Dissecting DSIT

Andy Burnham has delivered two big surprises so far: his choice of Chancellor and the scrapping of the Department for Science, Innovation and Technology (DSIT).

In hindsight, John Healey shouldn’t have been such an outside bet, having served as PPS to Gordon Brown at the Treasury (1999–2001), successively Adult Skills Minister, Treasury Minister, Local Government Minister and Housing Minister (2001–2010) and Defence Secretary (2024–2026).

The bigger shock was, of course, carving DSIT up between the Department for Business, Innovation, Science and Trade (DBIST) and the Department for Digital, Culture, Media and Sport. There’s no sugarcoating it — pretty much everyone is interpreting it as a blow to Britain’s capacity to deliver tech policy. As subscribers to our Policy Updates will have read earlier in the week, tech leaders and lobby groups were blindsided by its abolition.

The good news is that Kanishka Narayan will now attend Cabinet as AI Minister, jointly working in the Cabinet Office and DBIST. A friend of The Entrepreneurs Network, Kanishka is a leading thinker and doer in government — and one who has the respect of the tech ecosystem. As he wrote on X:

“AI is likely the most significant technology in human history. Its impact will dwarf other things. The best case for it is compelling beyond our dreams: a reindustrialised Britain, stronger national security, public services transformed for the better. The risks, too, are real: it is right that the British public shares those worries, for jobs, for the pace of change. The central fact is that it is happening. Nations have a narrow window to decide whether they shape AI or get shaped by it. Britain is in that window right now. While that window is still open, I will act with pace, I will act with ambition, and I will focus relentlessly on securing British influence in shaping AI.”

And it’s great to see the launch of the new AI Taskforce today, chaired by Lord Vallance, which aims to transform public services. Encouragingly, it’s framed as being based on the Vaccines Taskforce which, the press release claims (correctly), “showed that an empowered unit, with clear accountability to the Prime Minister, can drive extraordinary outcomes and deliver real benefits for people across the country.”

It’s also pleasing to see Jonathan Reynolds back at the helm of the beefed-up business department. In his speech as Business Secretary at the launch of our Backing Breakthrough Businesses report — led by our Patron Steve Rigby, with most of its recommendations now adopted — Jonny made the critical 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.

As the new Government will know only too well — in fact, one would hope that this is the central motive for ditching Starmer — one of the most-replicated and well-known findings in economics and political science is that voters return governments after periods of economic prosperity.

Of course, that’s not entirely in any Prime Minister’s control — global events can do plenty of damage. But even so, I agree with Matt Clifford that the UK could be one of the richest countries in the world.

Tech alone won’t get Britain there. But Britain won’t get there without it.

Wow!

We’re delighted to be supporting MHR and The Telegraph Media Group with their inaugural World of Work 2026 — a free, one-day gathering on how people, finance and AI/tech leadership are reshaping the way we work. Rory Sutherland and Tim Campbell MBE keynote, alongside a Telegraph Future of Work panel, Gerard Lyons on the economic outlook (global risks and UK realities), Lucy Adams on building high-performing teams and leading through change, and hands-on sessions on putting AI to work across people and finance functions.

It runs on Wednesday 23 September, with sessions followed by evening networking, at Tobacco Dock in Wapping. It’s aimed at business decision-makers, so do pass it on to your HR or people lead, your finance lead, or anyone else who’d get value from it. Find out more here.

We share free opportunities like this with our Members. Join for free here, or let me know if you have anything you would like us to share with thousands of founders.

Alma Matters

Amy Morgan, one of our Advisers, flagged this: applications are open for Barclays' inaugural Demo Day – Best of Universities, bringing 45 university spinouts before around 200 investors — VCs, angels and family offices — at Barclays’ London HQ on 3 November. Selected ventures get investor access, bespoke 1:1 mentoring and national visibility. Three stages run: life sciences (Parkwalk’s Anne Dobrée), physical sciences and advanced manufacturing (Innovate UK’s Tom Adeyoola), and deep tech (Conception X’s Riam Kanso). For spinouts actively raising — applications close 14 August. TTOs and investors, do share with your portfolios and alumni. Apply here to present.

Sinclair Research

We’re delighted to welcome Matthew Sinclair, Senior Director at CCIA UK, as an Adviser to The Entrepreneurs Network. Matthew leads CCIA’s UK office and its engagement with policymakers across competition, intellectual property, privacy and safety. An economist with fifteen years in public policy, he’s advised the UK government, EU institutions and major media and technology companies on digital regulation, and has served as a senior economic adviser to government. On why he’s joined us, Matthew says: “It is much too easy for policymakers to neglect the impact of their decisions on entrepreneurs.” Welcome, Matthew.

Compete Overhaul

Britain’s competition policy framework is changing. Earlier this year, the Government made a series of proposals for altering how the Competition and Markets Authority (CMA) operates. A public consultation on those proposals closed last month, and you can read our submission to it here. The King’s Speech announced the Competition Reform Bill, which will take these reforms forward.

While we were pulling together our initial response, we soon realised that awareness of the proposals was sorely lacking. When we got in touch with founders, investors and other key players in Britain’s entrepreneurship ecosystem, a worrying number replied to us saying this was the first they’d heard of the mooted changes. As such, we hope this article can go some way to redressing that.

Why policymakers are acting

In November 2024, the CMA set out its ‘4Ps’ approach, which would put improving the pace, predictability, proportionality and process at the heart of its work. Not long after, the Government issued its ‘Strategic Steer’ to the CMA, wherein it reiterated that “regulators have a key role to play in upholding and promoting the reputation of the UK as a centre for certain, proportionate and transparent regulation.”

To a large extent, the proposed changes can be understood against this backdrop. For both the CMA and the Government to make good on their intentions, the creation of new powers has evidently been deemed necessary.

It is also worth considering the changing business and technological landscape. Nobody can now ignore the dramatic impact artificial intelligence and algorithms are having on the economy — whether reinforcing the position of established firms, or allowing agile startups to scale rapidly. When technology is changing as radically as it currently is, it is only logical that the remit of regulators should be reviewed too.

What’s changing

The Government’s consultation spans a wide range of reforms, but four broad shifts stand out.

More discretion for the CMA

Decision-making within the CMA may become more centralised and discretionary. The Government consulted on abolishing the current panel system for Phase 2 investigations — wherein Phase 2 mergers are scrutinised by independent panel members operating separately from the CMA Board and from the staff who conducted the initial Phase 1 review. The consultation also proposed extending the timeframe for remedies to be agreed before moving on to Phase 2 investigation. The Bill did not give specifics on this but indicated that it will give businesses and the CMA more time at the early stages to engage and agree solutions. It further proposed replacing panel-led inquiry groups with committees drawn from the CMA Board itself.

The justification for this change is that it would increase accountability at board level, streamline processes and improve consistency. But there are fears that it may reduce the degree of outside expertise and independent challenge within the system, making it harder for businesses to anticipate how decisions will be made. To mitigate this, we believe merging parties should be granted the right to appeal adverse decisions on their merits and the right to access the CMA’s file on them. The Competition Reform Bill states that it will give the CMA Board “a role in decisions on mergers and market investigations” but does not confirm whether the panel system will be abolished.

Merging of the two-step system

The consultation proposed replacing the existing two-step market study and market investigation system with a more flexible, single-step review tool.

Currently, the CMA assesses whether there is an “adverse effect on consumers” in a market study and “adverse effect on competition” for market investigation. The consultation proposed merging the two into a single “adverse effect on consumers” test, which would allow the CMA to act in cases where the competition link is disputed but consumer harm is material. While adopting the lower threshold (for market study), the single tool could carry market-investigation remedial powers.

The Government committed to concluding most reviews within 18-24 months in the Competition Reform Bill, but did not clarify whether the replacement of the system would be the mechanism. In our response to the consultation, we pointed out that the 24-month baseline could increase uncertainty for businesses and recommended a shorter and more flexible timeframe combined with disciplined use of extensions.

Regular review of remedies

The consultation proposed a requirement for the CMA to consider sunset clauses on remedies and to review future remedies at least once every ten years. (Remedies are the corrective measures the CMA imposes after a market or merger investigation finds a competition problem.)

We think sunset clauses could ensure remedies remain proportionate and responsive to changing market conditions. For dynamic markets, such as AI or digital platforms, regular and proportional review of remedies is needed to ensure they don’t erect barriers for new entrants. We welcome the fact that the Competition Reform Bill commits to regularly reviewing all remedies placed on businesses and to concurrent regulators taking responsibility for ongoing remedies.

Algorithms in scope

The Government has proposed giving the CMA stronger powers to investigate how algorithmic systems operate in practice. As more startups build products around algorithms, scrutiny may increasingly extend into the design and deployment of core technologies.

Taken together, these reforms would see Britain’s overall competition regime adopt a more discretionary approach, and one that opens the door to more intervention. While we believe many of the proposed changes are well intentioned, we fear that they would render Britain a less attractive place in which to start, grow and invest in businesses.

How startups could be impacted

Why exits matter for founders

It is an all-too-common myth that successful entrepreneurs make their riches by bootstrapping a business and painstakingly seeing it through to being a profitable, money-making machine. Of course, some founders manage to do exactly that, and we applaud those who do. But for many more, the endgame is a little less romantic — to establish a promising startup with a deliberate intention to be acquired. That’s how most entrepreneurs and their early-stage investors make their returns. This is a feature, not a bug, and is the driver of innovation and economic growth that all startup hubs rely on.

This is why merger regimes matter. Even small shifts in how deals are assessed can have outsized effects upstream. If acquisitions become less predictable or harder to execute, investment invariably falls, as the likelihood of making a return declines. As such, capital becomes more difficult for companies to access, and the whole entrepreneurial ecosystem stutters.

The current consultation proposals would, we believe, increase uncertainty. The share-of-supply criteria and the material-influence criteria in the consultation proposals remain too broad to deliver real predictability and need to be addressed when the Bill is tabled. Separately, the Bill should clarify whether it adopts the proposed “adverse effect on consumers” test, which would broaden the scope for intervention and reduce predictability. Greater discretion for the CMA, combined with broader and more flexible intervention tools, would make it harder to anticipate which deals will be approved and on what basis.

It’s worth pointing out that a regime does not need to be blocking deals left, right and centre to change behaviour. What investors care about is predictability — and if they don’t think it’s there, they won’t be so ready and willing to back businesses. Over time, that can be enough to dampen acquisition activity and, with it, the dynamism of the startup ecosystem.

Operating under uncertainty

A country’s merger regime influences more than simply whether or not investors will cut cheques for startups. When regulators can consider a broad range of variables to establish jurisdiction over a merger, founders must be constantly aware of how they act. This can dictate decision-making on a day-to-day basis — determining, for example, whether or not they strike certain partnerships with other businesses, how they price their goods and services, if they’ll expand into new markets, and so on. Opportunities for growth may go unseized as a result.

Several of the proposed reforms risk increasing that burden on entrepreneurs. Broader legal tests would make it harder for businesses to anticipate when intervention is likely.

This is particularly acute in emerging sectors, where business models are novel and precedent is limited. A startup developing a new platform or AI-driven service may find it difficult to assess whether its conduct could later be subject to scrutiny.

From conduct to code

The consultation proposed an expansion of the CMA’s powers to investigate algorithms, which would mark a fundamental shift in competition policy, but was not included in the summary of the Competition Reform Bill.

Algorithms can shape market outcomes in powerful ways, and their importance will likely only increase over time. But it also raises difficult questions about the boundary between competition policy and conventional product regulation.

Traditionally, competition policy has focused exclusively on market structure and firm behaviour — including mergers, pricing and exclusionary conduct. Proposals to scrutinise algorithms in more detail, however, represent something altogether different.

For startups, the implications are significant. Many early-stage companies will rely on algorithmic systems as their core innovation. If those systems become subject to intensive scrutiny, the compliance burden may rise sharply. More importantly, the scope for experimentation may narrow, particularly in areas like AI where iteration and rapid deployment are central to progress.

There is a risk that, in attempting to regulate outcomes, policymakers inadvertently shape how products are designed in the first place. Beyond that, there is the more prosaic issue of compliance. Investigations could become a significant imposition on startups whose business depends on algorithms, further eroding Britain’s attractiveness as a place in which to operate such a business.

Getting the balance right

There is a credible case for updating Britain’s competition regime. Digital markets do present new challenges, and enforcement tools need to evolve accordingly. But reform should always be guided by an understanding of how business really works.

Predictability should be prioritised over discretion. Entrepreneurs and investors need to be able to reasonably anticipate how rules will be applied, particularly in fast-moving sectors.

Intervention should remain tightly focused on competition. Expanding the remit of competition policy to pursue broader social or economic goals risks diluting its effectiveness and increasing uncertainty.

And in areas like AI and algorithms, proportionality is essential. Scrutiny of any given technology must not come at the expense of experimentation at such a nascent stage, or end up placing an undue burden on businesses subject to investigations.

What next?

With a change of Prime Minister and reshuffling of ministers, the current legislative programme has been put on hold. Depending on the new legislative priorities of the incoming administration, it could shift its tone on competition or further tweak the Competition Reform Bill.

Make sure you are subscribed to all of our newsletters to keep abreast of further developments, and stay in touch to join future events.

Burnham’s First Cabinet

Andy Burnham’s first moves as Prime Minister are leading the headlines today. He promised a 10-year plan to transform Britain with a “new political model and new economic model” focused on reindustrialisation and a rollback of privatisation.

Burnham appointed John Healey as Chancellor and folded the Department for Science, Innovation and Technology (DSIT) into the Department for Business, Innovation, Science and Trade (DBIST) and the Department for Digital, Culture, Media and Sport (DCMS). The Business Department will be absorbing the science and innovation briefs, while digital regulation and online safety briefs return to DCMS. While the tech sector has expressed concerns over the scrapping of DSIT, former Business Secretary and former Chair of the Science Select Committee Greg Clark said the reorganisation can break down silos and make the department more joined-up and effective.

Junior ministers have yet to be confirmed, but Tech Secretary Liz Kendall and Science Minister Lord Vallance have left the Government. Lord Vallance — formerly the Government’s Chief Scientific Adviser and himself a scientist — earned praise from the science and research community for his thorough grasp of the brief. As Science Minister, Vallance secured the largest ever R&D settlement — with DSIT’s Spending Review 2025 settlement officially billed by the department as a “record” allocation, rising from £13.9 billion in 2025-26 to £15.2 billion by 2029-30. His departure and the scrapping of DSIT lead to uncertainty over funding for R&D and scientific research (Paywall – Times Higher Education) in the next round of the spending review.

Burnham has reportedly been exploring (Paywall – Financial Times) a spending review this autumn. Both DBIST and DCMS face competing priorities with unprotected budgets (their budgets are not ringfenced like Health and Social Care’s), and the loss of a departmental Cabinet minister compounds the uncertainty over future R&D funding.

With Liz Kendall and Lord Vallance leaving the Government, AI Minister Kanishka Narayan is the only survivor from the now defunct DSIT. Narayan is well regarded across the tech sector. Matt Clifford has praised his grasp of the urgency behind the AI opportunity, while Ian Hogarth has said he is “hard-working, smart and cares”. Formerly Parliamentary Under-Secretary for AI and Online Safety, Narayan’s promotion to Minister of State for AI means he will get to focus solely on AI. He will be spanning the Cabinet Office and the expanded Business Department. Narayan will also oversee a new AI Taskforce to “drive the Government’s overall strategy on AI”, which reports to Downing Street and the Cabinet Office.

For the first time, the AI Minister will also be given a seat at the Cabinet table as a Minister of State even if he’s not heading up a department. Prime Ministers signal their priorities by inviting non-Cabinet ministers to attend the Cabinet. Keir Starmer had the International Development Minister attending the Cabinet as a consolation for not reinstating the Development Department, while Rishi Sunak had the Immigration Minister and Security Minister attending the Cabinet.

Jonathan Reynolds is back in his previous position as Business Secretary, but now with the Business Department absorbing the innovation and technology portfolio from DSIT. When Labour was first elected, Reynolds spoke at our launch for the Backing Breakthrough Businesses report in the House of Lords, where he acknowledged economic growth below the post-war trend and the need to break out of this pattern. He has built strong relationships with businesses during his previous tenure as Business Secretary and inherited goodwill from that tenure — with him returning to his old position, there is hope for some stability.

Whether the machinery of a merged department can match the profile DSIT held under a standalone Secretary of State remains to be seen, but Reynolds’s return at least gives the sector a minister the entrepreneurial community has already worked with, and some reason to expect continuity in how the brief is handled.

New Order

When Labour swept in two summers ago, most entrepreneurs in our network — at least those without a strong political affiliation pulling the other way — were relatively optimistic about the new Government. After the churn and disruption of Brexit and Covid, founders just wanted some stability. However, the October 2024 Budget decisively soured that for many of them.

ICAEW’s Business Confidence Monitor collapsed to 0.2 in Q4 2024 from 14.4 the previous quarter, as the share of firms citing the tax burden as a growing challenge hit a record 41% — the first time tax had ever topped the survey’s concerns. The IoD’s Directors’ Economic Confidence Index fell to –65 in November 2024, close to its Covid-era record low of –69, with 83% expecting higher employer NI bills and investment intentions dropping to –27.

It doesn’t stop there. BDO’s Optimism Index posted its steepest monthly fall since August 2021. The BCC’s Quarterly Economic Survey sank to its weakest since the 2022 mini-budget, with tax worries jumping to 63% from 48%. And the CIPD’s survey of more than 2,000 employers found employment intentions falling sharply, with almost a third planning to cut headcount or hire fewer and a quarter scaling back or cancelling investment — all explicitly linked to the Budget’s NIC and minimum wage rises.

Given all this, Andy Burnham takes the keys to Number 10 without the same reservoir of goodwill. As our latest Entrepreneurs Survey with Public First makes uncomfortably plain, the relationship between founders and Westminster has curdled. Asked which party they trust most to understand them, Britain’s entrepreneurs hand victory to “none of the above” (32%), ahead of the Conservatives (30%) and streets ahead of Labour, on under 7%. Nearly four in five (79%) say the Government simply does not understand what they do.

I really didn’t want to write about tax again this week, but am duty bound. If I could give one piece of advice to Burnham for getting Britain’s businesses back on side, it would be to convince them that his Government’s tax policies will be tolerable. This isn’t purely about rates, but the uncertainty that engulfs the system.

Our survey finds that more than four in five founders (82%) take a dim view of the level of taxation, and when we asked what sends the strongest message that a country is serious about entrepreneurship, they put tax levels and breaks top (68%) — ahead of access to capital (60%) and simpler regulation (49%). Entrepreneurs don’t just experience tax as a cost; they read it as a message about whether Britain wants them and whether the country is heading in the right direction. Well before the Budget, Burnham and his new Chancellor need to put an end to speculation about equalising capital gains with income tax and bolting on an exit tax.

Of course, entrepreneurs won’t stop innovating. Almost two-thirds (63%) are optimistic about their own business over the coming year, even as almost three-quarters (73%) are pessimistic about the economy they’ll be building in. The founders in our survey are, despite everything, still hiring — 43% plan to grow headcount — and still investing, with a third (34%) increasing R&D spend. They back themselves, but Burnham needs to give them a reason to back Britain.

As I argued here at the very start of the year:

“Despite the challenges, the UK remains one of the best places in the world to start and grow a business. Across multiple independent rankings, produced by different institutions using different methodologies, the UK sits comfortably in the global top tier. We aren’t at the frontier on every single metric — but we’re very close on many.”

Most of the headlines are focusing on what Starmer failed to achieve, but to end I want to suggest that some policy changes that move the dial don’t ever make the front pages. These don’t outweigh the big issues of tax and employment costs, but they can compound over time.

Take the Fingleton Review of nuclear regulation: the Government commissioned it, accepted the principle of all its recommendations, and pledged to extend the same reset to infrastructure more widely. The positive impact of its implementation was never going to be realised in one Parliament, but in time the tough choices made by Starmer should result in cheaper, cleaner energy for Britain’s entrepreneurs.

The same logic runs through other policy areas: the Regulatory Innovation Office was created to unblock the regulators governing engineering biology, space, drones and other autonomous technology; the AI Opportunities Action Plan’s 50 recommendations were adopted in full; and an Innovator Passport, tucked inside the NHS’s ten-year plan, lets a technology proven in one trust spread to the rest.

If the new Government is going to win back entrepreneurs, it needs to offer a clear path on tax. But Burnham can also build on these small successes and set in train some of his own. It’s time for Burnham’s new order.

On Purpose

The Cabinet Office is seeking members for its new Impact Economy Advisory Council — a quarterly forum advising government on how it works with impact investors, philanthropists and purpose-driven businesses, from B Corps to social enterprises. Please share with anyone relevant in your network.

Procure Meant

We’re delighted to welcome Gus Tugendhat as an Adviser. Gus is the founder and MD of Tussell, which he started in 2015 to bring transparency to the UK’s £300 billion public procurement market. He and his team have bootstrapped Tussell into the trusted, market-leading brand in its sector, built on proprietary datasets not available elsewhere.

Procurement is one of the biggest and least legible ways government shapes the market for entrepreneurs, and Tussell’s research helps make it visible. Their latest SME Procurement Tracker, produced with the British Chambers of Commerce, found that England’s public sector spent a record £45.2 billion with SMEs in 2025 — 21% of direct procurement, a six-year high — though central government and the NHS lag well behind local government. You can sign up for Tussell’s updates to follow the data yourself.

Three Big Ideas #65

🔑 Philip Salter, Founder

When Stripe Economics reported a surge in American solopreneurs last month, it raised the question: is the same thing happening in the UK? According to the official numbers, no. The ONS says business creations fell 8% in the first quarter, and registrations have been flat for two years. Britain, apparently, isn’t starting up.

However, Stripe dug into the UK data and concluded the boom is almost certainly happening here too. Its UK sign-ups have doubled in two years, tracking the US and France almost exactly, and since 2024 they have pulled sharply away from Companies House incorporations.

We already know Britain is bad at counting this kind of activity. And what it does count doesn’t join up. Companies House doesn’t count sole traders, the ONS only counts businesses registered for VAT or PAYE, you don’t need to register with HMRC at all until you’re turning over £1,000 a year, and the Labour Force Survey — the survey meant to pick up everyone else — has lost roughly half its effective sample since the pandemic, was suspended in 2023 and returned as a shadow of its former self.

France and the US can see their versions of this shift because both keep dedicated statistics on solo and micro-businesses. France’s are the cleanest, because registration there is near-universal from the first euro of activity and the records join up.

We recently set out a fix for this in The Master Key, with Xero and Enterprise Nation. It proposes a Unique Business Identifier paired with reusable, verified digital credentials — one key a business carries across HMRC, Companies House, banks and local authorities. Its main purpose is to cut admin and fraud, but it would also let departments join up records they currently hold separately. It wouldn’t capture everyone, unless we required or incentivised the smallest side-traders to do what France does, but it would get us most of the way there.

Policy is built on data, and this gap calls into question a big part of the story we tell ourselves about declining business dynamism. The claim that entrepreneurship is in decline in Britain, creating fewer firms, with less churn and an ageing business base, rests almost entirely on data that counts employers and registered companies.

A country that can’t count its founders doesn’t know how to support them. Right now, Britain can’t count.

📈 Ian Ng, Researcher

High taxes, red tape, gaps in late-stage funding, and a Westminster that doesn’t understand entrepreneurship have become common complaints from founders since we started surveying them a year ago. We published our fourth edition of the Entrepreneurs Survey this morning, and the results tell the same story again.

Most founders continue to find it difficult to scale a business in the UK. Our survey also found that nearly 80% of founders think the government does not understand their needs, and when asked which of the political parties they trust most to understand their needs, the most popular option goes to “none of the above”. Most say it is difficult to raise investment and hold a negative view of the level of taxation and regulation in the UK. You can see the full results here.

In spite of all the hurdles, entrepreneurship in the UK continues to be alive and kicking. Entrepreneurs remain optimistic about the year ahead for their business, and many would still encourage others to start a business of their own. More than 40% of founders expect to increase their headcount over the next 12 months.

As Keir Starmer bid farewell with his final PMQs today, his successor will inherit a mixed bag of policies impacting entrepreneurship: a higher rate for employer National Insurance, of course, but also AI growth zones, legislation for regulatory sandboxes and the Industrial Strategy.

What founders are asking for has stayed consistent, and so have the answers they gave in our surveys. They look for certainty, not months of flirting with key taxes ahead of the Autumn Budget, and for less bureaucracy. None of this requires reinventing the state, just a government willing to act on what founders have been telling us for a year. The next Prime Minister can be the one who finally listens, or the one who gives us the same results to report again.

🔬 Dr Florence Young, Senior Public Opinion and Policy Officer, Campaign for Science and Engineering

The pioneering Research and Development (R&D) occurring across Scotland and Wales is expanding our understanding of the world, tackling society’s biggest challenges and bringing benefits to local communities. But this work, and the organisations doing it, are not well recognised.

Campaign for Science and Engineering (CaSE) works to champion R&D as a political and societal priority, including by exploring how the public think and feel about R&D, to help the sector make R&D matter to more people.

Our latest public opinion study – Public Attitudes to R&D in Scotland and Wales 2026 – confirms a consistent dilemma we see across the UK, that public support for R&D is broad but shallow. If our sector continues to feel distant and intangible to voters, it risks being deprioritised by politicians.

On the one hand, the vast majority of people value public investment into R&D and like the idea of R&D being present in their communities. Around three quarters think it is important for their devolved government to invest in R&D in their nation (77% in Scotland and 72% in Wales) and most people (66% in Scotland; 59% in Wales) would feel proud if their area were to become well known as an important hub for R&D.

But despite this, Scottish and Welsh R&D suffers from very low levels of awareness, and its benefits feel vague and hard to articulate for many.

Some 87% feel they don’t know much or anything about the R&D being done in Scotland, with an even higher proportion in Wales (91%). And people struggle to immediately identify the benefits of R&D, whether for themselves, their local area, or Scotland or Wales as a whole.

The sector cannot be complacent and must act now to deepen connections.

Our Advocacy Toolkit points to place, purpose and participation as powerful connection points. The R&D sector has a positive story to tell and CaSE is working closely with our members and the wider sector to make R&D more visible in communities, convey how it is contributing to the public’s priorities and highlight how the public can get involved.

Lottery Winnings

Within weeks, Andy Burnham will walk into Number 10 carrying a plan for the biggest rebalancing of power in Britain’s modern history. On the diagnosis, almost everyone now agrees. Britain is one of the most centralised economies in the developed world. But buying into the cure will be harder.

The basic case for devolution is that local people understand local conditions, so decisions taken nearer the ground will be better. There is something in this. Friedrich Hayek built much of his life’s work on the insight that the knowledge a society runs on is never held centrally but exists only as the particular circumstances of time and place, dispersed among the people actually on the spot. Whitehall cannot know what a mayor in Wolverhampton knows.

But knowing more is not the same as being made to act on it.

What makes the private sector work is not that entrepreneurs are wiser than mandarins. It is that competition, profit and loss, and the possibility of failure force a kind of discovery that no amount of cleverness can deliver. Give places the freedom to try different things, to keep the upside when they succeed and bear the cost when they fail, with voters and mobile investment standing in for the market. As Ryan Bourne argues in The Times this week, the postcode lottery is “a feature, not a bug”. A devolution that can’t tolerate a postcode lottery isn’t really devolution at all.

Mann Virdee, our Head of Science and Tech, set this out in our APPG for Entrepreneurship’s latest newsletter:

“There are really two kinds of devolution on offer. One hands money in the hope that local knowledge makes for better decisions. The other lets places keep the proceeds of growth — and bear the consequences of failure. Only the second changes incentives, and it is the harder sell. Letting places keep the proceeds of growth also means letting them diverge, and fears of a postcode lottery are the likeliest barrier.”

Charles Tiebout argued in 1956 that where people can move between jurisdictions, choosing the mix of taxes and services that suits them, local governments face something close to a market. Gabriella Montinola, Yingyi Qian and Barry Weingast went further, describing a system in which competition between regions for people and capital disciplines governments into behaving, and which they credit with a good deal of China’s growth.

Blöchliger’s work for the OECD finds decentralisation — and genuine tax autonomy rather than mere spending freedom — positively associated with GDP per capita, on the order of a few percentage points for a doubling of the local share. It is, however, a small and contested literature, so to some extent we’re relying on first principles here.

Of course, failure has its limits. When a firm fails, its customers walk away at no cost; when a region fails, most of the people living in it cannot simply leave, and would not want to. Exit is sticky. The evidence from Scotland’s divergent income-tax rates is that migration responses have been small.

But just because it’s not a pure market doesn’t mean it’s not better than the status quo. We are already bearing the brunt of failure. The levelling-up years were wasteful and dispiriting. Councils spent around £30,000 a bid to compete for grants from central government, with roughly three-quarters of them rejected, in what the Public Accounts Committee heard described as a “begging bowl culture”.

Local experimentation will uncover more of what works, voters and investors will back success, and over time good governance will be copied. There is no discovery without the divergence. If Number 10 North is to mean anything, it means letting Wolverhampton and Wakefield make different choices and reach different ends.

Supercharging Serendipity

There’s more to The Entrepreneurs Network than a weekly email. A lot more.

First and foremost, if you’re not already a Member — which is free — sign up here. We now have thousands of founders in the network and this helps us direct things your way that you’re interested in.

Second, we send a weekly email inviting recipients to share events, competitions, programmes and surveys in the News and Views section below. If you run things like this, let us know and we will add you. And if you’re a particular fan of an organisation’s work, direct them towards this opportunity. This email goes out to over 13,000 people every Friday and we don’t charge for this.

Third, I have a fortnightly email where I share opportunities to partner with us. Sometimes this is sponsorship, but other times we’re just looking for a space to host us. We also include occasional requests from our Advisers so it can lead to interesting collaborations between entrepreneurs, corporates and charities. It’s a way of solving the coordination problem that afflicts the entrepreneurial ecosystem in which we all operate.

Finally, Advisers get a weekly opportunities email where I extend invitations to exclusive events, media opportunities and updates on our work well before it hits the press. This isn’t free, but the opportunities far outweigh the cost of joining. Find out more here.

You Too

On the topic of Advisers, David Herbada has joined us. David is an operator-investor and venture builder working at the intersection of deeptech, health innovation, AI and entrepreneurship.

Over more than 25 years, he has helped translate complex scientific and technological innovation into investable, governable and scalable companies. He is a Venture Partner at Zinc, where he supports science- and technology-led ventures across health, deeptech and medical devices, and a Founding Partner at Fikra Ventures, an AI-native venture studio focused on building technology companies around complex real-world problems.

David supports The Entrepreneurs Network for exactly the same reason we started it. He believes entrepreneurship is one of the most effective mechanisms for turning innovation into long-term economic and societal progress. Maybe you do too?

Flight Risk

Last week, tax supremo Dan Neidle begged a small favour on X: “Please please don’t gossip about exit taxes. I know for a fact the exit tax rumours last summer caused some entrepreneurs to leave the UK.”

He’s right. I lost count of the number of entrepreneurs who told me they knew people who had left, and we got a fair number of responses to event invitations from people telling us they had left the country, while not mincing their words as to why.

He’s also right that if the next Government really is planning an exit tax, it is in HMRC’s interest — and that of taxpayers more broadly — that people don’t find out first, causing a mass exodus of wealth (and its creators).

It’s not just an exit tax entrepreneurs fear. The very real increase in capital gains tax (CGT) was enough to push many over the edge.

In truth, decisions haven’t even been finalised about who will make up the next Government, let alone what their policies will be. To quote Douglas Adams, with a healthy dose of irony: “Don’t panic.” However, as and when we actually have a new Government — including a new Chancellor — we will be asking them to rule out an exit tax for the very reason that Neidle cites.

If the new Government fails to rule it out, this doesn’t mean that we’ll definitely get one. When possible, governments like room for manoeuvre. But that automatically leaves space for rumours — particularly when government raises ideas like this to try to manage expectations. It is a clear sign of something failing in politics that, before budgets, governments now float policies they have no intention of passing just so interest groups feel relieved when the budget isn’t as bad as feared. Less 4D chess, more KerPlunk.

The Budget won’t be until October or November, but the deadline for steadying the nerves is a lot earlier than that. As one of the UK’s leading tax advisers told me on a call today, this is coming up in 80% of conversations with clients. I’ll finish with an email I received from an entrepreneur just yesterday:

“All this talk about raising CGT to the level of income tax? The natural inclination of me as an entrepreneur is to think about this, plan ahead and prepare to move. I am sure I am not alone. They have no idea of the uncertainty it causes. Once me and my family have gone we will have gone for good. I was always balancing CGT one way or another but while 24% is not great 40-50% is sufficient to make us leave. There will be many more tax exiles if it happens.”

Contract Killers

As many founders reading this will know all too well, most public contracts award around a tenth of the marks not for the thing being bought but for the supplier’s commitments alongside it — including training, jobs outside London, and Net Zero.

All are worthwhile goals, but as Joe Hill of the think tank Re:State argues, bolting them onto procurement as a toll for working with government is a poor way to pursue them.

It is, first, largely performative: suppliers promise, and nobody checks — policing it would cost more than government already manages to spend monitoring whether contracts are delivered at all. It also hits entrepreneurs hardest. While it might be trivial for the big “primes”, it’s a real burden for startups.

Nor is it free. Whatever suppliers do that they otherwise wouldn’t is folded into the price of the bid, so the taxpayer ends up funding a thousand sub-scale Net Zero initiatives and pretending it costs nothing because the bill is scattered across thousands of tenders. It is, in Hill’s phrase, “the worst kind of Everythingism.” As Hill has written previously:

“Everythingism is the belief that every proposal, project or policy is a means for promoting every national objective, all at the same time. Because of Everythingism, we never do any one thing well, we do everything badly. Housing policy becomes the main route for fixing the nitrogen imbalances in local rivers, and creating more social housing the main way of subsidising the welfare state. Trains must look after bats. Climate policy is to support the services sector.”

At heart, government — and society more broadly — has a deficient definition of social value. Everything government buys should be bought in the public’s service; delivering a contract well, at a fair price, is a social good of the first order. Priority number one, two, three, ad infinitum for public procurement should be to make it easier for good companies — especially new, innovative ones — to bid and win contracts, and easier for government to leave bad contracts behind.

Penningtons to Paper

As we grow from strength to strength, it’s becoming a weekly tradition to announce new Advisers to the network. This week we’re delighted to welcome Pat Saini and Matthew Martin from Penningtons Manches Cooper.

Penningtons will be our partner for the Job Creators 2026 report. You can read previous editions here. I’ve known Pat since founding The Entrepreneurs Network, and admired her work with Tech London Advocates and the Department for International Trade’s Global Entrepreneur Programme. Her expertise will be critical for ensuring that the report’s recommendations make a real difference.

If you would like to find out about becoming an Adviser, drop me an email.

Three Big Ideas #64

🪖 Mann Virdee, Head of Science and Technology

Navigating the world of defence procurement is notoriously difficult as a small firm. The new Defence Investment Plan, published yesterday, seeks to change that. I’m sure many entrepreneurs will welcome this, while others will naturally be more sceptical and will want to see it to believe it.

The headline figure is an increase in defence spending of £15 billion, funded from cuts to some road and energy projects – perhaps the last places such funding should come from.

The Plan explicitly frames defence as an engine for growth. Underneath some of the larger stories about submarines, sixth-generation fighters and drones, entrepreneurs will note that government is trying to become a better customer. There’s a commitment to spending an additional £2.5 billion through SMEs by 2028, representing a 50% increase in direct spend. That will be through the Defence Office for Small Business Growth, which was created at the start of this year.

Alongside this, there’s UK Defence Innovation, backed by £1.6 billion. That funding will be used to work with startups, scaleups and spin-outs to enable innovation in defence at ‘wartime pace’. The Plan also states that it aims to deliver ‘the next UK Defence unicorn’, with up to £100 million in accelerated contracts for British tech firms that have had limited or no current business with the Ministry of Defence (MoD).

This procurement-as-de-risking is one of the key ways the MoD can support entrepreneurs. When government sends clear demand signals and commits to buy, it helps SMEs cross the valley of death that kills so many promising firms between prototype and market. It’s the same logic that underpins Advance Market Commitments.

The last SME target, 25% of MoD spend, was technically met – but this was mostly through indirect spending via prime contractors. Direct spending with SMEs has remained around 4-5% (compared with 25% in the US), and as the government has noted, this figure has been falling. So this signal is welcome, but whether it will survive the transition to the next Government and actually deliver remains to be seen.

📈 Philip Salter, Founder

For decades, the official figures have shown the British economy is barely moving — a percent or two of growth in a good year. Yet, the ingenious entrepreneurs I meet week in week out, building incredible things at an astonishing rate, are suggestive of a more optimistic reality.

In When GDP Misleads: Inferring Living Standards from the Value of a Statistical Life, Stanford economists Philip Trammell and Charles I. Jones argue that GDP is poorly suited to counting the things that improve our lives most: namely, new goods, higher-quality goods, and the improvements that never register as a price at all. They open with Nathan Rothschild, the richest man in the world in the 1830s, who died at 58 in 1836 of an infection that $10 of antibiotics could likely cure today.

Picture an economy of two goods — food, which we get better at producing every year, and string quartets, which take the same four musicians they always have. As food gets cheaper, people spend a growing share of their money on music — and since the growth rate is a reflection of spending, the rate drifts downwards. Push that to its conclusion and you reach the absurd result that we would have been richer had the string quartet never been invented. A slowing growth rate, then, can be the mark of an economy rich enough to afford the finer things.

Progress comes from invention, not accumulation — and invention is precisely what GDP is worst at counting. The Trammell and Jones alternative is to use the value of a statistical life (VSL) — namely, what people will pay to reduce their risk of dying by a fraction. That figure reflects how much they value being alive, so it sweeps up everything that makes life better, new goods included. From this you can infer how fast living standards are really rising. As James Pethokoukis explains:

“The authors get at VSL partly by looking at the extra pay workers require to take more dangerous jobs. If workers need $1,000 more per year to accept a job with one extra death per 10,000 workers, that implies a statistical-life value of about $10 million.”

On the authors’ baseline, American lifetime wellbeing has risen five- to sevenfold since 1940. The usual consumption-based measures suggest it has merely doubled.

As the authors point out, the answer moves a great deal depending on the interest rate you assume. On less generous assumptions the gains shrink, or vanish. As Eamonn Ives has argued here, GDP shouldn’t be dismissed entirely. But we should be awake to the risk that relying on it too heavily understates both how much innovation is worth to us and the cost of putting up barriers to it.

🏛️ Ian Ng, Researcher

A report published by GovAI analysed 375 LLM releases over the past eight years and found that 11% were delayed or never released to the EU, with the figure standing at 7% for the UK. While the UK saw no delay in accessing the single most capable model at any point, it is still concerning when states are increasingly relying on frontier models for cyberdefence. Any delay in access, while hostile actors face no such constraint, could open a dangerous gap.

The authors attribute most delays and non-releases to regulatory factors, with data protection law the main barrier. Although the UK inherited most of its data regime from the EU, the authors point to the EU’s slower clarification of regulations and its more fragmented enforcement as the reason why barriers were higher across the Channel. They also note that the overall decline in delays may reflect labs building more mature compliance functions and greater regulatory certainty over time.

If Europe wants homegrown startups building frontier models, it needs to reduce the regulatory burden on them. The fewer resources a startup must dedicate to navigating regulatory uncertainty, the more it can spend on building. The regulations also risk becoming an entrance barrier for startups while protecting incumbents with large legal teams from competition.

We may also be witnessing the fading away of the Brussels Effect. The Brussels Effect held that EU regulations would set the global standard because it’s easier for businesses to comply with the strictest rule than to maintain a separate product. However, we are increasingly seeing the European market being carved out from the initial rollout of emerging tech products owing to regulatory uncertainty. As the authors have noted, Meta’s Threads and Apple Intelligence were both delayed in their European releases to comply with the Digital Markets Act.

When the term Brussels Effect was coined in 2012, the EU’s GDP was roughly a quarter of the world’s — today it stands at approximately one-sixth. Mounting regulatory uncertainty sits poorly with a shrinking market, and it is only making it more convenient for emerging tech companies to delay or completely avoid rolling out their products in Europe.

GovAI researchers found no evidence the EU AI Act itself has yet caused a single delay, but the enforcement of its general-purpose AI rules will only begin this August. The EU is about to run that experiment in real time. Britain’s advantage is that it doesn’t have to follow it down the same path.

Prime Time

At 63, after a life of public service, Keir Starmer could be forgiven for opting for semi-retirement upon handing over the reins. However, as our new study on the age of some of Britain’s most successful founders shows, many of Britain’s most well-funded companies were started not by a sprightly teenager, but by those with a few miles on the clock.

In How Old Are Britain’s Top Founders? Dr Mann Virdee analysed 183 founders across 100 of Britain’s highest-raising companies, showing that entrepreneurship is far less age-restricted than the Silicon Valley myth would have you believe. Specifically, he found a median founding age of 37, a range from 18 to 67 years old at the time of founding, and, crucially, that almost as many founders were 50 or older (20%) as were under 30 (23%) when the company was founded.

Energy and climate founders were the oldest, with a median age of 53. Several had clocked up 25+ years in the industry first. Biotech and pharma came next at 46, reflecting the academic, clinical and regulatory grounding needed to bring a drug or device to market. Fintech founders skewed younger at 34 — old enough to have worked inside the systems they set out to disrupt, but not yet institutionalised by them. And AI and software founders were the youngest at 33: younger than their peers in other sectors, but still older than the stereotype suggests, with most having started after 30, often coming from research or established tech firms first.

This is the first pass. We want to expand this beyond fundraising data in future iterations. If this is the sort of thing you might want to partner on, drop Mann an email to find out how you can get involved.

Infinite Jest

Keir Starmer is a man who had, by every available measure, won — a glittering legal career, the leadership of his party, a landslide — and then watched all that winning curdle the moment he was in office. So what went wrong?

In Finite and Infinite Games, James Carse separates games played to win, which end when someone does, from games played to keep the play going, in which the rules and even the boundaries shift to that end. As he puts it, the finite player plays within the boundaries; the infinite player plays with them.

Bernard Suits, in The Grasshopper, comes at the same idea from another angle: a game, he says, is “the voluntary attempt to overcome unnecessary obstacles” — we accept the rules precisely because they make the play possible. A prosecution is a finite game: fixed rules, a judge, a verdict, and an end. So is a leadership ballot. Governing isn’t. It could be argued that Starmer was so used to winning at finite games, he didn’t know how to approach an infinite game.

Entrepreneurship is mostly an infinite game.

In the past, I’ve sometimes pushed back when entrepreneurs tell me the answer is to get more of them into the heart of government — people who have built things. But I’ve come around to thinking they’re right, because the evidence has started to stack up. The exceptional people who disprove my rule: Matt Clifford, Alex Depledge, Emma Jones, James Wise, Martha Lane Fox and Kate Bingham, to name a few. Bingham has called for an “entrepreneurial mindset” in government, and Emma has been telling me much the same for over a decade.

A note of caution. It’s possible — not least given how much we love to copy the US — for this thinking to lead to something like DOGE, which managed to break more things than it fixed. But that isn’t Britain’s problem — sclerosis is. We need more infinite players in government.

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Rumour Mill

Equalising capital gains tax with income tax and instituting an exit tax are being discussed again. I’ve written before about why it’s bad for the UK. When we get a new Prime Minister, one of the first things they should do is rule out the most damaging scenarios. These rumours are exactly the problem of recent decades.

Fractional Future

I’m delighted to welcome Liberti to the fold, and to introduce Alex Evans, who directs Liberti Club — a campaign making the case that fractional is the future.

Liberti Group is the UK’s leading home for fractional C-suite talent, bringing together The CFO Centre, People Puzzles, The Marketing Centre, YRH Finance Team and Kiss The Fish, alongside a network of more than 1,000 principals across finance, marketing, people and sales worldwide. Alex has spent twenty-five years building communities of just this kind. I’ve known him for at least a decade of that time and so I know he brings deep expertise in the practicalities of business to the Network. Connect with him here.

Some Might Say

Andy Burnham won the Makerfield by-election last night in one of Reform’s target seats, returning to Westminster and all but declaring a challenge to Keir Starmer’s leadership. For entrepreneurs, the question I’m being asked is: what could it mean for them and their businesses? There will be plenty to come over the coming weeks, but the best place to start is Manchesterism.

Burnham describes it as economic progress alongside social progress, delivered locally through devolution. After all, since the first devolution deal, the city region has averaged around 3% growth annually, with the highest productivity growth in the country. Oxford Economics called it the “star performer of the UK economy since 2008,” with central Manchester’s employment growth in the top five in Europe.

If you want Burnham’s own case, Politics UK published it in May. Politico has perhaps the most comprehensive account of what Manchesterism means in practice and whether it can scale, including the observation from Jim O’Neill that the story “pre-dates Andy” and rested on decades of political and policy stability. The Centre for Cities offers a sympathetic view of the devolution mechanics, while the New Statesman argues that Manchesterism is not socialism, and that Burnham has largely inherited rather than built the model.

The most rigorous empirical treatment is Michael Hill’s recent piece on our Adviser Sam Dumitriu’s Notes on Growth substack, asking whether Manchesterism is working. His conclusion is more nuanced than many: Greater Manchester is a genuinely strong performer among British city regions, though Edinburgh and Bristol have done better, and the growth has been concentrated in the centre, which Hill argues is a feature of agglomeration economics, not a flaw. If you want to be the smartest person in the room when this topic inevitably gets raised, this is the article for you.

It would be premature to judge Burnham. Events may yet conspire against his ambitions for the top job. Not that you’ll find many people to take the other side of that bet right now.

Sunset Boulevard

The British state is fast becoming a sizeable shareholder in startups and scaleups. Given the direction of travel, it’s worth revisiting Josh Lerner’s Boulevard of Broken Dreams.

Lerner is the foremost expert on the economics of venture capital and how governments try (and mostly fail) to nurture it. He is no enemy of state support; he’s just a realist on its limits. There are, he argues, two ways to help venture capital: raise the demand for it, by making the country somewhere worth building in, or raise the supply, by writing cheques. Politicians reach for the cheques, because the money is the satisfying part.

The neglected half is what Lerner calls setting the table — the tax, regulatory and labour conditions that decide whether the capital has anywhere worth going. His starkest example is Japan, which funded a venture industry directly for years. The moment the money stopped, the industry went with it.

His other recurring complaint is the urge to be fair with the butter — to spread it so thinly across every region that it cannot be tasted anywhere, when venture is lumpy and rewards concentration. Geographic mandates have a poor record.

Then there is the picking itself. Take a stake in a company, the argument runs, and Whitehall gains a reason to clear its regulatory path. But if a barrier is worth removing for the firm the state owns a slice of, it is worth removing for all of them.

None of which is a case for doing nothing. The interventions that have worked share a shape. They match private money rather than allocate it directly, so the market signals where it should go. They keep ministers at arm’s length from the picking, behind the sort of moat New Zealand built around its fund of funds. And they carry sunset clauses and honest evaluation, so a scheme that isn’t working is allowed to end rather than harden into a permanent subsidy.

Backing British firms is the easy part. Setting the table is the hard part.

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Ink-redible

Congratulations to our Patron Chris Hulatt, co-founder of Octopus, who was made a CBE in the King’s Birthday Honours for services to entrepreneurship. In his own words:

“When we started Octopus, many people told us we were crazy and that our idea would never work — but entrepreneurship rewards the bold. From cold-calling 15,000 people from the Yellow Pages to raise our start-up capital, Octopus has grown into a group of businesses spanning energy, money and investments, education, death and divorce.”

As I argued in this week’s Three Big Ideas, honours for entrepreneurship remain far too rare. More of this, please – including a new order of chivalry for innovators.

Three Big Ideas #63

🎖️ Philip Salter, Founder

The King’s Birthday Honours landed last week, which gives me an excuse to return to ask the same question we’ve been asking since 2021: how many of these honours go to the people inventing and building things?

Five years ago, in our report Honours for Innovators, Ned Donovan and Anton Howes ran the numbers and found the answer was not many. We have now repeated the exercise across the last eight lists — every New Year and Birthday Honours since the end of 2022, more than 9,000 appointments to the Order of the British Empire — to see whether anything has shifted.

It hasn’t. Just one in ten citations mentions anything to do with innovation, science or industry, almost exactly where we found it in 2021. Strip out the broadest catch-alls of “industry” and “business” and it is lower still. Narrow it to the word “entrepreneurship” and it all but vanishes: 0.68% of honours. And these are generous counts — plenty of the citations we include are really for management or charitable work within a sector, rather than for invention in its own right.

As we argued in Honours for Innovators: “Given the current system, one would be forgiven for assuming that the surest way to an honour is to become a civil servant, politician, or philanthropist, or to achieve the fame that comes naturally to especially successful sports people, musicians, authors and actors.”

There are always honourable exceptions. In the latest list, our Patron Chris Hulatt, co-founder of Octopus, was made a CBE for services to entrepreneurship. More of this, please. Or, if the Government is feeling more ambitious, they might institute our dedicated order — what we called the Elizabethan Order — of genuinely equal standing to the OBE, with the same familiar four classes and a Sir or Dame at the top, awarded purely for invention and enterprise. It would cost around £66,000 a year: less than a single MP’s salary, for a payoff in status and aspiration many times larger.

This isn’t as radical as it might sound. Britain built its early reputation as the best place in the world to innovate partly by heaping status on inventors: the Society of Arts (now the RSA) struck medals to encourage them, monarchs granted them personal pensions, and there was even a chivalric order — the Royal Guelphic — that honoured the likes of Charles Babbage and William Herschel, the astronomer who discovered Uranus. It lapsed in 1837, not because the idea failed but because Queen Victoria could not inherit the crown of Hanover.

It’s time for a new chivalric order. This is the signal we need to give that Britain is serious about being the best place in the world to be a scientist, an inventor or a founder.

🔀 Mann Virdee, Head of Science and Technology

On Monday, the Government Office for Science published their updated five AI scenarios for 2030. It’s the first update to a set of scenarios originally developed in 2023 and first published last year — with the aim of helping policymakers plan for the future of AI.

Before getting into the details of the five scenarios, there’s an important methodological point. People often believe that scenarios are attempts to predict the future — but that’s not true. Scenarios are a rigorous and methodical way to consider several imagined future situations which could come to pass, but they don’t have to happen in order to be useful. They’re designed to be different from one another, and their value lies in helping policymakers identify trends and useful courses of action across a wide range of potential outcomes. That’s to say, we should avoid the temptation to focus on the scenario we think is most likely because that’s not the purpose of such exercises. At the same time, they should still reflect plausible outcomes, otherwise you end up with AI scenarios like this unhelpful graph from the Federal Reserve Bank of Dallas.

How not to do AI scenarios (Source: Federal Reserve Bank of Dallas)

The scenarios outlined in the GO-Science report range from a ‘slow burn’, to ‘augmented growth’, to ‘take off’ — and provide a more nuanced picture than the graph above. The report looks at six ‘critical uncertainties’ for each scenario: capability, model access, security, adoption, labour displacement and global cooperation.

Across most scenarios, AI drives significant productivity gains, helps to transform public services and make them more accessible, and accelerates scientific breakthroughs in fields such as health and energy — which will likely become key drivers of Britain’s productivity growth.

At the same time, across all scenarios, even in the slowest, the nature of cognitive work changes significantly, with routine, execution-oriented tasks being automated. There’s also a risk that workers become overly reliant on AI and have trouble operating if it fails. Another finding that holds true across all scenarios is the uneven adoption of AI and the compounding effect that will have, with a bifurcation where some realise the tremendous potential of AI while others are left behind.

It may not be the most groundbreaking report, but should serve as a good tool to help policymakers think more systematically about the future of AI and its adoption.

⚡Ian Ng, Researcher

The Trump administration placed Anthropic’s Fable 5 under export control last Friday, barring foreign nationals from accessing it. Anthropic responded by disabling the model for all customers. The ban came a day after the Europe 2031 essay imagined precisely a world in which Washington rations AI exports as a geopolitical lever. AI Minister Kanishka Narayan drew the obvious lesson: “access to AI capabilities is crucial.”

Europe’s dilemma is rooted in having no frontier model of its own. Adopt American models and you cede control of the access lever; adopt them slower than the US and the productivity gap only widens. If the past year has demonstrated anything, it’s the value of sovereignty and autonomy.

We live in an economy defined by chokepoints. Just as the Netherlands has ASML and Taiwan TSMC, Britain must think about the leverage we can build. We do have a seat at the table as a signatory of Pax Silica and the AI Security Institute being one of the few trusted to evaluate Mythos. However, it does not guarantee access to frontier AI models. The US has already floated a “trusted partner” scheme granting close allies privileged access. The tiers are being drawn now, and Britain cannot be sure if it will retain such access in future.

Leverage cannot be built overnight. The nature of a chokepoint is that once built, it cannot be easily replicated. ASML took four decades and an extraordinary accumulation of tacit knowledge across 5,000 suppliers. But that is precisely the argument for doubling down now. Britain, through our higher education sector, still holds an edge on talent. Our universities produced the researchers behind DeepMind and Arm. Without strategic chokepoints of our own, it matters all the more that we sharpen the edge that we still have and do everything to retain that talent.

Keeping talent is not solely about money because Britain will not win a bidding war with American labs. It is about whether there is anything here to work on. For frontier researchers that means compute, and the gap is stark: Isambard-AI, our most powerful machine, ranks eleventh in the world, while the top three are all American exascale systems.

We are not going to out-spend Washington. Government funding for British compute — £1 billion for AIRR, £750 million for Edinburgh — is barely a tenth of the £22 billion Microsoft alone is putting into the UK. Accepting American capital is unavoidable, and any honest plan builds most of its capacity that way. But some must sit on a sovereign core — publicly held compute backing British firms directly. AIRR is how Britain avoids having to 'rent its AI future from abroad’.

If the shelving of the Edinburgh supercomputer and the pausing of OpenAI’s Stargate UK were not wake-up calls enough, the export ban on Fable 5 should be. Certainty over the long term funding is crucial to attracting investment and retaining talent. That requires fiscal discipline from the government — both resisting borrowing for day-to-day spending as well as resisting the urge to axe capital projects when money is needed elsewhere.

None of this delivers leverage Britain can wield alone. But the fundamentals built at home are what give us something to bring to a table we cannot dominate.

Capital Gains

This week saw a bonanza of policy announcements during London Tech Week. So many that this morning we put out a Policy Update on the main things you need to know so I wouldn’t have to bombard you with them all now. Alongside the policy, we’ve also seen some major private sector investments announced, showing that our capital city still has the power to attract serious capital.

But are we telling the world the most compelling story we can about London — and the country more broadly? It’s the theme of our latest survey, which closes soon. Your views will be fed directly to those who matter. If you want to help us make the UK the best place to start and grow a business, ten minutes filling in our survey is one of the most efficient ways to do it. (The most efficient way is to share it with a group of like-minded founders so they can amplify your ideas.)

It’s your insights that inspire our reports, events and campaigns. Here’s how it happens.

First, conversations with entrepreneurs have driven our case across numerous reports for cutting the cost of visas. As detailed in our write-up, the Government has now launched a Visa Fees Reimbursement Scheme for Scale-Ups. Qualifying firms in clean energy, life sciences, and digital and technology can claim back up to £5,000 per employee — dependants included — and £25,000 a year per business in visa application fees for specialist hires recruited through the Skilled Worker, Global Talent or Scale-up routes. While these reforms are too restrictive, the message has clearly landed.

Second, as reported in our Policy Update:

“The AI Minister announced a new partnership between the Regulatory Innovation Office and the Health and Safety Executive to produce the first guidance on advanced robotics in the workplace. They will work with industry to deliver regulatory clarity for collaborative robots. This follows our roundtable with the Regulatory Innovation Office in May, in which founders said that pre-market guidance from the Health and Safety Executive would be valuable.”

Relatedly, the Regulatory Innovation Office, working with the Office for Product Safety and Standards, is convening a small, invite-only roundtable later this summer for companies working on consumer robotics — domestic appliances through to humanoids. The session will bring together innovators and senior UK regulators to discuss real-world regulatory and standards challenges, and how regulation can better support innovation. Drop Mann an email if you’re keen.

And third, a few weeks ago, after we reported that G-Cloud’s financial tests are blocking innovative scaleups, a number of politicians who read Perennial Gale got in touch to be connected to the founders affected. This week, we heard that officials are softening their position and the founders’ G-Cloud rejections have been overturned. Credit where it’s due. To its credit, the government has acted swiftly.

It’s not just robots, and it’s not just tech. We exist to be the bridge between all entrepreneurs and policymakers. Help us help you by telling us what you need.

Head Start

Education policy is largely impenetrable. Even when the government announces the right ideas, nothing much changes in practice for many schools, colleges and universities.

But just because the state lacks capacity, it doesn’t mean we need to fail the next generation. There is a lot of great work being done by self-driven educators as well as charities and private companies with limited input from Whitehall. We’ve worked with many of them.

To that end, we’re building a small group made up of people already helping the next generation become more innovative, entrepreneurial and enterprising. There will, of course, be a policy angle to the discussions, but as much as anything it will be about connecting those who are already building the future. Email me if you want to get involved.

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New Signing

I’m delighted to share that Ian Ng has joined us as a Researcher. He comes from Parliament, where he focused on innovation and technology policy. His work so far has covered AI regulation, emerging technology, the energy use of AI, and innovation funding. Connect with and follow him here.

Tender Spot

Our friends at Startup Coalition are currently researching a report into the barriers startups and scaleups face selling to government and are looking for case studies of different challenges startups have encountered. If you’re keen to be involved, drop Edd Elliott an email.

What’s Up

Our WhatsApp community has grown organically to over 750 people — yet only 5% of you are in it. So what are you missing? Perhaps the most useful thing is our occasional media opportunities. Just yesterday we posted this from a journalist writing for a national newspaper and we got some great replies from a few incredible founders:

“A journalist is looking for entrepreneurs whose disability has become a genuine edge in their business — something specific to the work itself. The story that sparked it is of a blind yoga teacher who finds she can describe poses, and how they should feel, far better than any sighted teacher could. (NB. They’ve covered ADHD and dyslexia separately, so they’re after something different this time.) If someone springs to mind — or it’s you — drop a line to press@tenentrepreneurs.org and we’ll forward it on.”

Join the group here. Any journalists reading this are welcome to send me their requests.

London Tech Week 2026

Our roundup of policy announcements across the AI Adoption Summit, London Tech Week and the AI Hardware Plan.

Grow on Trees

This week, the Maple Review published its final report. Spearheaded by Small Business Britain, its aim is to identify and dismantle the barriers to entrepreneurship caused by economic deprivation.

The problem it identifies is one that resonates with us and many in our network. As Blair McDougall, the Minister for Small Business, puts it in his foreword, “talent and determination are spread evenly across society, but opportunity is not.” Or, to misquote Ratatouille’s Anton Ego: “Not everyone can become a great entrepreneur, but a great entrepreneur can come from anywhere.”

We aren’t just about high-growth companies. For a great many people, starting a business is a survival strategy — a way to take charge when the labour market isn’t delivering for them.

Back in January, I wrote here about the Financial Confidence Taskforce I chaired for Xero, whose report was written expressly to feed into this Review. I’m pleased to say it has. Financial confidence — the ability to read your own cash flow, price your work and stay on the right side of HMRC — is one of the Review’s eight recommendations. So is the case the Taskforce made for teaching business and enterprise in schools, not merely personal finance, which our own work with Young Enterprise had argued for too.

Elsewhere, the Review notes that the government’s Growth Guarantee Scheme only backs term loans above £25,000. For a kitchen-table business, £25,000 is an intimidating sum to borrow. The founders the Review studied tend to need somewhere between £500 and £5,000 — enough for a laptop, a van, some stock, the first few months’ rent — the range that commercial lenders find least worth their while, since a small loan costs almost as much to administer as a large one. The state fills part of it: Start Up Loans covers £500 to £25,000, but it lends only to businesses in their first few years, and its affordability checks screen out the thin-credit, no-savings founders.

The Review’s answer is a national micro-capital system, paired with light-touch support. There is even a precedent: the old Enterprise Finance Guarantee backed loans as small as £1,000.

The other barrier worth dwelling on is the welfare cliff-edge, because it is a clear case of the state tripping up the very people it is trying to help. Move from Universal Credit into self-employment and you get a twelve-month grace period; after that, the Minimum Income Floor kicks in. From that point, the system can treat you as if you are earning the equivalent of a full-time minimum wage job, even when your actual income is much lower. The result is that a founder can lose support because of uneven cash flow, which, as everyone reading this knows only too well, almost every early-stage business experiences.

The Taskforce’s own research found that more than a third of small business owners don’t know whether they made a profit last month, and Xero’s data shows that 94% of small firms have at least one loss-making month a year, with four or five being typical. A rule designed around predictable monthly wages is a poor fit for the messy reality of building a business.

The lesson running through the Maple Review is that entrepreneurship policy cannot just be about the next unicorn. As regular readers will know, we aren’t afraid of championing Britain’s most successful entrepreneurs, but we also need to recognise the millions of people for whom entrepreneurship is a route to independence, resilience and a better life. If talent really is everywhere, our job is to make sure the opportunity to turn it into a business is too.

Xero Hour

Relatedly, I’m delighted to share that Xero’s Laura Burley has joined us as an Adviser. My favourite section of all our Advisers’ profiles is when they give their take on the UK. Laura nails it:

“The UK has genuine, structural strengths as a place to build a business — and it’s important to say that clearly, because the story is sometimes told with more pessimism than the evidence warrants.

“Britain has world-class universities, a deep pool of financial and professional services talent, and one of the most dynamic startup ecosystems in the world. The fact that over half of our fastest-growing companies are co-founded by people who chose to come here and build their businesses on British soil says something powerful about our underlying appeal.

“We now just need to work a little bit harder to remove some of the barriers, listen to founders and unleash that growth!”

Insider Trading

We appreciate the time many of you put into filling in our surveys. That’s why we want to honour it with the new role of Insider.

As long as you’re a business owner, you become an Insider by filling in our Entrepreneurs Survey and opting to leave your email address when asked, or filling it out anonymously and signing up here as a Member and ticking the Become an Insider box.

In exchange for filling in our 10-minute quarterly survey — so, 40 minutes or so of your time every year — we’ll give you priority access to our events. In particular, our No Agenda Breakfasts. We’ll build this community over time as we have with others, but fundamentally we are looking for entrepreneurs who share our mission to make the UK the best place in the world to start and grow a business.

Seeds of Greatness

Over at The Generalist, Mario Gabriele has spent the past couple of months studying the childhoods of 260 exceptional entrepreneurs. The thing that unites them isn’t wealth, or the lack of it, but their experience of economic flux. While this is the beginning of a deeper study, early indications show that the founders he looked at grew up in families where their fortunes were rising or falling — scrambling towards a fortune, or watching one slip away: “Being moved by an economic vector is a more common pattern than belonging to a specific class.”

Saplings is the opener to a longer series, built from 260 founders, more than 560 books and 430 variables encoded for each one — everything from a father’s occupation to the number of times the family moved house. Most of that reading wasn’t done by a team of multilingual researchers but by AI agents working in parallel, one per book, with Claude doing the heavy lifting and a fair chunk of the source material in languages Gabriele doesn’t speak. I’ll be watching this closely.

Three Big Ideas #62

🏗️ Philip Salter, Founder

Since 1970, productivity across most of the American economy has roughly doubled. In construction, it has fallen by around 40%. A new VoxEU column by Dongkeun Choi and Munseob Lee unpacks why.

The fall in the price of equipment — computers, machines, instruments — has been one of the great engines of the post-war economy, adding around 1.3 percentage points a year to growth in output per person. But structures have moved the other way. The relative price of buildings in the US is now 80% higher than in 1970, and that rise claws back almost two-fifths of the gain from cheaper machines. The net contribution of falling capital-goods prices is therefore closer to 0.8 points than 1.3.

“About three-quarters of the drag runs through standard capital deepening. When structures are expensive, firms accumulate less of them, and production slows accordingly. The remainder operates through innovation. Laboratories, offices, and pilot plants are themselves structures. Stagnant productivity in construction raises the cost of doing science.”

This is not an American curiosity. Choi and Lee examine thirteen advanced economies, and all but Belgium sit in the same troubling quadrant: construction prices up, construction productivity down. Across the entire sample, the UK records both the largest fall in construction productivity and the steepest rise in the relative price of building.

Why has construction forgotten how to build? The leading suspect is regulation. Hilber and Vermeulen show that the restrictiveness of the UK’s planning system, more than any physical shortage of land, drives the long-run rise in house prices; D’Amico and co-authors tie America’s construction-productivity stagnation directly to land-use rules. A planning regime that makes every project bespoke, contested and slow has meant construction is one of the few industries that never industrialised — it never achieved the scale economies and standardisation that lifted output almost everywhere else.

This resembles Baumol’s cost disease. When productivity stalls in one sector but the rest of the economy still needs its output, the relative price rises and everyone else pays for it. What makes construction unusual is that there is no way to route around it: the economy cannot make do with fewer hospitals, fewer fabs or — increasingly — fewer data centres. The cost of standing still in construction shows up everywhere.

As is often argued, restrictive planning acts as a tax on housebuilding. But it has also held back innovation in the construction industry. Alongside planning reform, we need to look deeper at what’s made us less efficient at building.

🏹 Mann Virdee, Head of Science and Technology

When I was invited to give evidence before the Business and Trade Select Committee on industrial strategy, I emphasised three main points. First, a few outliers skew the statistics on British science. Once they’re removed, British science isn’t quite so ‘world-leading’. Second, the state can play an important role in procurement, such as through Advanced Market Commitments, and in de-risking the journey to market for entrepreneurs. Third, I offered some historical background on how Silicon Valley came to be the world’s pre-eminent hub for innovation and entrepreneurship.

But one question from the committee stumped me slightly: how effective is the Catapult Network? It’s a part of the UK’s R&D ecosystem I hadn’t really looked into in detail, although my overwhelming sense was that the Catapults were usually an afterthought in conversations about innovation and commercialisation I’d been part of. I thought it best to say nothing rather than pretending I had a more considered response.

The Catapult Network was created in 2011 after a report by Hermann Hauser that proposed an elite network of centres to help translate breakthrough scientific discoveries into commercial industries. It was modelled on 12 international comparators, including Germany’s Fraunhofer institutes.

There have been a series of reviews with mixed findings. A 2014 review called for doubling down on the approach, saying that it was mirroring international comparators, and recommended expansion. A 2017 review by Ernst & Young found that the centres were not being properly managed and that they had no common purpose statement. A 2021 government review recommended reviewing the Catapults less often, but it also found that the High Value Manufacturing Catapult alone had generated 75% of all the Catapults’ income the previous year, showing a highly uneven impact.

Against this background, there are reports that ministers are lining up another review of the Catapults to assess their value and impact after concerns that some have failed to support regional growth and help build national champions. It’s rumoured that streamlining and job cuts may be on the cards.

I recently wrote about an OECD report on the ‘valley of death’ between Britain’s strong support for research up to prototype and its thin support for demonstration, customer validation and early market entry. That report’s proposed solution was to expand the commercialisation role of the Catapults.

So the function clearly matters. The gap the Catapults were built to fill is, if anything, widening. The question remains whether these particular institutions are still the right vehicle for the job.

One approach is to keep tinkering and topping up funding, hoping that some future permutation works. The other is to know when to call it a day and build something new with a sharper remit, explicitly tied to growth and closing the demonstration-to-market gap. Founders I’ve spoken to lean towards the latter. But before we can choose well between these, we need an honest diagnosis of why the Catapults are underperforming — and what, concretely, we would do differently.

📈 Rafi Pollack-Joyce, Policy Analyst, Public First

Tony Blair’s intervention last week has put AI in the public sector at the heart of the fledgling Labour leadership debate. But is he right that governments can harness the technology to deliver more with less?

Earlier this year, Public First surveyed 3,335 public sector workers across ten countries. The headline finding is striking. AI is everywhere. Around three-quarters of public servants now use it, and most started in the past year. That probably makes AI the fastest-adopted technology the public sector has ever seen. But there’s a big difference between using a tool and changing how the government works.

The countries doing best aren’t simply the ones with the biggest AI sectors. They’re the ones that have made AI feel usable inside government. That means clear permission, decent training, approved tools, and a way for good experiments to become normal practice.

Singapore is the clearest example. Its advantage isn’t magic technology. It’s that public servants have more of the scaffolding around them: guidance, tools, training and institutional support. For example, Singapore is twice as likely as the UK or US to conduct mandatory training for employees. The results are clear: compared with the UK and US, Singaporean public sector workers are more than twice as likely to use AI daily, to be using it for complex tasks, and to think the public sector in their country overall is using it effectively.

The UK and US have a more awkward problem. Both are AI leaders in the obvious sense, with companies, researchers and policy attention. But inside government, use is patchier. People are interested, and often already experimenting, but many still don’t have clear guidance on what they’re allowed to do or how to move beyond low-risk tasks. While just over half of public servants in the UK and US feel confident using AI tools, that rises to 85% in Singapore.

That matters because unclear permission doesn’t necessarily stop AI use. It just makes it messier. People experiment on personal accounts, stick to shallow use cases, or run pilots that never really scale.

Ultimately, this is fixable. The hard part isn’t persuading public servants that AI matters, it’s building the basic machinery around it: procurement, guidance, training, data access and routes to scale.

Blair is right that AI could change the state. But the first test is more mundane: whether the government can manage the adoption that’s already happening

Order, Order!

It won’t have escaped many of you that this week Tony Blair published an essay of close to 6,000 words on what he thinks is going wrong in the Government. Within hours it was leading the news. Whatever you make of him or the essay, he still has the power to lead the conversation even though he’s not leading the country.

I’ll leave you to make up your own mind about what to make of it. It covers welfare, energy, defence, immigration, Europe and the shape of the state. It is worth noting, though, that he mentions, in passing, the idea of equalising capital gains with income tax as “something rejected by successive governments for good reason”. We covered those reasons in detail last week.

The headlines have focused on the political implications and the rebuttals, but the part worth the most attention is his theory of politics. Blair’s argument is that British politics keeps getting the order wrong: it does the politics first and the policy second. For example, Labour is asking how to see off Reform before working out what the right thing to do actually is. His answer, which he calls the “radical centre,” is to flip that around. It’s an unhelpfully named term, but the idea underneath is clear enough:

“The centre – properly defined – is where you put policy first and politics last. So, you begin with the question: what is the right answer? And only once you have that do you engage in the political task of persuading people of it.”

Later he adds:

“You work out the correct analysis, then the correct answer, and shape your political strategy around it. Where, therefore, the correct answer requires radical change, the centre should be the radical changemaker.”

(“Changemaker” — another dreadful term.)

This is how Blair has thought about government for thirty years. It’s why, as Prime Minister, he ran delivery units and chased a “what works” pragmatism that often annoyed his own side. His foreword for our essay collection The Way of the Future from a few years ago captures this.

It’s why, when asked recently by the podcaster Dwarkesh Patel what advice he would have given Lee Kuan Yew in the 1960s, he waved the question away as the wrong way round. He had gone to see Lee in Singapore in the 1990s, when he was still Labour leader. Lee’s first words, by Blair’s account, were: “Why are you seeing me? Your party’s always hated me.” Blair’s answer was that he had watched what Lee had done in government and wanted to learn from it. As he wrote when Lee died, Lee “was the first to understand that modern politics was about effective government, not old-fashioned ideology.”

“Britain’s problem,” Blair writes, “isn’t with a ‘Westminster’ bubble. It is with a ‘politics’ bubble.” He thinks, correctly I think, that “the politics of the future may be better understood by those presently outside politics.” It’s certainly true of the people reading this.

Think of the founders navigating the tax system, integrating AI into their businesses, dealing with planning rules and on the front line of energy costs. Entrepreneurs understand what’s coming and what’s needed better than almost anyone inside the politics bubble. I would say the same of those who work closely with founders, as it’s their job to know what’s keeping them up at night.

Closing that gap is the whole point of what we do, which is why I’ll ask you once more to fill in our Entrepreneurs Survey if you haven’t already. It takes about ten minutes. We use it to build the kind of evidence Blair is gesturing at: namely, what founders really think about tax, talent, regulation and Britain’s place in the world, and we take it straight to government and the media. The last wave made the news in Sifted, The Telegraph and City A.M., and fed into our submission to the Treasury. The more founders who respond, the harder our findings are to ignore.

Given Blair’s central message, it’s perhaps ironic that most of the attention has fallen on the political implications of his essay. The bit worth taking from it isn’t about Labour at all. It’s his theory of politics: one that many of the most effective leaders follow. I don’t think it’s a coincidence that the great Peter Drucker gave executives the same advice 60 years ago:

“One has to start out with what is right rather than what is acceptable (let alone who is right) precisely because one always has to compromise in the end.”

Pocket Money

We’re delighted to welcome Zara Ransley as an Adviser to The Entrepreneurs Network. Zara is co-founder of MyPocketSkill, an award-winning platform that helps 13- to 25-year-olds earn, save, invest and learn about money. It has a quarter-of-a-million-strong community in the UK and partners including Lloyds Banking Group and the BBC. Find out more, including why she supports The Entrepreneurs Network and backs the UK, here.

Self-Raising

We’re also pleased to welcome Geeta Sidhu-Robb as an Adviser. A multi-award-winning serial entrepreneur, Geeta is now launching The Bootstrappers’ Breakfasts, a national breakfast series and podcast for female founders building their first £1 million, with lessons from women who bootstrapped to £20 million and beyond. It opens in London on 7 July, the first of five UK cities in the series, and is free to attend. She’s also on the lookout for partners to help bring it to life. Do get in touch with her if that’s of interest — you can scroll down here to connect.

Tinker Taxer Founders Fly

First, if you’ve not yet completed our latest Entrepreneurs Survey, what better way to spend this sunny Bank Holiday? It only takes around 10 minutes, but its insights and impact — as you’ll read below — go much further. Politicians can’t make the UK the best place in the world to start and grow a business if they don’t know what entrepreneurs need. Tell them.

Some policy areas are neglected. Others are tinkered with to death. Capital gains tax sits firmly in the second camp. In the last fifteen years, the headline CGT rate has been raised, cut, raised again, and split into multiple sub-rates. And now equalising it with income tax is being seriously discussed in Westminster again.

Entrepreneurs’ Relief was introduced with a £1 million lifetime cap, expanded to £2 million, then £5 million, then £10 million, then cut back to £1 million, then rebranded as Business Asset Disposal Relief (BADR), then ratcheted from 10% to 14%, to 18%. The last clean settlement was Lawson in 1988. Every Chancellor since has felt obliged to fiddle.

BADR is now capped at a level low enough to be irrelevant for serious scaling, and has been continuously revised in ways that signal political instability to anyone considering where to base their business. We have, in effect, the worst of both worlds.

The behaviour the Treasury actually wants — or should — is reinvestment. Capital gains are taxed differently from labour income to attract entrepreneurs from abroad, keep the ones we have, and incentivise them to do it again. In our recent Entrepreneurs Survey, 72% of founders told us they would invest the proceeds of a more generous BADR in someone else’s startup, while 70% said they would launch a new venture. The reinvestment instinct is overwhelming, and it is the thing the UK tax system most needs to protect.

The case for equalising CGT with income tax comes dressed in sophisticated economics: get the base design right — exempt a “normal” return on capital through a rate-of-return allowance, make losses more generously offsettable — and the headline rate stops mattering. It is a serious argument. It is also, as the tax policy expert Tom Clougherty argued in The Times yesterday, one that does not survive contact with how entrepreneurship actually works.

On losses, Clougherty notes the basic asymmetry: “an entrepreneur’s potential losses are uncapped; their upside is highly uncertain. If you tax the gains without subsidising the losses (and you should definitely not subsidise losses) you are skewing incentives around risk-taking.” On the rate-of-return allowance, his point is even sharper: it “assumes that any returns above a ‘risk-free’ rate are ‘unearned rents’ — unrelated to skill, effort, or the risks taken. This assumption does not hold up in the real world. High returns on capital are not random strokes of luck — often they are a manifestation of precisely the qualities that drive economic progress.”

That is the substantive case. Then there is the practical one. The most carefully designed CGT regime in the world is useless if founders can’t plan around it. A founder building a company is making a ten- to fifteen-year bet. The UK tax system has been resetting every year.

CGT does more than raise revenue. It tells founders what the country thinks long-term, illiquid, risk-bearing capital is worth. A regime that keeps changing tells them something else: that the tax treatment of their decade-long bet will turn on a single Budget, election or leadership race.

The behavioural evidence is visible. Pre-Budget realisation spikes are now a standard feature of UK tax data, as founders rush to crystallise gains ahead of expected changes. The 2024 spike was the largest on record. Our own polling found that 62% of founders personally know an entrepreneur who sold up or left the UK after the 2024 Budget. Seven in ten know one planning to leave because of the current or expected tax regime. None of this is hypothetical — which is why over a thousand of Britain’s most ambitious founders, including those behind Synthesia, OakNorth, Zopa and CMR Surgical, signed our letter to the Chancellor when this was last being seriously considered.

Clougherty puts the pattern starkly: “If you look at the blended marginal tax rate on capital income — combining the effects of corporation tax, CGT and dividend tax — since 2000, you see two big spikes: one immediately after the financial crisis, and another after the pandemic. Why do we keep responding to economic crises by hiking taxes on investment? Could this possibly have anything to do with our failure to bounce back from these downturns?”

A tax system can be defensible at every point in time and still be impossible to plan around, because founders are not pricing today’s rate — they are pricing the range of rates they expect to face over the next decade. Britain has spent 15 years teaching them to expect the worst.

Sweden faced the same question in 2003: how to tax founder gains without choking off new ventures. It didn’t cut the rate. It changed when the rate applied. Corporate tax on capital gains from selling shares in unlisted companies was deferred indefinitely, provided the proceeds went back into other unlisted companies. Founders who exit and consume pay tax. Founders who exit and reinvest defer it.

As Luis Garicano and Per Strömberg set out, Sweden — a country of 10 million — has produced more unicorns per capita than almost anywhere in the world. Alumni of the first wave of Swedish tech successes have founded and funded the second because the 2003 reform let them recycle exit proceeds at scale. It worked because it targeted people who already had deal flow, judgement and operating experience — and because, crucially, it has been left largely alone for over two decades. Reward reinvestment, then get out of the way.

This isn’t a left-right argument. One of Mark Carney’s first acts as Canadian Prime Minister, in March 2025, was to cancel his predecessor’s planned increase to the capital gains inclusion rate. The centre-left Carney framed it as catalysing investment and rewarding the people who take risks to build things.

The Treasury will point out that income reclassification through closely held companies is a real problem. They are right. Owner-managers can dress up labour income as capital gains to lower their tax bill, and the rate gap creates the opportunity. But the answer is not a blunt rate hike on every capital gain. It is to fix the specific structures that allow the reclassification in the first place. Punishing genuine entrepreneurship to close a definitional loophole is a category error.

Any reform has to pass two tests: does it keep founders building and reinvesting, and can they plan around it for a decade? Everything else is just tinkering.

YEF @SXSW

On Tuesday, we’ll be inviting a small number of our Young Entrepreneurs Forum to an event at SXSW London. It comes with a free pass to the entire festival, which normally costs over £1,000. If you’re not a member of the group, sign up for free today. Spaces are very limited for this one, but there will be plenty more events on the horizon.

Intelligent Design

In our latest interview for our UK AI Fieldbook series, Mann Virdee speaks to Jarek Rzepecki about how AI can help design complex hardware as a single, unified system.

Three Big Ideas #61

🧑‍💼 Philip Salter, Founder

AI adoption is usually discussed in terms of cost and compute. In More Than Just Plug and Play, a working paper published this month, Diane Coyle and colleagues at the Bennett School use the ONS Management and Expectations Survey to show that UK firms with stronger management practices in 2020 were significantly more likely to go on to adopt AI by 2023.

Digging a bit deeper, it turns out different technologies call for different organisational capabilities. The same management practices that predict AI adoption show no relationship with the adoption of robotics, specialised software or specialised equipment.

We already know the UK has a management problem. Nick Bloom and John Van Reenen’s seminal 2007 paper introduced a structured way of measuring management practices across firms and countries, and the body of work that followed has consistently shown UK firms lagging US counterparts — with a particularly long tail of badly managed firms dragging down the productivity distribution. The policy response has tended to bundle this into general management improvement — training, peer learning and leadership development — rather than targeting the specific practices.

The new evidence narrows the target. As the paper notes, “it is specifically monitoring practices, such as use of KPIs and target-tracking, along with decentralised product development, that predict adoption.” Practices around continuous improvement and employment had weaker or insignificant effects.

Among multi-site firms, those where product development decisions sit closer to the frontline were more likely to adopt AI. The authors suggest “AI applications are more likely to be context-specific and require domain or technical knowledge to identify valuable use cases.” The combination of autonomy and measurement is the specific organisational structure that predicts AI adoption.

The policy implication is that management training interventions may be better targeted on capability-building around performance measurement and data architecture, combined with organisational design that empowers technical teams.

Policy aside, there’s a lesson here for founders bullish on AI. You don’t need a government programme to adopt the organisational shape this research describes. Building KPI infrastructure and pushing product decisions closer to the people who understand the work is something firms can do on their own. The companies that get this right won’t be waiting for policy to catch up. (Mann picks up the structural side of this problem below.)

💻 Mann Virdee, Head of Science and Technology

The OECD, in collaboration with the Department for Science, Innovation and Technology, recently released a report on technology adoption in the UK.

On the one hand, their findings indicate that British firms do well on mature digital technologies. The UK’s adoption of cloud computing, data analytics and basic process tools sits above EU and OECD averages, and SMEs have largely closed the gap with larger firms in using these foundational tools. On the other hand, for more advanced technologies, such as AI, robotics and automation, uptake is more limited than one would expect for a country with the UK’s income level (see Philip’s article above).

Take robotics, for example. The UK has a strong manufacturing legacy, particularly in the Midlands — yet adoption of robotics among manufacturing firms trails the EU average. The OECD attributes this to a mix of factors that compound in smaller manufacturers: high upfront costs, the average age of business owners, distrust of technology vendors, and a ‘wait-and-see’ approach whereby firms only adopt after peer validation. Each barrier is manageable in isolation, but together they create a structural drag on uptake in the sector in which the productivity dividend should be largest.

Geography compounds this problem. The OECD’s data on regional adoption finds that between 2018 and 2022, average SME adoption of AI and robotics technologies stood at around 15% in London and the South-East, but just 1.9% in the North-East. The concentration in the Golden Triangle is well-documented, but the within-region picture is just as stark. In the West Midlands, the Black Country trails most innovation indicators despite sitting next to one of the UK’s strongest industrial clusters.

The OECD’s overarching diagnosis is that Britain supports research well through to prototype (Technology Readiness Level (TRL) 6–7), but that support thins out at the stage of demonstration at scale, customer validation and early market entry (TRL 8–9). It’s at the later stage that firms package innovations into off-the-shelf products with the reliability and support that allow non-frontier SMEs to adopt them. Without that later stage of support, brilliant science struggles to become widely diffused technology.

The report’s proposed solution is to expand the commercialisation role of the Catapults, paired with the British Business Bank to crowd in private co-investment. For our part at The Entrepreneurs Network, we’ve been bringing together robotics founders with the Regulatory Innovation Office and the Health and Safety Executive to try to make their scaling journey smoother — exactly the kind of intermediary work the TRL 8–9 gap demands at scale.

🛡️ Harry Pitts, University of Exeter

Britain’s drive towards defence reindustrialisation and rearmament will depend on whether smaller, more agile firms can be integrated into the defence supply chain. In a new report for Babcock, The Next Line of Defence: Unlocking SME Potential in UK Defence from Policy to Practice, our team at the University of Exeter’s Defence, Security & Resilience Network found that the primary barriers relate to culture and process.

We interviewed 20 cutting-edge defence SMEs, both those well-established in the supply chain and those pivoting in from civilian sectors. The picture that emerged is of significant capability waiting to be unlocked, set against procurement systems that struggle to engage with it.

Ukraine’s high-tech resistance to Russia’s invasion has demonstrated what agile, software-led innovation can do on the modern battlefield. The UK has firms capable of producing similar capabilities at pace, but defence procurement, administrative systems and financing frameworks remain designed around large, established suppliers operating on multi-year cycles.

SMEs need credible demand signals to justify the investment and recruitment that scaling for defence requires. The forthcoming Defence Investment Plan is the obvious vehicle, and its credibility with the SME community will depend on how concretely it signals where money will flow and over what timeframe.

There is also a vital role for primes — the large, established contractors that sit between government and the SME base. Our interviews suggest that the most productive prime–SME relationships invert the usual power dynamic, with primes acting as supporting partners that help smaller companies articulate the value of their products to government, navigate procurement processes and bridge the gap between SME agility and government risk aversion. This is a markedly different role from the traditional one of subcontracting work down a tiered supply chain.

Babcock’s SME Engagement Charter, informed by our evidence, is an attempt to formalise this. Against a backdrop of rapid geopolitical change, primes have the power to realise in practice the promise of government policy in this domain.

Batteries Not Included

At our roundtable hosted by the chair of the Regulatory Innovation Office, Lord Willetts, robotics founders warn that outdated regulation, structural conservatism and an absent insurance market are holding back one of the UK’s most promising technology sectors