Annabel Denham is Associate Director at The Entrepreneurs Network.
In the face of prolonged political uncertainty, UK business has proven remarkably resilient. Since 2010, the number of people engaged in early-stage entrepreneurial activity has increased by a third from its previous long-run rate. Over the last four years we have seen a 35 per cent rise in the number of high-growth companies. Pro-enterprise policies, from business rates relief to corporation tax cuts, have played an important role in signalling that Britain is open for business.
But no company is an island. Founders need to have confidence in the general economic outlook, so policies matter. Concerns have been voiced, not least by the business community, that Labour’s radical manifesto pledges if implemented would stunt innovation and harm the economy. By its own calculations it would push up day-to-day spending by £80 billion in 2023-24, and that excludes the extraordinary £58 billion vow subsequently made to WASPI women.
Nonetheless, the Conservatives cannot take entrepreneurs for granted. Their own manifesto featured a welcome focus on skills, infrastructure and research. Further, their comparatively modest spending pledges were viewed as “a pro-enterprise vision” by business owners. But vague plans to “review” business rates, “clamp down” on late payments, or “reform” Entrepreneurs’ Relief will do little to inspire. Some founders will be troubled by the Tory promise that “overall [migrant] numbers will come down,” given access to talent remains a persistent barrier to business growth.
And there is a third way: after all, Jo Swinson claims that the Liberal Democrats are the “natural party of business”. The Lib Dem leader also claimed last month that she was Britain’s next Prime Minister and three weeks later her Party is polling at around 14 per cent, so perhaps such bold statements shouldn’t be taken at face value.
We recently launched our Startup Manifesto in partnership with Coadec, outlining the 21 policies the next government – majority, minority or coalition – should implement to boost British business. What entrepreneurs need to build scale-ups is simple: world-class talent from here and abroad; the right kind of incentives to support the creation of early-stage businesses and then access to the capital needed to grow; and a clear set of rules and regulations flexible enough to encourage new and innovative startup business models.
This means visa reform, because while 14 per cent of UK residents are immigrants, 49 per cent of the UK’s fastest-growing businesses, and 11 out of the UK’s 16 “unicorns” (pre-IPO startups with a valuation of over $1bn) have at least one foreign-born co-founder. In our knowledge economy, prosperity is closely linked to our ability to produce and attract highly-skilled talent.
The last government was right to replace the Tier 1 Entrepreneur and Graduate Entrepreneur visas with the new Innovator and Start Up visas giving incubators, accelerators and VC firms a key role as external endorsing bodies. As the Tory Manifesto states, “Our start-up visa…will ensure that we can attract the entrepreneurs of the future who want to start great businesses here in the UK”. But flaws in implementation risk making it even harder for foreign entrepreneurs to create jobs in the UK. The process is overly bureaucratic and needs to be simplified.
It means unlocking more investment into startups – by streamlining the application process for advance assurance for EIS and SEIS tax relief, for instance. Or by unleashing pension fund capital to invest in early-stage businesses through VC funds by adjusting the pension charge cap. For many founders, seeking investment from abroad is not a strategic decision, it happens because the funds are not available in this country. VCs completed £63.7 billion of deals in the US but just £5.8 billion in the UK in 2017. While the steady flow of investment from overseas can be seen as a vote of confidence in the UK, it does mean that the fruits of our own startups’ rapid growth will be enjoyed abroad.
It means working with startups to ensure tech regulation does not create new barriers to entry. The FCA’s regulatory sandbox has helped small companies concentrate on innovation as well as compliance and should be extended to other tech sectors in the guise of five-year provisional licences to innovative companies with business models that conflict with existing regulations.
Don’t just take our word for it: our Startup Manifesto has the backing of over 250 UK entrepreneurs. Some have built household names – like Justine Roberts of Mumsnet or Taavet Hinrikus of TransferWise. Others are just getting started. All are asking that the next government prioritise the needs of Britain’s startups and scale-ups.
In recent years, the Conservatives have pursued policies that Thatcher would hardly recognise and, in doing so, have thrown into doubt their claim to be the “Party of Business”. Though Labour have tacked to the left, the Tories cannot grow complacent. Since the EU Referendum many entrepreneurs feel they are without a political home: by implementing the 21 policy recommendations in our Startup Manifesto, the next government could help them feel anchored.