
