Why MPs need to know more about entrepreneurship

Which policies to support entrepreneurs do MPs value the most? Which do they feel could have a negative impact on entrepreneurial activity in the UK? Are our elected representatives knowledgeable enough on the initiatives already in force to support entrepreneurs?

These are the questions The Entrepreneur’s Network sought to answer in our 2015 Parliamentary Snapshot: MPs on Entrepreneurship, which was conducted by YouGov and supported by law firm Bircham Dyson Bell.

It came as little surprise to learn that Conservative and Labour MPs are ideologically split on tax, regulation and increased government spending. For example, 89 per cent of Tory MPs support the lowering of business taxation; but just 48 per cent of Labour MPs agree. And while 63 per cent of Labour MPs support spending more on government grants and loans, this is the least popular policy among Conservative MPs, with just 36 per cent thinking it would buy ativan mexico have a positive impact on UK entrepreneurial activity.

MPs from the two main political parties do see eye to eye on some policies, however. Spending more on the skills of the domestic workforce, for example, saw 85% support from Conservative MPs and 93% from Labour. Making it easier for entrepreneurs to move to the UK is the second most positive policy among MPs – receiving 80% support from Conservative MPs and 66% from Labour.

But the biggest divergence was in response to the UK’s membership of the EU, and the regulations coming over from Brussels. Although some commentators suggest the Labour Party is as Eurosceptic as the Conservative Party, the survey reveals Labour MPs are significantly more pro-Europe than their Tory counterparts. Over half, 58%, of Conservative MPs think withdrawing from the EU would have a positive impact on entrepreneurial activity in the UK, but 95% of Labour MPs believe it would have the exact opposite effect.

It is positive that MPs have such strong opinions: we want our politicians to analyse and scrutinise the multiple, complex policy options open to them. But our Snapshot also exposes a worrying lack of knowledge about the policies already in place to support entrepreneurs. Too often, MPs are in the dark about established initiatives – or if they have heard of them, they don’t know enough to decide whether they are effective. Which means they don’t know enough to vote on important policy changes that could affect the startup community.

Conservative MPs may believe that tax cuts offer one of the best ways to support entrepreneurship in the UK, but over half, 56%, either haven’t heard of the Seed Enterprise Investment Scheme (38%), or didn’t know enough about it to decide whether it was effective (18%). And just 45% support the Enterprise Investment Scheme, down from 68% last year. Both these initiatives offer tax relief to investors in smaller companies, and are rightly seen by startup community as essential to the UK’s entrepreneurial success.

Similarly, many Labour MPs think spending more would be the best way to boost entrepreneurship in the UK, with 63% supporting spending more on government grants and loans, and 61% supporting more spending on government support services. However, many are unaware of government spending already in place. For example, 61% of Labour MPs haven’t heard of the lauded Innovate UK (which runs competitions for government funding), or don’t know about it well enough to determine whether it is effective.

It’s certainly encouraging that MPs are increasingly vocal about supporting Britain’s entrepreneurs. But in order to improve policymaking, we need more knowledgeable MPs. And we need a more outspoken entrepreneurial community to tell them which initiatives are working on the ground.

What MPs know and think about entrepreneurship

Following the release of our new Parliamentary Snapshot 2015 today, The Entrepreneurs Network’s director has highlighted the importance of government policy on entrepreneurial success – in any country.

Entrepreneurs, Philip says in his most recent Forbes column, are not a loyal bunch – and if they can build a bigger, better business elsewhere, they probably will. Read his take on the findings of our report here.

Why the National Living Wage is bad policy

It’s the first Conservative budget in 23 years, but Chancellor George Osborne has introduced a policy that is bad for the most vulnerable workers, bad for entrepreneurs, and bad for the UK.

Studies have shown that minimum wages in fact reduce employment and slow jobs growth. The Government should leave such decisions to the Low Pay Commission – which was set up with these problems in mind.

If the Chancellor really wanted to help low paid workers, he should have cut Employers’ National Insurance, 70 per cent of which is paid for by the employees.

As Sam Bowman, Deputy Director of the Adam Smith Institute, said in response to the announcement:

“This move will condemn tens of thousands of people to long-term unemployment.. If the Office for Budget Responsibility’s estimates are to be believed, today the Chancellor will have put 60,000 people out of work.”

Read my Forbes article on the National Living Wage in full here.

Aim: Here’s to 20 more years

The Alternative Investment Market (Aim) – a sub-market of the London Stock Exchange that allows smaller companies to participate with greater regulatory flexibility than applies to the main market – is today celebrating its 20th anniversary.

Aim has seen over 3,600 companies join since its 1995 launch and is now home to around 1,100 small and midsized companies. A less tightly regulated market than the main exchange, Aim provides a lower-cost alternative for small and mid-sized companies seeking investment.

But crucially, once afloat firms can raise further finance from their shareholders without going through the procedures enforced on those listed on the London Stock Exchange. And in a bid to ensure the flexible ambitions of SMEs are served even further, acquisitive companies and those looking to be acquired encounter far fewer controls than those on the main market.

Many successful companies have listed on Aim, including:

Arbuthnot Banking Group
Arbuthnot Banking Group, previously known as Secure Trust Banking Group, listed on the Alternative Investment Market (having previously been listed on the London Stock Exchange). Over the past five years, share prices have steadily risen, and have seen a 22.66 per cent rise in the past 12 months.

Asos
Asos, the online fashion retailer, is one of the most famous success stories since Aim’s debut in 1995. Asos was initially priced at 3p and share prices once soared as high as £70 (now close to £38, after a major swing in value). Since the beginning of the year, shares have risen by 49 per cent.

Fevertree Drinks
In 2005, Charles Rolls and Tim Warrillow joined forces to change the face of tonic water, finding an alternative preserver to sodium benzoate and instead using high quality quinine. A newbie to Aim, share prices have soared 65.51 per cent in the past six months. Today, the company sells more than 60m bottles of its premium mixers in 50 markets.

Fitbug
Fitbug tracks sleep, steps, and estimates calories burned, and was founded in 2005 by ex-management consultant Paul Landau. At around £40, the Fitbug Orb device affordable compared to its competitors and it is now stocked by major retailers. Its share price soared late last year, and despite a correction this January, is still up 675 per cent in the past 52 weeks.

GW Pharmaceuticals
One of Aim’s great success stories, GW Pharmaceuticals – the biopharmaceutical company founded in 1998 and best known for its MS treatment product Sativex – is listed on both the Nasdaq Global Market and Aim. In the past five years, share prices have rocketed from just over a pound, to 655p today.

Majestic Wine
A favourite tipple of investors in the Aim for years, Majestic Vintners opened its first wine warehouse in Wood Green in 1980. In 1996, the company floated and it now has 200 stores and an online platform. Despite a rocky 2014, Majestic’s share price has risen 4.67 per cent in the past year.

Portmeirion
You may be surprised to learn that a company specialising in tableware has become one of the most successful in the UK today. Over 40 per cent of its sales are to the North American market, and the company sells almost as much to South Korea as it does to the UK. Portmeirion has never cut its dividend and has been paying out since 1982.

Nevertheless, the market has been plagued by poor returns and a host of corporate failures – including buy ativan online some high profile fraud cases (the Langbar International fraud was once branded “the greatest stock market heist of all time”). And let us not forget that the market has performed pretty poorly over the years, with annualised total returns of -1.6 per cent per year when measured over the past two decades.

Nonetheless, Aim shares have surged in popularity since 2013, when they became eligible for inclusion in Isas. The high-risk factor had previously stopped the government from removing the restriction, but a desire to ensure that small and medium-sized companies – which are driving the economic recovery – have sufficient access to funding led to it reversing this decision.

It was the right choice: without Aim, there was a risk these companies would have turned to Nasdaq, or simply failed to grow. Research from Grant Thornton has also revealed that the companies listed on Aim paid £2.3bn in taxes in 2013 and directly employed 430,000 people at the end of that year.

For investors, Aim shares remain one of the most tax-advantaged options. If held through an Isa, benefits include no capital gains tax (CGT), no tax on dividend income, and no stamp duty. In addition, once certain Aim shares have been held in an Isa for a two-year period, they can qualify for Business Property Relief (BPR) and thus up to 100 per cent exemption from inheritance tax (IHT).

But the market is volatile: in 2008, for example, it lost around two-thirds of its value. Neither does the market offer plain sailing for the smaller companies that choose to list on it. Analysts predict that floating on Aim can cost anywhere between £400,000 and £1m – so for businesses with a projected market capitalisation of less than £25m, it may not be worth considering. 2014 research from accountancy firm UHY Hacker Young found that professional fees paid by companies to brokers and nominated advisers for a placing on aim accounted for 9.5 per cent of all funds raised.

And many of the mining, oil and gas companies (which account for a whopping 40 per cent of the market) that listed on Aim have since gone bust – among them ScotOil, African Minerals and Independent Energy Holdings. Firms involved in exploration for natural resources are among the riskiest of all: if a company digs for oil and there’s none to be found, the money raised for exploration has all but gone down the drain.

But should the government be doing more to serve the needs of smaller companies? Xavier Rolet, chief executive of the London Stock Exchange, certainly thinks so. Compared to the US, there are relatively few UK companies that progress to mid-size (and then on to become multibillion pound corporations like Facebook or Google). And as Rolet recently told the CBI:

“The entire business and financial community is working to nurture and celebrate these firms. But we must continue to challenge the status quo and not become complacent. We need to carry on fostering, through policy and practice, a richer, more diverse entrepreneurial ecosystem, so that the UK’s high-growth firms can take root and flourish.”

Rolet is right. Although floating your company isn’t the only way to grow a business, it needs to remain a workable option: particularly if we are to get the share-owning democracy that so many in the current government crave.

The TEN Interview: Philip Salter chats to Share Radio’s Gavin Oldham

Launching a radio station may not be an obvious choice among most entrepreneurs – but Gavin Oldham isn’t like most entrepreneurs.

As he tells TEN’s Philip Salter, Oldham has recently sold close to 11 million shares in Share plc – the retail stockbroking business he founded a quarter of a century ago – to raise finance for his radio station. He previously founded the Share Centre back in 1991, which provides investment and trading services for c. 250,000 personal investors, company employees and shareholders generally. And in 2005, Oldham established The Share Foundation, which offers a Junior ISA scheme for children and young people in care.

Read the interview in full in Philip’s Forbes column here.

The TEN Interview: Philip Salter talks visas with Migreat’s Josephine Goube

For his most recent Forbes Column, our director caught up with Josephine Goube, director of partnerships at Migreat.com and author of Open Borders to Entrepreneurs & Innovators.

First, she explains the origins of the entrepreneur visa. She then discusses how the progressive rigidity of immigration systems across the globe has made it so difficult for entrepreneurs to qualify for and receive a visa to start a new venture – particularly in Europe. And finally, where to buy ativan online in canada Goube details which countries have the best policies in place for foreign entrepreneurs – and why.

Read the fascinating interview in full here.

20 government initiatives every entrepreneur should know about

Through our work on the next Parliamentary Snapshot, we’ve come up with 20 government initiatives to ask MPs whether they support. This list also doubles up as a useful summary of government initiatives for entrepreneurs. It’s neither ranked nor exhaustive (such a list would number in the hundreds), but it should nevertheless be useful.

• Start Up Loans
• Seed Enterprise Investment Scheme (SEIS)
• Enterprise Investment Scheme (EIS)
• Venture Capital Trusts
• Patent Box
• Entrepreneurs’ Relief
• Tech City UK
• Business Growth Service (which now incorporates GrowthAccelerator)
• Angel CoFund
• British Business Bank
• Catapult Centres
• Regional Growth Fund (RGF)
• Business Rate Relief
• Enterprise Zones
• Employment Allowance
• Annual Investment Allowance (AIA)
• Research and Development (R&D) Relief
• Northern Powerhouse
• New Enterprise Allowance
• Innovate UK

What Labour’s Manifesto means for entrepreneurs

Manifestos are like buses: slow and rather dull. Labour’s Manifesto, which was launched today, proved no different.

If you’re a dyed-in-the-wool Labour supporter you’ll be content enough with the content. While if you’re political predilections swing the other way, the Manifesto won’t be enough to persuade you to cancel that one-way ticket to Monaco on 8 May.

In truth, most entrepreneurs are too busy running their business to worry about Westminster’s machinations. But there is no denying that the outcome of next month’s election will have an impact on the state of entrepreneurialism in the UK.

To save you the bother of reading the eighty odd pages, following are the key Manifesto promises that could impact entrepreneurs.

Corporation Tax

Labour has committed to keep corporation tax low:

“With Labour, Britain will continue to have the most competitive rate of Corporation Tax in the G7.”

But they’ll reverse the Coalition’s cut, reinstating the 21% rate:

“Instead of cutting Corporation Tax again for the largest firms, we will cut, and then freeze business rates for over 1.5 million smaller business properties.”

Putting the 20% versus 21% debate to one side, the answer to the business rates debacle is a swift revaluation, rather than a freeze. This may not be the popular move, but it’s the economically literate one.

High-Speed Broadband

It’s amazing how quickly technological miracles become the source of rage. For those of us who grew up on dial-up internet, today’s internet speeds are the first, second and third wonder of the modern world. Yet the moment our connection drops – if only for a second – we turn from Dr Jekyll into Mr Hyde. My heart goes out to those living out in the sticks with a tardy connection and Labour is promising to fix this:

“Labour will ensure that all parts of the country benefit from affordable, high speed broadband by the end of the Parliament. We will work with the industry and the regulator to maximise private sector investment and deliver the mobile infrastructure needed to extend coverage and reduce ‘not spots’, including in areas of market failure. And we will support community-based campaigns to reduce the proportion of citizens unable to use the internet and help those who need it to get the skills to make the most of digital technology.”

But though it’s a noble aim (and one close to my heart), the evidence suggests that this might not be the best use of public funds. The What Works Centre for Economic Growth recently reviewed the literature, and it seems to conclude that there isn’t a great deal of evidence to support ploughing millions into this policy.

Small Business Administration

Labour has taken inspiration from the US in its plan to set up a Small Business Administration:

“Small businesses are the backbone of our economy. Their creativity and dynamism are vital for raising productivity and competing in the global economy. Labour will give them a voice at the heart of government – a Small Business Administration, which will ensure procurement contracts are accessible and regulations are designed with small firms in mind.”

Ensuring government procurement is opened up to small businesses and regulations are proportionate is vital, and a Small Business Administration could prove useful to those ends. Or it might not.

Banking Reforms

Labour’s Manifesto contains plans for banking reforms:

“We will develop a banking system that works for businesses in every region and every sector in Britain. The long-standing problems of our banking system mean that too many small and medium-sized businesses cannot get the finance they need to invest and grow.

Labour will establish a British Investment Bank with the mission to help businesses grow and to create wealth and jobs. It will have the resources to improve access to finance for small and medium-sized businesses, and will support a network of regional banks.

We will increase competition on the high street. Following the Competition and Market Authorities inquiry we want a market share test and at least two new challenger banks. And we will deal with the scourge of household debt by introducing a new levy on payday lenders, using the funds raised to boost low-cost alternatives like credit unions.”

Over the years, banks have been quasi-nationalised through mounting regulation (and since the Financial Crisis fully nationalised in a number of instances). The British Investment Bank is the next natural step in this process. Whether you think this is a good thing will depend on the degree to which you think the blame for the Financial Crisis lies with banks versus regulators. Perhaps more interestingly, we are seeing the rise and rise of crowdfunding, which is relatively unregulated and may prove to be the remedy to the problem that Labour is seeking to solve.

National Minimum Wage

Labour will raise the minimum wage:

“Too many people do a hard day’s work but remain dependent on benefits. We will raise the National Minimum Wage to more than £8 an hour by October 2019, bringing it closer to average earnings. We will give local authorities a role in strengthening enforcement against those paying less than the legal amount.

And we will support employers to pay more by using government procurement to promote the Living Wage, alongside wider social impact considerations. Our Make Work Pay contracts will give tax rebates to businesses who sign up to paying the Living Wage in the first year of a Labour Government. Publicly listed companies will be required to report on whether or not they pay the Living Wage.”

It’s difficult to argue with the sentiment behind raising the minimum wage, but good policies aren’t made on sentiment alone. When instituting the national minimum wage, the previous Labour Government set up the Low Pay Commission – an independent body that advises the government on what rate to set it at. The very existence of this Commission is a tacit acceptance that raising the minimum wage comes at a cost. More often than not this cost is articulated as a cost to employers (which it is), but it’s also a cost to wannabe employees who cannot command the minimum wage and are therefore unemployable. Politicising the setting of the minimum wage is a mistake (Labour aren’t alone in this). The experts at the Low Pay Commission should be left to do their job.

There are lots of policy areas not covered in the Manifesto but I suppose we should be grateful that it’s not War and Peace. In any case, the odds are that the next Government will be a Frankensteinian coalition, in which Manifestos have been torn up and replaced with an agreement decided behind closed doors. And whether you think that is a good thing will depend on you faith in democracy versus politicians.

Why we should welcome those who can make our country greater

For many firms in my constituency, a flexible immigration policy is the litmus test for the proposition that the UK is ‘open for business’.

It was therefore only a matter of months into the coalition’s five year term before the wisdom of its immigration cap came into question. No one doubted the popular appeal of this sound-bite policy. But was it possible to reduce net annual migration to the ‘tens of thousands’ without causing economic harm?

The public commitment to this policy goal has always disguised tensions over it within the coalition government. The Treasury and Business Department understand that the free flow of talented professionals, entrepreneurs and students to the UK is vital to delivering economic growth. But the Home Office has always pushed back against attempts to loosen the rules, confident in its strong mandate from the public.

It goes without saying that immigration reform of some kind was needed. The Home Secretary has made great strides in cracking down on bogus colleges, sham marriages, health tourists and the like. The government is also making progress in addressing the ‘pull’ factors that make Britain appeal to benefits tourists – thought not fast enough for some.

However as February’s migration figures demonstrated, the coalition’s cap has been undeliverable – net migration has risen by 42% to 298 000 in the past year alone. This was always going to be the case for so long as we had virtually unrestricted movement of EU citizens. What is a mark of this nation’s success – the economic growth that is attracting young workers from across the continent – has become a badge of this government’s failure.

What is worse, however, is the consensus from businesses and higher education providers that the cap has caused damage to the UK economy and Britain’s image abroad. I represent a central London seat that contains many of the country’s top businesses and three of its best universities. For several years now they have highlighted to me the hurdles and hoops placed in their way of bringing into the UK, or retaining, highly talented individuals whether students, post-graduate researchers or leading academics.

They cannot understand why this government has led a clampdown on precisely the type of migrant that we want to attract – the skilled student, entrepreneur or worker from natural growth markets such as China and India, or the English-speaking professional from allies such as Australia, the US and Canada. Indeed they fear we are training and educating some of the world’s brightest international students, and then discouraging them from staying here to benefit existing businesses or to set up their own enterprise.

It is a cliché that a reputation takes years to build but can be lost in an instant. However, the UK has risked losing its hard-won standing as a country that welcomes trade, investment and talent from around the world as a result of the cap.

It is for that reason I set up Conservatives for Managed Migration in March last year, a group that hopes to promote a calm, reasoned debate about immigration both within and beyond the Conservative Party. As we approach the General Election on 7 May, we have been calling on the Party to drop the idea of an undeliverable cap of numbers.

However if the Party insists on keeping this type of target-based policy in place, we have been calling for students to be removed from the net migration figure. We should also like to see a partial reinstatement of the Post-Study Work Visa, focusing on specific subjects to address skills gaps. This visa’s removal in 2012 has had a detrimental impact on the graduate jobs market, driving many of the most talented students back to their home countries when they are ready to join the workforce. It had previously enabled graduates to seek employment without having a sponsor, but now students who wish to stay in the UK after their course have to prove they have a job offer from a government-approved sponsor employer. Alternatively they can apply for independent status such as tier-one entrepreneur, but that requires a minimum £50,000 investment (something we might perhaps look to lower for talented graduates who wish to stay and develop business ideas).

To encourage English-speaking professionals, such as Kiwi accountants or American lawyers, we should like to see a Professional Mobility Programme as part of the current Tier 2 entry arrangements. Beyond that, we are really encouraging the Home Office to find a way of dealing quickly and efficiently with applications. I receive a steady stream of complaints about the Border Agency from business constituents and I believe many of the concerns about our immigration system could be addressed if we simply got to grips with the processing system.

Thankfully the government is alive to many of the concerns we have raised. Last month, for instance, HQ-UK was launched, an unashamed bid to get US tech companies to base their European headquarters in London. The government programme includes a so-called ‘concierge service’ that speeds up visa applications and gives priority border control at airports. We also have the Sirius programme from UKTI which is aimed at international graduates who want to start and grow a business in the UK.  This pioneering scheme invites talented young entrepreneurs with world-class start-up ideas to get their business off the ground in the UK, helping boost Britain’s enterprise community, creating jobs and inviting foreign investment.

Immigration will not go away as an election issue over the next 51 days. So it is up to all of us here to keep steadfastly and patiently making the case that the UK’s economic future depends on our taking the right approach towards those who wish to work, study and contribute here. Flexibility in a country’s immigration system is now part and parcel of being an engaged member of the global economy. International businesses and business people, not to mention academics, expect to be able to move with relative ease between open and dynamic global cities, just as many mobile Britons would anticipate being able to work in Hong Kong, New York, Shanghai or Mumbai for a spell. Similarly, students who come here when they are young become ambassadors for the UK for the rest of their lives.

These are precious advantages we should not throw away. Simply put, those countries which restrict the flow of talent risk economic isolation in an age of globalisation.

Mark Field is MP for the Cities of London and Westminster and Founder of Conservatives for Managed Migration. This article is based on a speech delivered at a recent Power Lunch.

March Budget 2015: Good news for entrepreneurs?

As TEN director Philip Salter writes in his Forbes column this week, the one thing that stands out from this year’s Budget is the Chancellor’s relentless commitment towards supporting UK entrepreneurs.

What we have, he writes, is a government obsessed with “innovation” and “growth”. The Budget contains details on more incubators, the introduction of an apprenticeship voucher – and, even more positively, the removal of the requirement that 70 per cent of the funds raised through SEIS must have been spent before EIS or Venture Capital Trust funding can be raised.

Octopus Ventures’ George Whitehead told TEN that such measures will “sustain the very strong entrepreneurial environment” that has been built in Britain. Now, the country just has to weather the inevitable political uncertainties in the run up to and after May’s General Election.

Budget reactions

From the moment the Chancellor sat down yesterday, there was a rush for commentators to do what they do best: comment. However, until we employ artificial intelligence for the job, there just isn’t time to read and analyse the 124 page document, the many other relevant documents, as well as reasonably crunch the numbers before the end of the day. In truth, you may want to wait until the Sunday papers for a more detailed reaction.

That said, if you’re keen to get the headline announcements, I’ve written a short article for Forbes here, and following are some other useful reactions outlining how the Budget impacts entrepreneurs:

• The Key Measures for Businesses and Entrepreneurs – Sophie Hobson, London Loves Business
• What the Budget means for SMEs – Anil Stocker, Economia
• Budget reaction from Enterprise Nation – Emma Jones, Enterprise Nation
• Octopus comments on the Budget 2015 ­– Octopus Investments
• Budget 2015 CBI Reaction – John Cridland, CBI
• A “solid and responsible Budget” – IOD
• What the Budget means for Startups – Guy Levin, Coadec
• Companies cautiously welcome cocktail of tax cuts – Lucy Tobin, The Independent
• Government must do more to level the business playing field – Phil Orford, Forum of Private Business
• Innovative firms, tech clusters and exporters receive lion’s share of giveaways – Rebecca Burn-Callander, Telegraph
• 8 ways Budget 2015 affects UK tech startups – Sam Shead, Techworld

Entrepreneurs’ Relief is worth defending

Defenders of Entrepreneurs’ Relief are on the back foot. In the corridors of power, rumblings have been heard that this tax relief is under threat. As entrepreneur Guy Mucklow writes in City A.M.:

“Originally introduced by Labour seven years ago, the Entrepreneurs’ relief lifetime allowance was doubled by the coalition government to £10m in March 2011. However, according to a report by the National Audit Office in November 2014, the cost of the relief has increased to almost £3bn. Subsequent political scrutiny could put its future in jeopardy.”

Entrepreneurs’ Relief offers business owners a lifetime allowance of £10m of gain taxed at the reduced rate of 10% for individual shareholdings of over 5%. Since its introduction in 2008 – when it replaced Taper Relief – the allowance has been raised to £2m, 5m, and finally its current level of £10m.

Its success may well contribute to its downfall. The £3bn has been “lost” because entrepreneurship is flourishing in the UK – partly because successive government have realised how vital entrepreneurs are and therefore offered people tax incentives to take the leap. If the idea is to encourage entrepreneurs, it is short-sighted to bemoan the loss of tax revenue (an inevitable by-product of the policy’s success).

In our Manifesto, Tim Hames of the BVCA argued forcefully that we should be extending Entrepreneurs’ Relief:

“If the Government were to discard the 5% requirement, lure business angels yet further into the start-up scene and eliminate the current cap altogether, it would revolutionise the tax treatment of entrepreneurs in Britain. The howls of anguish from the likes of Berlin, Dublin and Luxembourg would be audible in the Treasury.”

Getting rid of the 5% equity requirement should be prioritised in any move pushing for its extension. It may be pushing entrepreneurs to exit their companies or not take on extra funding in case they get diluted below the 5% threshold. Labour may be amenable. Its March 2013 Small Business Taskforce report stated:

“Extend entrepreneurs’ relief beyond capital gains to dividends, in order to remove the incentive for entrepreneurs to dispose of their businesses rather than grow them. Reduce the 5% threshold for entrepreneurs’ relief to 1% or below to allow more employees to benefit from investing in the high growth companies they work for.”

In contrast, the Liberal Democrats’ 2013 autumn conference, a policy paper entitled Fairer Taxes, Policies for the Reform of Taxation was endorsed by the party. It included the following statement:

“We wish to focus Entrepreneurs’ Relief to better serve the purpose for which it is intended; incentivising entrepreneurs and start-up business owners, and prevent it from simply being used as a way for wealthy investors to reduce their tax bills. We would therefore increase the shareholding requirement to 25%.”

Extending it to 25% would definitely incentivise entrepreneurs to exit their companies early. There is no earthly reason why it should be raised from 5% and every reason why is should be cut. Britain is backing entrepreneurs – now isn’t the time to take the foot off the pedal.

The TEN Interview: How Nutmeg’s Nick Hungerford spiced up the investment management industry

Nutmeg is an online discretionary investment manager that builds and manages portfolios for all levels of wealth (the minimum investment is £1,000).

Within each portfolio, clients get a mix of up to ten asset classes, ranging from private equity to gold. Nutmeg’s founder is Nick Hungerford, a former Stanford MBA student who grew up wanting to be a teacher. He talks to TEN’s director Philip Salter about the ways in which the financial services landscape will change in the next few years – and how he is continuing to attract clients.

Read the full Forbes interview here.

One way to narrow the North-South divide

We all know there’s a North-South divide, but from a policymakers perspective it’s not clear what – if anything – we should be doing about it.

To a significant degree, the relative economic success of London and the South East is due to factors beyond the powers of politicians to rebalance (without simply dragging the country’s capital down). The decline of manufacturing, the rise of London and Cambridge as tech hubs, and the cultural pull of the metropolis cannot be overturned – no matter how much money the government throws at it.

But even though we can’t turn the country upside-down, given that most of us would prefer wealth and opportunity to be a little more evenly distributed, we should try to identify instances where we are prejudicing the South at the expense of the North. Here, one thing stands out above all others: the decision to postpone the revaluation of business rates.

As Simon Danczuk MP wrote a few years ago in the Guardian: “The problem is in my constituency – and no doubt many others – some commercial property values have fallen by up to 40 per cent since 2008.” For Danczuk’s Rochdale constituency, the FT reported that “a study by Liverpool can you buy ativan online university showed that if business rates were set using up-to-date property values, shops in Rochdale would experience a 65 per cent fall in rates bills.” In contrast, London shops would see a 52 per cent increase.

These costs weigh heavily on the North. Of the top 10 town centres with the greatest percentage of empty shops, seven are in the North East or North West. The Daily Mail reported last year that the North West is suffering from 16.9 per cent empty shop space, versus London’s 7.9 per cent. In Hartlepool, County Durham, 27.3 per cent of stores in the town are up for rent.

Demanding regular revaluations shouldn’t be confused with a call to cut business rates. As has been argued forcefully on this blog, business rates are about the least worst form of taxation: “Repeated taxes on property, that is business rates, have the lowest deadweight costs of any form of tax. The only one that could be better is a proper land value tax.” Nevertheless, landlords and the entrepreneurs that want to use the abandoned spaces deserve rates that reflect the value of the land – the first step of a Northern regeneration should be a revaluation.

The TEN Interview: Philip Salter talks to Enterprise Nation’s Emma Jones

Our director Philip Salter chats to Enterprise Nation founder Emma Jones MBE about what UK small businesses want from the General Election.

Enterprise Nation was founded in 2005 to create an inspirational environment for business owners and would-be entrepreneurs, a supportive community, informational books and events, and a campaigning voice to help small businesses in the UK flourish.

Read the full interview in Philip Salter’s Forbes column here.

Green Belts increase business rents too

If you’ve picked up a newspaper or turned on a radio or TV today then the chances are you’ve read or heard about the Adam Smith Institute’s latest research paper – The Green Noose: An analysis of Green Belts and proposals for reform.

A section of the paper considers the impact of Green Belts upon businesses. As author Tom Papworth explains, increasing the cost of business premises increases the costs of running businesses, which pushes up prices. This reduces the real disposable incomes of households, while putting UK businesses at a competitive disadvantage by shifting production overseas.

A few years ago, I interviewed the inventor of the iconic Brompton bicycle. While visiting their factory in Wandsworth a couple of television crews from the BBC and ITV turned up to record the conveyor belts and workers in action. It turned out this was a common occurrence, principally because it’s the only manufacturing taking place on that scale in London (and the television crews didn’t want to travel any further). According to Papworth, London’s Green Belt could be the reason Brompton is that last factory standing:

“Evans and Hartwich suggest that land-intensive industries, such as manufacturing, have declined rapidly, because many have fled the country to locate themselves in a country with lower land prices. If correct, this would be a major challenge to the conventional view that deindustrialisation was the result of supply-side reforms and monetarist policies in the 1980s, instead suggesting that our land use planning laws bore a substantial amount of responsibility for the decline of UK manufacturing in the past half century.”

This makes sense. LSE Geography Professor Henry Overman cites some concerning research in an useful blog looking at the case for building on Green Belts:

“Green Belts increase office rents. Cheshire and Hilber (2008) carefully document how planning restrictions in England impose a ‘tax’ on office developments that varies from around 250 per cent (of development costs) in Birmingham, to 400-800 per cent in London. In contrast, New York imposes a ‘tax’ of around 0-50 per cent, Amsterdam around 200 per cent and central Paris around 300 per cent.”

If enacted, the paper’s suggested reforms would provide affordable housing to Generation Rent, more competitive business rents, and the possibility for more manufacturing entrepreneurs to run their businesses out of this country. What’s not to like?

One reason why we get bad policies

If the What Works Centre for Local Economic Growth didn’t exist someone would have to invent it. It analyses policies to see which are the most effective in supporting and increasing local economic growth. Although its focus is local, most of its findings have national implications.

So far, the centre has looked at a number of policy areas. A theme cutting across all of its findings is that to a large extent we don’t really know what works. Too often, the evidence is inconclusive or lacking.

On access to finance:

• We found very few studies that look at the impact of schemes on both access to finance (direct effect of the scheme) and on the subsequent performance of firms (indirect effects of the scheme).
• While most programmes appear to improve access to finance, there is much weaker evidence that this leads to improved firm performance. This makes it much harder to assess whether access to finance interventions really improve the wider economic outcomes (e.g. productivity, employment) that policymakers care about.
• As with other reviews, we found very few studies that gathered (or had access to) information on scheme costs. As a result, we have very little evidence on the value for money of different interventions.

On business advice:

• There is insufficient evidence to establish the effectiveness of sector specific programmes compared to more general programmes.
• We found no high quality impact evaluations that explicitly look at the outcomes for female-headed or BME businesses.
• We found two high-quality evaluations of programmes aimed at incubating www.ativan777.com start-ups. Both programmes were targeted at unemployed people and show mixed results overall. However, there is a lack of impact evaluation for Dragons’ Den-type accelerator programmes that aim to launch high-growth businesses and involve competitive entry.

On employment training:

• We have found little evidence which provides robust, consistent insight into the relative value for money of different approaches. Most assessments of ‘cost per outcome’ fail to provide a control group for comparison.
• We found no evidence that would suggest local delivery is more or less effective than national delivery.

As the above suggests, on key areas of government policy we lack evidence of what works, particularly when it comes to determining value for money. Given the billions spent on various schemes this simply isn’t good enough.

The way to move forward from this is to work backwards, ensuring that a robust framework of analysis is build into each and every government programme so that we can know how successful (or otherwise) each intervention is. Crucially this should be done in a way that lets it be compared by the same metrics also being measured in other schemes trying to achieve similar outcomes.

Residing in the economic departments of our universities are the brains to do exactly this – to date though, policymakers have lacked the gumption to systematically experiment, measure and evaluate what works. Until they do we will just keep getting ad hoc policies with enough Rumsfeldian known unknowns to make an economist cry.

The TEN Interview: Philip Salter speaks to YPlan’s Rytis Vitkauskas

YPlan, co-founded by Rytis Vitkauskas and Viktoras Jucikas, is the perfect business for the FOMO generation.

The app helps users decide what to do that night, by matching them to tickets for a selection of West End shows, music where to buy ativan online gigs, food tastings and gallery exhibitions. Almost 90 per cent of YPlan’s sales are made within 48 hours of an event starting.

You can read the full interview in our director’s Forbes column here.

Government loans for master’s students is a risky business

The chancellor announced a student loan system for postgraduate master’s degrees in the Autumn Statement. Although many have praised the move, it risks doing more harm than good.

There are the obvious unintended consequence of encouraging students to undertake courses that aren’t in their (or taxpayers’) best interest, but here I’ll focus on risks to the nascent funding market for postgraduate loans.

It’s certainly a popular policy. As the FT reports: “Universities, unions and business groups have reached rare agreement in welcoming new £10,000 loans intended to ‘revolutionise’ the support available for students taking postgraduate degrees.” But the devil will be in the detail. Just consider the Student Loans Company, which MPs recently requested face an inquiry following the ‘persistent miscalculation’ of money paid out in loans that will not be repaid. But more important than the wasted money, the government’s intervention in the postgraduate student loan market risks crowding out private sector solutions.

The failure of the Professional and Career Development Loans (PCDL), which are already subsidised by the government through the Skills Funding Agency, is principally due to banks being ill-suited to lending to students (and one the main reasons for this is because of excessive banking regulation). The analogy with SME business lending is the right one – students, buy ativan usa like SMEs, are risky and banks are no longer best placed to lend to them.

Smaller and leaner companies can fill the gap where banks fear to tread. As we have seen with Santander’s partnership with Funding Circle in SME finance, the banks know that nimble companies have the skills to plug gaps in the market. In fact, entrepreneurial companies like Future Finance, StudentFunder and Prodigy Finance are already responding to the demand for loans for postgraduate studies.

Whether the bulk of the money comes from peer-to-peer (P2P) investors, alumni or universities themselves, the plurality of the private sector would trump the one-size-fits all approach that the government could take. We are on the verge of the equivalent of the funding revolution we are seeing in SME finance but this intervention risks stymieing it.

All is not lost. The government will consult on how to put the policy into practice and here they have the opportunity to do less harm than copying the PCDL model. As with SME finance, the government could funnel the loans through providers already in the marketplace. And, most importantly, government needs an exit strategy so that we don’t see mission creep and the destruction of a private sector solution.

Why Randomised Controlled Trials are vital for policymaking

In this week’s Forbes column, I analyse the findings of a new report from the RSA which aims to use behavioural insights as the basis for recommendations to boost recruitment and growth for the UK’s self employed.

Introducing RCTs for business support schemes isn’t new. In fact, the recent Growth Vouchers programme randomly assigns £2,000 to help finance strategic business advice.

Read my analysis of the report – and why RCTs are so important for policymakers weighing up the cost and benefits of competing schemes – here.