We can’t have it both ways. We’ve all complained about governments too readily chopping and changing policies, and then a rather boring Budget comes along and suddenly we’re all asking: is that it? Nevertheless, it wasn’t without consequence.
First and foremost, it was great to see the Government reinstate the lower eligibility criteria to qualify as a high-net-worth or sophisticated investor. This will make sure thousands of angel investors, many of whom come from underrepresented groups, can continue to back startups across the country. In an ideal world, u-turns would be celebrated in politics as nine times out of ten they’re the right thing to do because they are a result of things going wrong in an unexpected way. For those of you who signed the petition we helped coordinate and shared here: pat yourselves on your back. Ultimately, it was the collective voice of thousands of entrepreneurs and investors that convinced the Government to change tack.
Also, we broadly support the Public Sector Productivity Plan. However, as our Researcher Derin Kocer argued in the New Statesman: “Public sector productivity gains can only happen with the adoption of new technologies, and the planned investments to achieve this should therefore be welcomed. However, we must not lose sight of the fact that for genuine transformation in delivery, our most innovative start-ups need a fair shot at supplying these new technologies, making reforms to public procurement all the more important. Many of Britain’s start-ups want to work with the state for the benefit of the country – the government should open its doors to them.”
We have produced Procurement and Innovation and Access All Areas: Government (with Enterprise Nation) on this, some of which was reflected in the recent Procurement Act, and recently held a roundtable with MDRx which made it clear there is still a lot more to do. Watch this space.
As detailed last week, the balance of power between academic founders and universities is out of whack. Therefore, as our Head of Research Eamonn Ives said: “It’s pleasing to see the Government put a timeline on when universities have to report their spinout policies by, but this should not be seen as the end of the matter. If academics remain under-empowered to launch investable spinouts, we will continue to fail to maximise the groundbreaking innovation necessary to deal with climate change, fight diseases, and tackle other looming problems. Delivering a better settlement for entrepreneurial academics who want to commercialise their research to build innovative startups cannot come soon enough.”
Separately, Eamonn was quoted on the fact that the government wanted changes to National Insurance to be the headline announcement. And it goes without saying that the 2p cut to Employee NICs will be welcomed by workers who’ve seen earnings squeezed, but because the incidence of NICs – i.e. who ultimately bears the burden – can fall in part on business owners too (the IFS explains this well here), entrepreneurs may well benefit too.
Another policy area where economic insights are important is around the VAT threshold. Derin was also quoted in The Times on it. “Britain’s VAT registration threshold, which was already extremely high by international standards, incentivises small businesses to stay small. This threshold instantly burdens any business that only just breaches it with a significant marginal cost. As a result, we see a bunching of businesses that turn over slightly less than the threshold, as many businesses deliberately stop working when they approach it. This move is superficially appealing, but will not help Britain grow in any radical way.”
Derin was in good company, with Michelle Ovens of Small Business Britain and the influential Dan Neidle of Tax Policy Associates agreeing. We appreciate this is a policy area that a few small business champions feel differently about. But our position is true to our core aim of supporting entrepreneurs not as an end in itself, but because they are key to making everyone richer, healthier, happier and all the other good things in life.
If you’re looking for a more entertaining (and brutal) response to the Budget, check out Air Street Capital’s diagnosis that unseriousness lies at the heart of UK policy-making around technology.
Happy IWD!
It would be remiss if I didn’t mention International Women’s Day. I’m buzzing from a great event with Debbie Wosskow OBE and Hannah Bernard OBE at Barclays celebrating female entrepreneurship. Regular readers will know we’ve worked for years with Barclays on our Female Founders Forum project.
We’re busy putting together our plans for our next piece of work, so watch this space. In the meantime, our friends at Enterprise Nation have put together a practical guide that shines a light on resources that can help build an entrepreneurial nation of female founders. It quotes Beauhurst’s statistic from our last report that just 3.5% of equity investment went to female-founded start-ups in the first half of 2023. Much to do.
Cool Evidence
You can now submit evidence to the Lilac Review, the government-backed independent review, aiming to tackle the inequality faced by disabled-led businesses and level-up entrepreneurial opportunities across the UK. I sit on the Steering Board, so if you want to run anything past me before sending it just let me know.
Two Pennies' Worth