Management Matters

The following is an edited version of a speech I gave at the launch of our new report Management Matters in the House of Commons on Wednesday 23rd January. To read the report, click here.

Thanks to everyone for coming. Thanks in particular to Dr Lisa Cameron MP for hosting us, to Rob May and everyone at the Association for Business Executives for helping making this possible, and for the Minister for Small Business for a great speech.

Now, before we jump into the key findings and recommendations of the report, I think it’s worth thinking about why we should and shouldn’t care about business failure.

We shouldn’t want to save every business. Creative Destruction is key to economic progress. Shielding firms from competition traps labour and capital in unproductive firms limiting the ability of new entrepreneurs to create wealth and raise living standards.

There’s interesting paradox too. Failure rates are highest in the best places to start a business. It shouldn’t really be a surprise. In places like London or Silicon Valley, investors are willing to take risks and back companies that have a high chance of failure (provided the pay-off from success is good enough).

It’s also true that we shouldn’t write-off entrepreneurs who fail. There are many great businesses founded by entrepreneurs whose first venture failed.

Still that doesn’t mean failure is good or something to be celebrated. As Paypal founder Peter Thiel once said “Failure is massively overrated”.

It can sap ambition and while it is a learning experience, it’s highly possible you might not learn the right lesson. Businesses rarely fail for a single reason.

That’s why we’re campaigning to prevent unnecessary business failure. While some business ideas are simply bad, there are many cases where an entrepreneur isn’t equipped with the right experience and training to take a good idea further.

It’s the idea behind many of our reality TV guilty pleasures from Ramsay’s Kitchen Nightmares to Troubleshooter.

The report we’re launching today takes that idea and looks at the hard evidence on management.

First, good management isn’t some fluffy vague concept. It’s something that we can measure and something that explains why some businesses are more productive than others.

The World Management Survey finds whether or not firms consistently monitor and improve their processes, set and revise targets, and incentivise employees through merit-based hiring, firing and promotion procedures explains almost a third of the differences in productivity between and within countries.

Furthermore, one study finds that innovations in management like Taylor’s Scientific Management and Six Sigma Manufacturing have as big an impact on economic growth as the technological innovations we rightly celebrate.

Second, the UK is behind when it comes to management. German, Japanese, and American firms score higher on the World Management Survey.

Screenshot 2019-01-25 at 13.23.07.png

The problem isn’t with Rolls Royce, GSK or, I originally put Dyson here but perhaps I need a better example given current news. It’s our long-tail of underperforming SMEs.

Screenshot 2019-01-25 at 13.28.17.png

Third, not enough British firms are engaging with adult education and management and leadership training.

We’re behind 17 OECD nations when it comes to business owners engaging with adult education. While under a third of SMEs offer training for their managers.

That’s despite the fact that management and business training programmes like Goldman Sachs’ 10,000 Small Businesses have delivered impressive results boosting revenue growth and productivity.

So what should we do?

First, we need to know what works. The Government should sponsor randomised controlled trials of the most promising interventions. They should consider setting up a What Works Centre for management capability.

Second, We should remove the barriers preventing people from funding their own training. Employer-funded work-related training is tax-deductible, but if a self-employed graphic designer wanted to expand her skill set by taking a digital marketing course, she wouldn’t benefit from a similar tax break. She should. And in 21 out of 30 OECD countries she would.

Third, we need to reform the apprenticeship levy to give levy payers more freedom to use their funds to support the management capability of firms in their supply chain. There are management apprenticeships available but there needs to be more flexibility to allow levy funds to be spent on cheaper or shorter courses.

Finally, entrepreneurs are most likely to trust information from other entrepreneurs. Evidence from China found that when business owners in different industries were required to meet up and share their experiences they adopted better management practices. In the long-run, creating an environment where organically grown peer-to-peer networks can flourish could be key to upgrading our management capability.

Most entrepreneurs will never get visited by a TV crew and a celebrity troubleshooter, but enabling them to get the management training they need might be the next best thing.

Is Silicon Valley merely “reinventing the wheel”?

In the Guardian, Amelia Tait asks “Why do we keep praising Silicon Valley for reinventing the wheel?” This was sparked by a recent New York Times profile on Lambda School, a coding school that doesn’t charge tuition fees upfront and instead charges graduates proportionally based on their salary. Tait’s objection can be summarised as: “That’s the English tuition fee system. You’ve invented the English tuition fee system.” She’s not the only one to make this observation.

Lambda School isn’t her only example. She also objects to Lyft Shuttle: “For a small fee, passengers share a single car that follows a predesignated route — instead of being picked up and dropped off at their chosen location, they must walk to or from one of the determined stops. It’s convenient! It’s affordable! It’s a bus.”

Her objection to Lyft is stronger. It’s not just unoriginal, it’s also classist (“online, people have praised Lyft Shuttle for allowing them to get around without sitting next to common riff-raff”), and it hurts poorer people by undermining investment in public transport.

Somewhat ironically, Tait’s article about how Silicon Valley is reheating old ideas is itself not particularly original. It’s a common complaint on Twitter.

Back in 2017, Gizmodo posted a list of “Silicon Valley’s Dumbest ‘Inventions”. Lyft’s ‘bus’ featured, as did bizarrely Uber Elevate (which was dismissed as just helicopters).

So is Silicon Valley just reinventing the wheel? I don’t think so.

I think the ‘That’s X. You’ve invented X’ crowd make two big mistakes.

First, taking ideas that work relatively well but have some shortcomings and using technology, or even better incentive structures, to correct those shortcomings is a fundamentally good thing. Uber is a good example. It’s very easy to dismiss the idea as “Taxis. You’ve invented taxis”. But, Uber uses technology to solve a number of problems with the existing minicab and taxi markets. Take surge pricing, it solves a problem known by economists as ‘the Wild Goose Chase’. When demand spikes, it means there aren’t enough idle drivers and cars must be sent on trips to pick up distant customers. The longer drivers have to spend picking up customers, the less they earn. As a result some drivers choose to stay at home making the problem even worse. Surge pricing solves that problem by bringing more drivers online at periods of high demand.

Lyft Shuttle is innovative for similar reasons. Buses in San Francisco are overcrowded on commuter routes at peak time but it’d be expensive to buy new buses and hire new drivers just to meet demand at peak times. Lyft Shuttle doesn’t require drivers to purchase new vehicles. As a result they can meet demand at peak times without purchasing assets that would sit idle 95% of the time. And as Byrne Hobart points out in an article that touches on similar themes Lyft Shuttle is almost certainly safer than riding the bus in San Francisco.

Second, they ignore the importance of funding. Public services, while in many cases necessary, face a number of unique problems. Their funding is set through a political process. As a result, they lack the same pressure to find savings and efficiencies than businesses. Arguably, a bigger problem is that they’re constrained from taking risks. In the private sector, firms who find new markets or launch radically different services are rewarded with profits for their entrepreneurial initiative. There’s no corresponding reward for innovation and risk-taking in the public sector.

Lambda School is a good example. The comparison between Lambda’s income share agreements and the UK’s system of contingent student loans isn’t far-fetched. They’re based on relatively similar principles — the idea that human capital investments should be funded through equity not debt because the investment is risky and lenders can’t claw back the investment if a student defaults on their loan.

But there are big differences too. The UK’s universities get paid the same whether or not the student gets a good job at the end. Well-run universities who produce highly employable graduates effectively subsidise underperforming universities who produce graduates incapable of paying back their loans. But even with this cross-subsidy, the system still requires significant taxpayer subsidy with 83% of graduates forecast to have some debt written off. Worse still, universities in the UK are incentivised to expand courses that don’t cost much to run, even if they don’t expect the loan to be repaid.

Lambda School is different. If Lambda School graduates don’t get well-paying jobs then Lambda School doesn’t get paid. There’s no cross-subsidy between institutions or government guarantee to rely on. As a result Lambda School’s incentives are closely aligned with its students. They are forced to only offer courses that promise a real return on investment for students.

Why then do journalists frequently attack the efforts and inventions of entrepreneurs as unoriginal? It might simply be the case they fail to see why an idea is innovative and useful. Possibly, but I think there’s something else at play. There’s been a shift in cultural power from the media and politics to business and tech. If Silicon Valley isn’t actually as innovative as they claim to be, then pointing this out is a way of reclaiming some of that lost status.

I suspect this is the real motivation when people jump to criticise Silicon Valley’s ‘inventions’.

A Hard Place

"If I was told I would be stewing grass to feed my family in five years time if we left the EU, I would still do it." Thus spoke Simon Heffer in the pro-Brexit film: Brexit the Movie.

Luckily for Heffer's children (and us), it won't come to that. No matter how bad things get, comparisons with wars and depressions are overblown. That doesn't mean entrepreneurs should be blasé about a no-deal Brexit though – quite the opposite.

No-deal will mean tariffs, as the UK would be treated like any other third-party country. Even those backing a no-deal Brexit acknowledge there will be some negative economic impacts. After all, it's hard to rebut the world's leading economists, who all agree that tariffs are harmful (see herehere & here).

When it comes to trade, the EU is particularly important to us because it's on our doorstep. The gravity model of international trade – which is that that bilateral trade between two countries is proportional to size, measured by GDP, and inversely proportional to the geographic distance between them (in plain English, we tend to trade with people that are physically close to us) – shows why putting barriers between you and your closest neighbour is a bad thing.

You don't need to be an economist to get this though. Just check out the advice the Department of Business, Energy and Industrial Strategy (BEIS) has asked me to share with you. (This isn't 'project fear', it's 'project stuff you really need to know if you trade with or in the EU'). Business Element is part of its EU Exit Public Information Campaign and it's not light bedtime reading:

Some or all of this might not impact your business directly. But few of us are immune from the fallout of a no-deal scenario. Businesses in your supply chain doing slightly worse will be bad for your business. Some might think there's a niche reason that their business will benefit, and they might be right. An export-focused company that sells only to non-EU countries may well benefit from the recent fall in the pound. These are the exception; not the rule.

According to betting markets, a no-deal Brexit is still not likely, but well worth businesses scenario planning for. Whatever happens, we won't be eating grass. But that's hardly a ringing endorsement.

Uncanny Valley?
Our Research Director Sam Dumitriu analyses the growing tension between journalists and Silicon Valley in his latest Medium article. He sides with the entrepreneurs: "Why then do journalists frequently attack the efforts and inventions of entrepreneurs as unoriginal? It might simply be the case they fail to see why an idea is innovative and useful. Possibly, but I think there’s something else at play. There’s been a shift in cultural power from the media and politics to business and tech. If Silicon Valley isn’t actually as innovative as they claim to be, then pointing this out is a way of reclaiming some of that lost status."

Post Brexit
From Monday,EU citizens will be able to apply for status under the EU Settlement Scheme.However, you'll need an Android phone or tablet if you want to scan your identity document – otherwise you'll have to send it by post. It's all veryLean Startup. Hopefully the minimum viable product is a little more viablethan was during its trial.

News and Views
 

Why high street planning policies need reform

On the impact of the EIS seven-year rule

How thousands of foreign students – including entrepreneurs – were failed by the Home Office (£ FT)

Our research on the equity funding gap is cited in Boss magazine

Working into your 70s or 80s needn't be a bad thing

In the US there is a big debate about raising top tax rates to 70% – here's what the experts think... and Bloomberg View has a debate on it

Tech whizz Birdie aiming to revolutionise care for the elderly

The Indian entrepreneur who brought the curry house to Britain

David Warsh on David Autor on Automation

App connected salt-dispensers!  (£ FT)

new study on the effect of digital technology use and adolescent well-being finds the association “between digital technology use and adolescent well-being is negative but small, explaining at most 0.4% of the variation in well-being. Taking the broader context of the data into account suggests that these effects are too small to warrant policy change”

File under important: Declining labor force growth explains declining dynamism in US

Vanguard founder Jack Bogle has died – he made millions of Americans richer by offering them a free lunch

Tyler Cowen debates Joshua Kim, Agnes Callard, and Eli Dourado on the ethics of economic growth

Read the whole e-bulletin here, and sign up here.

A New Medium

The Entrepreneurs Network has joined Medium. We'll be using it regularly to write about the policies affecting entrepreneurs and how to make them work better.  Here are our first two posts.

Here's our Research Director Sam Dumitriu on why entrepreneurs need planning reform:

"Though a third of young people want to start a business, there are massive barriers to risk-taking activity. Quitting your job to found a company will always be a big step, but it’s an even bigger step when you live from paycheck to paycheck spending up to half your post-tax income on rent. (And that’s before you’ve even looked at the cost of office space.)"
Keep reading.

And here are my thoughts on how to fix the UK’s visa system:

"Rolling the Entrepreneur Visa into the Start-Up Visa would cut out unsuitable applications and unwieldy bureaucracy. Immigrant entrepreneurs will then gain endorsement from government-approved third parties — whether accelerators, venture capital firms or other respected organisations. These sorts of organisations would be regulated by the Home Office to avoid fraud, but they will have skin in the game and the expertise and incentives to evaluate entrepreneurs’ potential. They will also invest in marketing the scheme abroad so people better understand our visa regime."
Read the rest of it here.
 

News and Views
 

The UK needs a bold strategy to survive Brexit, according to the Harvard Business Review

London has retained its spot at the top of the tech charts for another year, securing almost double the amount of investment in 2018 than its closest European competitor

The Cabinet Office fails to meet its own late payment targets despite private sector crackdown, while MPs back calls to fine firms for late payments to suppliers

Gove argues that the 'fourth agricultural revolution' can help slash environmental impacts, and praises a new generation of entrepreneurs in the food industry

Automation expert David Autor’s lecture on “Work of the past, Work of the Future”

Why is the US economy becoming less dynamic? It’s down to demographics

Science historian George Dyson’s New Year’s Essay for Edge

Silicon Valley is backing a novel idea: Instead of charging students tuition, students go to school for free and are required to pay back a percentage of their income after graduation, but only if they get a job with a good salary (Sound similar to the UK system? Remember this is a private company with no government guarantees or subsidy)... And they’re coming to the UK

Understanding the enterprise ecosystem can increase the number of women-owned businesses

The British entrepreneur helping solve Germany's migrant language problem

Bosses matter: The effects of managers on workers’ performance

Read the whole email here, and sign up for the e-bulletin here.

Why Britain’s entrepreneurs need planning reform

It is easy to see the immediate consequences of Britain’s inability to build enough homes, offices, or infrastructure. Rents are too steep, retailers are closing, and the high cost of office space is preventing firms from expanding.

But look deeper and the situation is even worse. High rents are sapping dynamism from the UK economy. Though a third of young people want to start a business, there are massive barriers to risk-taking activity. Quitting your job to found a company will always be a big step, but it’s an even bigger step when you live from paycheck to paycheck spending up to half your post-tax income on rent. (And that’s before you’ve even looked at the cost of office space.)

Productivity is unevenly distributed throughout the UK. Cities in the South East are 44% more productive than they are in the rest of the country, but workers still don’t move to them because they typically barely earn more once rent is taken into account. No wonder almost every entrepreneur we talk to brings up talent shortages.

Workers in cities become more productive due to the benefits of agglomeration. Firms move to large cities knowing that they have a large skilled workforce to choose from, and workers move to cities knowing large employers will be there too. By creating larger markets cities allow for greater specialisation and workers end up matched to the jobs they are best suited to.

The sheer scale of untapped potential is staggering. One study analysed 220 US metropolitan areas from 1964–2009 and found that if restrictions on new housing supply cut aggregate US economic growth by more than 50 per cent between 1964 and 2009. As John Myers of the Yimby Alliance points out the situation is likely much worse in Britain.

Agglomeration also spurs on entrepreneurship. Companies typically aren’t founded alone and it’s much easier to meet someone with a similar mindset and vision in places like London, Oxford, Cambridge, or Manchester than it is elsewhere.

What’s the underlying cause of the problem? An uncertain planning system that releases too little land for development and empowers Nimbys to block new development. Research from the London School of Economics found that house prices would be 25% lower in the South East if planning restrictions were merely as restrictive as they were in the relatively less North East.

Cities with predictable and permissive development rules are able to meet housing need and keep rents low. Take Tokyo, in 2014 it built more new homes than the whole of England thanks to liberal rules on housing development. The result? As the FT’s Robin Harding puts it “In Tokyo there are no boring conversations about house prices because they have not changed much.” The UK should aspire to achieve the same to ensure that entrepreneurs aren’t priced out.

Our complex planning system also hurts business directly by pushing up office rents and disadvantaging retailers. Cheshire and Hilber find that “planning restrictions in England impose a ‘tax’ on office developments that varies from around 250% (of development costs) in Birmingham, to 400–800% in London. In contrast, New York imposes a ‘tax’ of around 0–50%, Amsterdam around 200% and central Paris around 300%.” Small shops suffer too. Raffaella Sadun found that planning restrictions designed to block out-of-town supermarket developments lead to a 15% decline in employment for independent retailers as extra demand for scarce high street space pushed up business rents.

The UK’s planning system is uniquely complex. Developers lack certainty, planning obligations are often not known till late in the process. Complexity functions as a fixed cost. As a recent Create Streets/Legatum Institute report states “regardless of the cost of actually complying with any regulations,discovering how to comply with regulations will cost a similar amount for

all firms. Why does this matter? Well, larger developers are able to spread that cost over a large number of projects. Smaller developers can’t.

Risk too is an issue. If permission can be withdrawn unexpectedly or planning obligations can be added suddenly, as often is the case, then the processes becomes risky. This creates a barrier to entry as larger developers can survive the odd setback, while smaller developers can’t.

At The Entrepreneurs Network our ambition is to make Britain the best place in the world to start and grow a business. To make that a reality, we will work with like-minded organisations and produce research focusing on three key areas.

  1. What is the impact of high housing costs on startup formation?

  2. What impact does complexity and uncertainty have on competition within the house-building market? And how can we simplify the rules?

  3. What impact do high office rents have on entrepreneurship in the UK? And how can we bring them down?

The bad news is that under the status quo planning policy is making Britain a worse place to start and run a business. But the good news is that we know the solutions and if we can develop politically viable solutions then the prize is massive.

Here’s how to fix the UK’s visa system

A successful, globally outward-facing Britain is the best way to mitigate the disruption of Brexit. Though there are limits to reforms as they are unlikely to offset the damage of ending free movement with the European Union, this only makes liberalising reforms more vital.

On asylum seekers The Entrepreneurs Network has backed the #LiftTheBan campaign, which focuses on the politically feasible goal of restoring the right to work for people seeking asylum six months after arriving in the UK. There are strong economic reasons to support this. Recently published research suggests that taxpayers would be £42.4m a year better off under this policy due to lower benefit costs and higher income tax receipts. Many entrepreneurs — including Google’s Sergey Brin and WhatsApp’s Jan Koum — were refugees. The UK wouldn’t have Marks & Spencer, had Michael Marks not fled Russia. If the economic case is strong, the moral case is stronger. We all want to feel useful and appreciated. Of course, this doesn’t just come through work, but most of us get a great deal of meaning from what we do for a living. Those seeking asylum are denied this dignity.

In 2015, we undertook a report with the NUS on the aspirations of international graduates towards entrepreneurship. Made in the UK was based on a unique survey of international students and found that the Tier 1 (Graduate Entrepreneur) Visa wasn’t fit for purpose. In short, despite strong entrepreneurial ambitions, international students were being underserved by their universities. Higher education institutions aren’t to blame, as they are rarely the ideal institutions to judge and support entrepreneurial ambitions and they fear losing their Tier 4 licence (which allows them to accept and make a lot of money from international students) if turns out endorsed graduates aren’t actually running their business. We concluded that other organisations besides universities should be able to endorse graduates who want to build their business in the UK.

This led to us hosting roundables with and responding to the Migration Advisory Committee’s (MAC) consultation in which we recommended that the Graduate Entrepreneur Visa be converted into a Start-Up Visa, and that the power to endorse graduates should be extended from universities to accelerators, venture capital firms and other respected organisations, which have better knowledge and stronger incentives to ensure that we are giving visas to graduates with the highest potential to succeed. Our recommendations are exactly what the Home Secretary announced.

When the Start-Up Visa visa is up and functioning the government should roll the Tier 1 (Entrepreneur) Visa into it, which doesn’t work as intended. The Entrepreneur Visa requires £50,000 from a venture capital firm registered with the Financial Conduct Authority (FCA) or £200,000 of other funds. This doesn’t work well as a proxy for assessing the entrepreneurial skills of a migrant and creates an unnecessary hurdle for bootstrapping entrepreneurs. It is also seen by migrants as a “cheap” investor visa and therefore receives many unsuitable applications. The introduction of a Genuine Entrepreneur Test was an attempt to try to cut down on bogus applications, but this has made the system overly bureaucratic and many genuine entrepreneurs are put off or wrongly rejected, necessitating costly legal advice.

Rolling the Entrepreneur Visa into the Start-Up Visa would cut out unsuitable applications and unwieldy bureaucracy. Immigrant entrepreneurs will then gain endorsement from government-approved third parties — whether accelerators, venture capital firms or other respected organisations. These sorts of organisations would be regulated by the Home Office to avoid fraud, but they will have skin in the game and the expertise and incentives to evaluate entrepreneurs’ potential. They will also invest in marketing the scheme abroad so people better understand our visa regime.

The Investor Visa is for immigrants who invest £2 million in the UK in exchange for the right to live and work here, and the ability to apply for permanent residency after five years (or sooner if they invest more). In the past, a lot of this so-called investment went into government bonds, but this wasn’t doing the UK much good. As Sir David Metcalf noted in 2014: “the annual aggregate loan via the investor route is equivalent to less than two days of our budget deficit”.

Alongside many others, The Entrepreneurs Network pushed for the government to ensure that the Investment Visa funds don’t just go into gilts. As my colleague Sam Dumitriu has written: “If the aim of the investor visa is to promote job and wage growth in the UK then a better system would target investment towards the UK start-ups and scale-ups that need capital the most. SMEs often struggle to prove their viability to investors as they lack collateral or a track record. While fintech innovations such as crowdfunding are helping to solve this problem, there is still an equity gap affecting firms seeking equity investments of between £250,000 and £5 million.” We suggest restricting access to the Tier 1 Investor Visa to EIS or VCT qualifying investments so that cash flows to the firms best able to create new jobs and grow the economy.

Of course, increased investment risk will make the Investor Visa less attractive. As such, we should lower the threshold. Individuals with £500,000 or even £100,000 to tie up in investments will have high disposable incomes. They aren’t going to claim welfare, will on average be limited users of public services and will stimulate demand and create jobs through high spending. The threshold should reflect the direct and indirect benefits these people bring to the country rather than a random number plucked from the air.

Britain’s FTSE 100 has dozens of businesses set up by first and second immigrants, and our flourishing tech scene is run and staffed by foreign talent. We have some of the best universities in the world and investors want to build a life here. Britain is one the best places in the world to start and grow a business. Brexit is a challenge to that. Now is the time to fix our immigration system to attract entrepreneurial talent to Britain.

Cup O' Kindness

Happy New Year! This time of year is a good time to reflect on things.

Everyone wants to be appreciated – it's one of the few universals. Whether this comes from our family, friends or strangers, we want our lives to matter. As such, it's important that we think about what to prioritise in praising, as that's what we'll get more of.

If we think that having a six pack is the pinnacle of human achievement then resources will be diverted from other things to meeting this end. Personal vanity is not inherently bad and can lead to wider positive consequences beyond self-satisfaction, but all things being equal we should glorify things that obviously do more good for more people.

Making commerce a respected thing to do was a catalyst for the British Industrial Revolution and the modern world of higher living standards. And more progress is being made as a fashion favouring tech and start-up culture takes hold.

Anything we can do to reinforce this should be welcomed, which is why we should be encouraged to see so many great entrepreneurs on this year’s New Year’s Honours list, including OBEs for Tom Blomfield, the founder and CEO of Monzo, Paul Lindley, Founder of Ella’s kitchen and an MBE for Amali De Alwis, CEO of Code First Girls. 

The more entrepreneurs are celebrated, the more they become an inspiration for the next generation. It's a virtuous circle. If you know an entrepreneur deserving of an honour: nominate them.

Get the Gates?
Successful entrepreneurs often support society beyond their business activities. Bill Gates has gone further than most with the Bill & Melinda Gates Foundation. To wrap up the year he has written about what he learned, including his changing priorities as a 63-year-old: "Did I devote enough time to my family? Did I learn enough new things? Did I develop new friendships and deepen old ones? These would have been laughable to me when I was 25, but as I get older, they are much more meaningful. Melinda has helped broaden my thinking on this point. So has Warren Buffett, who says his measure of success is, 'Do the people you care about love you back?' I think that is about as good a metric as you will find.”

Gates also has updates on his work and thoughts on Alzheimer’s, polio, energy, gene editing, and the potential next epidemic. It’s not all positive, but a valuable lesson in what's on the mind of one of the world’s most successful entrepreneurs, as well as a useful template for entrepreneurs looking to take stock of their own work and personal life.

Marshall the Facts
Now back to policy. More companies than ever before are finding it hard to recruit staff. As Adam Marshall, British Chamber of Commerce Director General, says: “Business concerns about the government's recent blueprint for future immigration rules must be taken seriously – and companies must be able to access skills at all levels without heavy costs or bureaucracy.” As I wrote at the end of last year, access to talent is the number one issue for entrepreneurs and the immigration white paper is a case study in self sabotage. We will be responding to the consultation and asking for your input.

Read the whole e-bulletin here, and sign up here.

Post-Brexit Immigration Plan Will Hurt UK Startups, say The Entrepreneurs Network

In response to today’s immigration white paper, Philip Salter, Founder of The Entrepreneurs Network, says:

“Entrepreneurs will be disappointed by today’s immigration announcement. In survey after survey, entrepreneurs rank access to talent as the number one obstacle to growth. Yet under the proposed system, startups will face more red tape and will struggle to meet the suggested £30,000 salary threshold to hire the workers they need.

”Entrepreneurs will welcome the abolition of the cap on high-skilled workers and the resident labour market test, but this is offset by the decision to pull up the drawbridge to EU workers. This will make Britain a worse place to start and grow a business and will lead to venture capitalists looking elsewhere.

“Requiring a job in advance of moving will put off prospective European entrepreneurs who up until now have been able to experiment by working for UK startups before building their own business.

“If the Government goes ahead with these plans, it will put the UK at a significant competitive disadvantage to EU countries and result in less investment into the high-growth businesses that drive prosperity and ultimately increase the wages of all workers.”

For further comments or to arrange an interview, contact Philip Salter, philip@tenentrepreneurs.org, (07919 355 290) or Sam Dumitriu, sam@tenentrepreneurs.org, (077 8060 7647)


Known Unknowns

Anyone claiming to know how this Brexit debacle will end is lying – even if they're the Prime Minister. On Tuesday, ministers were found in contempt of parliament, which in the past has led to MPs getting suspensions. Before the 20th century it could lead to MPs being held in the clock tower of the Palace of Westminster. It's probably the best place for a few of the current lot, and I expect they would enjoy the break from the humiliation. 

All this political uncertainty might be good for the news industry, but the wider economic costs are significant. Using data going back to 1900 and covering 11 major economies, researchers have found that heightened levels of policy uncertainty leads to firms reducing investment and employment. In fact, we have experienced the cost of this uncertainty ever since Cameron decided to have a Referendum.

Ho-hum!

#LiftTheBan?
Now some good news. Sajid Javid has indicated that he would like to review the ban on asylum seekers working in UK. I think there are a strong moral and economic reasons to do this, which is why The Entrepreneurs Network has supported the #LiftTheBan campaign, and why we signed and helped to coordinate a letter in the Financial Times. Javid is a Home Secretary who listens. He also took on board our suggestion to morph the Graduate Entrepreneur Visa into a Start-Up Visa. What next?

Under Pressure
Launching and running a business can be tough. Christina Richardson – founder of social-impact venture 3Sixty and Member of The Entrepreneurs Network – has put together a short survey as part of a study into the pressure and wellbeing of entrepreneurs. Complete the survey here. All data are anonymised.

Read the whole e-bulletin here, and sign up here.

A Rising Tide

In the grind of Brexit, we risk losing sight of the fact that the UK is one of the best places in the world to start and grow a business. According to the World Bank's Ease of Doing Business index we're ninth, but this doesn't really do us justice. Outside a few cities in the US, you would be hard-pressed to convince me there is anywhere better to be an entrepreneur than the UK (though, arguably, opportunities aren't evenly distributed well enough across our major cities.)

Just consider the way we incentivise employees. More than 30 business leaders and entrepreneurs have signed a letter to be delivered to European policymakers early next year, urging them to consider updating EU laws on giving employees shares in the startups they work for.

As the letter states: "universally, stock options reward employees for taking the risk of joining a young, unproven business, and give them a real stake in their company's future success." Currently, European employees own around 10 per cent of the firms they work for, compared to 20 per cent in the US.

The letter – signed by the leaders of top businesses like TransferWise, Funding Circle and Klarna – wants EU policymakers to adopt a similar structure to that of the UK, and ditch "patchy, inconsistent and often punitive rules that govern employee ownership".

This doesn't mean the UK shouldn't strive to be event better. Earlier this year, the UK's popular and successful Enterprise Management Incentive (EMI) share option scheme, was interrupted by the temporary failure of the government to secure an extension of an existing exemption from the EU State Aid rules.

Sanity prevailed, but EMI is starting to show its age, and is probably approaching the point where a review of its operation is required. "The EMI tax reliefs come with a plethora of granular conditions. The rules on independence, the rules that prevent companies with EMI schemes participating in some joint ventures, constraints on making changes to the Articles of EMI companies, working time and employee number requirements, and changes in the mix of the activities of companies with qualifying and non-qualifying trades are just a few of the rules that companies can trip over during the lengthy lifetime of an EMI scheme."

But, ultimately, it's worth remembering that the UK is still one of the best places in the world to be an employee in a fast-growing firm. Whatever happens with Brexit, let's hope our policy influence in Europe doesn't diminish, as we should want European countries to continue to follow where we lead. A rising tide of entrepreneurship lifts all countries.

Policy Updates
Following the Finance Bill scrapping through, this month's Policy Update focused on The Budget. Our Policy Updates are pithy explanations of how Government policy impacts entrepreneurs, as part of our aim to be the bridge between entrepreneurs and policy makers. This month, Research Director Sam Dumitriu explains everything from the (temporary) tax cut for the High Street, the string attached to Entrepreneurs’ Relief and new resources for improving Management Capability in business owners. In the coming months, we'll explain in plain language how the Brexit deal will impact entrepreneurship, as well as deeper dives into how entrepreneurs can benefit from other policies, like R&D Tax Credits, Innovate UK funding and Entrepreneurs' Relief. (Find out how you can join here).

Half full of it
I also asked a few Members what they thought about May's Brexit deal for a Forbes article. As you would expect from people who spend their lives thinking differently for a living, there are some opposing views – but they are united in their optimism for British entrepreneurship.

Blijven
We also pass on press opportunities and speaking engagements to Members. For example, on Saturday 8th December, EenVandaag, a current affairs programme broadcast on the Dutch public television network NPO, will be in town filming a story on Brexit. They already have the pro-Brexit angle sorted, but are looking to speak with a small business owner who voted to Remain. Just let me know if you want to pass on your details (and that of your business) to the producer.

Read the whole e-bulletin here, and sign up here.

Regulation risks making Big Tech bigger

Should we regulate Big Tech? Writing in CapX, I argue that there’s a risk that regulation could put smaller companies at a disadvantage.

Smaller companies are less able to comply with tough mandates to take down content. While a large firm can hire the best Machine Learning engineers on six figure salaries, smaller firms will struggle to automate content moderation and will instead rely on costlier manual moderation.

This isn’t just theory. GDPR, the regulation that provides the model for the Federal privacy law desired by Cook has stifled competition within Europe.

The EU’s privacy law has led to a consolidation within the market. Google’s market share increased, while Facebook’s fell slightly. But the real victims were smaller adtech vendors who saw 20-30 per cent falls in reach. Dozens of companies have blocked EU users or shut down services entirely in response to regulation.

GDPR has also depressed VC investment in Europe. A recent paper from Illinois Institute of Technology found that aggregate investment in the EU’s tech ecosystem fell by 40 per cent once the strict rules came in. As the report’s author put it: “The lesson from GDPR is that whatever regulation you adopt, don’t make it overly burdensome for the youngest companies.”

Read the full article here.

What do entrepreneurs need to know from the Budget?

This is the first of many policy updates. Through these updates, we aim to keep you abreast of any policy changes that affect entrepreneurs from tax changes to reforms to the UK’s immigration system. We know that entrepreneurs are busy people, so we’ll keep these briefs, er, brief. 

This month, we’re focusing on the Budget. While the ‘end of austerity’ and tax cuts for 32m grabbed the headlines, there were a range of measures targeted at start-ups, scale-ups, SMEs and entrepreneurs that are worth looking at.

We’re singling out measures that could directly affect your business (for better or worse). For a broader look at the budget, we recommend the Institute for Fiscal Studies’ post-budget analysis. If you’re working in tech then you might also want to look at our founder Philip Salter’s tech rundown for UK Tech News.

Policy Changes

A (temporary) tax cut for the High Street.

Small retailers got a boost when the Chancellor announced that he would cut business rate bills by a third from April 2019 for retail properties with a rateable value of under £51,000. This will benefit 90% of retailers. But note, this is a temporary tax break. It will expire in 2021. However, the appetite for reform in the long run will surely grow.

Entrepreneurs’ Relief survives (but with strings attached).

Ahead of the budget, there was talk of scrapping Entrepreneurs’ Relief to fund additional NHS spending. The Chancellor ruled that out stating “I do not believe we can have sustainable public services unless we have a dynamic economy. And encouraging entrepreneurs must be at the heart of our strategy.”

But he did announce additional controls on the relief. Currently, Entrepreneurs’ Relief means entrepreneurs pay a 10% (instead of the usual 20%) rate of capital gains tax on the first £10m when they sell their business. Under the new rules, entrepreneurs will need to have held their assets/shares for at least two years (instead of one). This shouldn’t affect most business owners, but might affect tech start-up founders who sell-up after a year to a Facebook, Google or Amazon (See tbh)…

Join Us to read the whole Policy Update

True Stripe

Building on the work of economists Tyler Cowen and Robert Gordon, Stripe's billionaire co-founder Patrick Collison and Y-Combinator’s Michael Nielsen add more meat to the hypothesis that we’re getting less scientific bang for a buck than we used to. They survey scientists, comparing Nobel Prize–winning discoveries in their fields and conclude that scientific breakthroughs look to be getting less significant.

This matters for entrepreneurs and policymakers around the world. In the UK, the Government has committed to a target of 2.4% of GDP invested in UK R&D by 2027, with a longer-term goal of 3%. If science really has significantly slowed per pound or hour spent – and I'm broadly convinced it has – this should make us question whether the funding processes and institutions are the very best that they can be. After all, a lot of this money is funded by governments with the aim of ultimately stimulating entrepreneurial activity.

As Collison and Nielsen conclude, the "evidence demands a large-scale institutional response. It should be a major subject in public policy, and at grant agencies and universities. Better understanding the cause of this phenomenon is important, and identifying ways to reverse it is one of the greatest opportunities to improve our future."
 

Easy as APPG
Following last week's publication and launch of the All-Party Parliamentary Group (APPG) for Entrepreneurship's Enterprise Education report, as the Secretariat we're busy scoping out potential research areas for the next 12 to 18 months ahead of our AGM in December. Now is the time to get in touch if you have any areas of policy that you think we should raise with the MPs and Peers across the House of Commons and Lords who make up the APPG's Officers.

Top programming
In last week's political turmoil, we didn't have space to mention the ScaleUp Institute's formidable 2018 ScaleUp Review. The report is packed with useful information on the state of scale-up activity in the UK, but for entrepreneurs looking for a practical angle, Annex 1 provides pithy Local Area Summaries on the top programmes in the area to help them scale their business.

Fintech's 4 Fingleton
Calling all fintech entrepreneurs! Next month we will host a roundtable with John Fingleton, founder and CEO of Fingleton Associates and the former CEO of the Office of Fair Trading from 2005 to 2012. This event will be a chance to hear from one of the UK's leading experts on regulation. In government, he oversaw merger regulation, enforcement of competition rules, consumer protection, and credit regulation. Get in touch if you're a fintech founder who wants to get involved.

Read the whole e-bulletin here, and sign up here.

Wise Council

Theresa May is setting up five business councils to advise on Post-Brexit policy –one of which will be for Small Business, Scale ups and Entrepreneurs. It will be co-chaired by James Timpson (CEO, Timpson), Brent Hoberman (chairman, Founders Forum) and Emma Jones (founder, Enterprise Nation). All are great appointments. Emma is one of our Advisers and one of the most prolific and most effective defenders of small businesses in the country. Watch this space for updates on its work.

Turing complete
The Alan Turing Institute, the UK’s national institute for data science and artificial intelligence, is exploring how it will work with small companies as a part of their mandate to achieve impact through data science and AI research. They are seeking to understand how UK SMEs could benefit from the Institute’s assets and activities and they are inviting your input via a public consultation. Tell Turing what SMEs need to succeed. The consultation closes on 26th November.

Read the whole e-bulletin here, and sign up here.

Fiscal Phil loosens up

Chancellor Philip Hammond's Budget delivered the largest discretionary "fiscal loosening" since 2010. While the NHS got most of the money, entrepreneurs weren't ignored. However, it wasn't a perfect Budget.

In response, we were quoted in The Times (£) on the need to make the welcome increase in the Annual Investment Allowance permanent, and our Research Director Sam Dumitriu wrote for CapX explaining why a special tax for tech giants isn't a smart policy.   

I also dug into the documents to give a pretty comprehensive roundup of the tech announcement for UKTN. And we were quoted in SmallBusiness.co.uk on what the Chancellor should have done on Business Rates.

Entrepreneurs running businesses of all sizes will breathe a sigh of relief about what wasn't announced. The predicted scrapping of Entrepreneurs' Relief didn't materialise (just a tightening around the rules), and many of the self-employed will be content with the delay in introducing IR35 to the private sector.

Following are our thoughts on a few of the announcements.

On the increase in the Annual Investments Allowance
To help stimulate business investment, the government will increase the Annual Investment Allowance (AIA) to £1m for all qualifying investment in plant and machinery made from 1 January 2019 until 31 December 2020.

This will be a welcome announcement for business owners looking to invest, but by making it temporary the Government is failing to offer businesses the stable environment they need to properly plan for the future. Over recent years the AIA has yo-yoed from £100,000 down to £25,000, up to £200,000, up to £500,000, down to £200,000, and now temporarily up to £1m. This is the epitome of business uncertainty.

On the plan to impose a 2% Digital Services Tax on ‘tech giants’
The Chancellor may live to regret making the tax system even more complex. Corporation Tax needs updating, but any reform should focus on fixing the general rules, rather than papering over the cracks in the status quo. Singling out ‘tech giants’ may lead to UK SMEs paying more to advertise through social media and because the tax is levied on revenue not profits could unfairly disadvantage firms who are still raising money through equity finance.

On additional Business Rates Relief for small high-street retailers
The Chancellor has missed an opportunity to fix business rates. Instead of managing decline, Philip Hammond should have prioritised removing barriers to business growth and investment. Replacing business rates with a business land tax paid by commercial landowners would dramatically cut paperwork for most business owners and create a stronger incentive for businesses to invest in improving their properties.

On increased funding for management training
There’s clear evidence from The Entrepreneurs Network’s Business Stay-Up campaign that improving the quality of management skills in the UK is key to raising productivity. Creating stronger peer-to-peer networks and boosting the Knowledge Transfer Partnership to allow best practices to diffuse is rightly a priority. But the Chancellor should go further and create additional tax reliefs for employee-funded training.

On boosts to R&D spending
A significant amount (£1.6bn) has been allocated to increasing the Industrial Strategy Challenge Fund. Among other things, the Government is taking a punt on quantum technologies, nuclear fusion, artificial intelligence and distributed ledger technologies. It will also put another £115m into the Digital Catapult, which has centres in the North East, South East and Northern Ireland, and the Medicines Discovery Catapult in Cheshire.

While there are strong arguments that at current R&D investment levels increasing Government spending could leads to positive economic spillovers, we need to ensure that we get value for money. For example, just last year the Digital Catapults were heavily criticised in a BEIS commissioned review by Ernst & Young. The devil will be in the implementation.

Read the whole e-bulletin here, and sign up here.

Fiscal Phil Backs Entrepreneurs but Dodges Overdue Reforms

Philip Salter, Founder said:

“Hammond's Budget wasn't short of pro-business rhetoric, and the Budget document itself contains a number of announcements designed to support Britain's entrepreneurs. And we didn't get the predicted scrapping of Entrepreneurs' Relief which will be a boost to Britain’s ambitious business owners."

“However, it is by no means a perfect budget for entrepreneurs. While spending on R&D, management training and the boost to the Annual Investments Allowance are welcome, the 2% digital services tax on ‘tech giants’ and business rates relief represent missed opportunities for fundamental reform.”

On the increase in the Annual Investments Allowance:

Philip Salter, Founder said:

To help stimulate business investment, the government will increase the Annual Investment Allowance (AIA) to £1m for all qualifying investment in plant and machinery made from 1 January 2019 until 31 December 2020.

This will be a welcome announcement for business owners looking to invest, but by making it temporary the Government is failing to offer businesses the stable environment they need to properly plan for the future. Over recent years the AIA has yo-yoed from £100,000 down to £25,000, up to £200,000, up to £500,000, down to £200,000, and now temporarily up to £1m. This is the epitome of business uncertainty.

On the Chancellor’s plan to impose a 2% digital services tax on ‘tech giants’

Sam Dumitriu, Research Director said:

“The Chancellor may live to regret making the tax system even more complex. Corporation Tax needs updating, but any reform should focus on fixing the general rules, rather than papering over the cracks in the status quo. Singling out ‘tech giants’ may lead to UK SMEs paying more to advertise through social media and because the tax is levied on revenue not profits could unfairly disadvantage firms who are still raising money through equity finance.”

On additional business rates relief for small high-street retailers

Sam Dumitriu, Research Director said:

“The Chancellor has missed an opportunity to fix business rates. Instead of managing decline, Philip Hammond should have prioritised removing barriers to business growth and investment. Replacing business rates with a business land tax paid by commercial landowners would dramatically cut paperwork for most business owners and create a stronger incentive for businesses to invest in improving their properties.”

On increased funding for management training

Sam Dumitriu, Research Director said:

“There’s clear evidence from The Entrepreneurs Network’s Business Stay-Up campaign that improving the quality of management skills in the UK is key to raising productivity. Creating stronger peer-to-peer networks and boosting the Knowledge Transfer Partnership to allow best practices to diffuse is rightly a priority. But the Chancellor should go further and create additional tax reliefs for employee-funded training.

On boosts to R&D spending

Philip Salter, Founder said:

A significant amount (£1.6bn) has been allocated to increasing the Industrial Strategy Challenge Fund. Among other things, the Government is taking a punt on quantum technologies, nuclear fusion, artificial intelligence and distributed ledger technologies. It will also put another £115m into the Digital Catapult, which has centres in the North East, South East and Northern Ireland, and the Medicines Discovery Catapult in Cheshire.

While there are strong arguments that at current R&D investment levels increasing Government spending could leads to positive economic spillovers, we need to ensure that we get value for money. For example, just last year the Digital Catapults were heavily criticised in a BEIS commissioned review by Ernst & Young. The devil will be in the implementation.”

Press Coverage: APPG Reports

In mid-July, Sam Dumitriu and Philip Salter were busy writing for the Telegraph, Conservative Home and CapX on the key issue of business tax reform.

Sam wrote for the Telegraph, arguing that the solution to the problem of business rates is obvious – base them on land value.

Furthermore, Sam went on to write an article in Conservative Home, in which he argues that policy-makers should look closely at the regulations and taxations on businesses. Citing an APPG survey, it was noted the taxes that discouraged entrepreneurship the most were business rates.

Our founder, Philip Salter, was writing on the same subject for CapX; saying that tax reform is needed to remain competitive. Philip reasons that regular reviewal by the Treasury to test if policies are cost-effective would be highly beneficial, plus helping to promote property investment. He goes on to write that tax breaks such as the ISA and EIS are both successful and would level the playing field for the smaller, unlisted businesses.

Finally, Stuart Stone’s piece in the MorningAdvertiser comments on the welcoming of a reformed tax by UKHospitality, due to the gross overpaying of the hospitality sector––a £1.8bn sum that is hard to blink. UKHospitality’s chief executive Kate Nicholls says that the tax reformation is “something that we have consistently called for.” and stridently indicates that “The current system of business tax is completely out of date and totally unsuitable[...]”.  

Our second report, on female entrepreneurship, has also received extensive press coverage.

Neil Hodgson from TheBusinessDesk wrote an article on the women in leadership paper, quoting the vice chair of the APPG for Entrepreneurship, Seema Malhotra MP, and Lisa McMullan, the organisation’s director for development and consultancy. Lisa stated that ‘it’s about time that we recognise that female entrepreneurship is not only a gender issue, but an economic one, too.’ TheBusinessDesk went on to include some recommendations and highlighted that ‘only a tenth of growing firms with revenue between £1m-£250m are run by women. In the US, this figure is closer to a fifth.’

In the Telegraph, Annabel Denham, wrote about the gender pay gap discussion and how it should help the conversations around female entrepreneurship; calling for the government ‘to review nursery and pre-school teacher-child ratios’ so that self-employed mothers can work ‘while receiving maternity allowance’. Annabel argues that first the societal expectations must be reversed in order for the gender funding gap to be reduced. Annabel ends strongly with ‘If the Government wants UK companies to compete on global markets, it must do all it can to boost the growth of female-led businesses’.

The Telegraph featured the report in their Saturday paper: “Mumpreneur” and “lipstick entrepreneur” are terms Olivia Rudgard, Social Affairs Correspondent at the Telegraph, used to highlight gender stereotypes before stating their harmful effects on girls’ mindsets. Olivia argues that “The media should move away from gender altogether when profiling Britain’s most successful entrepreneurs.” and quotes the women in leadership paper when it states 31% of women say gender is a hindrance when trying to expand their business. This is due to obstacles such as “networking opportunities that favour men”. With the sponsorship of Octopus, headed by Chris Hulatt, the APPG has suggested that the introduction of a paternity allowance might improve gender stereotypes in the office environment. Olivia also called for childcare laws to be changed for more children to be looked after, i.e. a higher teacher-pupil ratio, as “the UK’s ratios are currently “among the stringent in the OECD””. Chris added that “it is critical that women have the same opportunities to realise their ambitions and create the high growth businesses of tomorrow.”

Annabel also wrote for CapX arguing why if we liberalised the childcare system, options for female entrepreneurship would widen.






 

Omnishambles

At yesterday's Balkan Summit in London, foreign ministers and entrepreneurs from Serbia, Bosnia-Herzegovina, Montenegro, Kosovo, Macedonia and Albania were stood up by Boris Johnson who was due to unveil £10 million in aid funding to help young people in the Western Balkans improve their digital skills. When he later emerged, Boris followed David Davis in quitting the government. Our politics is an omnishambles.


A year ago, I wrote an e-bulletin entitled M is for Mediocre. It got lots of responses from people agreeing with my pointed conclusion that too many of our current crop of MPs aren't up to scratch. (The exceptions we invite to speak at our events.) Whether through the current political parties, or perhaps through one of the plethora of new "centrist" parties, we need smarter people in power. Now is the time for those with the right skills to enter politics. But as Billy Connolly quips: "The desire to be a politician should bar you for life from ever becoming one."

What a GEM!
It's not all bad news. Last week we helped launch the Global Entrepreneurship Monitor (GEM). Coming out of Aston University and sponsored by NatWest, the GEM is the largest and most comprehensive study on entrepreneurship globally, collecting data on entrepreneurial activity in 54 countries, covering two-thirds of the world’s population.
 

This year the UK edition revealed that people from ethnic minority and immigrant backgrounds are twice as likely as their white British counterparts to be early-stage entrepreneurs. On the back of the launch, I wrote for City AM yesterday on why Britain should be proud to be a nation of immigrant entrepreneurs.

 

You can read the full e-bulletin here and sign up here

Unlike a Virgin

Richard Branson and Harland David Sanders are exceptional. Branson was always an entrepreneur, shunning school to trade in Christmas trees and budgerigars; while "The Colonel" waited until he was 65 before starting KFC.

Branson and Sanders are exceptions to the rule – that there is a sweet spot for successfully starting and growing a business. Thankfully, it's rather large: 25 to 49. After this age, entrepreneurship is more likely to take the form of self-employment or micro businesses without growth ambitions.
 

According to Demographics and Entrepreneurship – a book that we have recently released with the Fraser Institute – leaders across developed countries should be concerned about ageing populations and mitigate the pressure this will exert on reducing the quantity and quality of entrepreneurship.

The ideal demographics for entrepreneurship peaked around 1995, the UK, US, Australia and Canada are all expected to see a significant projected decline in this key entrepreneurial age group across all four countries by 2065.

Short of governments distributing aphrodisiacs – and sadly clinical trials suggest oysters and other natural libido enhancers don’t actually work – what can be done? Across 498 pages, we have some suggestions.

Chapter considers the impact of capital gains tax upon entrepreneurship. Capital gains tax is effectively a tax on future consumption over current consumption. Mitchell and his co-authors argue that high rates reduce start-up activity:

“Compared to other countries in the OECD, Australia, Canada, the United Kingdom, and the United States all have room for improvement when it comes to their top personal capital gains tax rates. The United States and Canada, for example, have top capital gains tax rates above the OECD average and rank in the top third of countries with the highest top capital gains tax rates in the OECD. While Australia and the United Kingdom have top capital gains tax rates under the OECD average, they, too, still have room for improvement as 11 and 14 countries have top capital gains tax rates lower than those in the United Kingdom and Australia, respectively. All four countries are thus able to improve their position on capital gains taxes in order to spur entrepreneurship.”

In chapter 9, Peter Vandor and Nikolaus Franke consider immigration. The evidence shows that immigrants are particularly entrepreneurial, with the Global Entrepreneurship Monitor showing higher entrepreneurial activity among first-generation immigrants than natives:

“The relatively strong inclination of immigrants to become entrepreneurs is not a new phenomenon. Historians have documented the economic impact of immigrant entrepreneurs in different countries and time periods. Jewish immigrants constituted a significant share of successful entrepreneurs in the United Kingdom between the 1930s and 1950s. These mostly Lithuanian and Polish immigrants have left their mark in many industries, creating household names such as Marks and Spencer or the food retail giant Tesco by introducing product and financial innovation.”

Just consider Silicon Valley. As John Collison, an Irish immigrant and co-founder of the payments start-up Stripe, explains in the New York Times: “The U.S. is sucking up all the talent from all across the world… Look at all the leading technology companies globally, and look at how overrepresented the United States is. That’s not a normal state of affairs. That’s because we have managed to create this engine where the best and the brightest from around the world are coming to Silicon Valley.” 
 

Collison is right. Our Government desperately needs to change tack to offset the uncertainty around Brexit. As Vandor and Franke argue:

“The economic and political climate of a country plays a significant role in the attraction of highly skilled migrants, as has been witnessed with the Brexit vote and the election of president Trump in 2016. Even before any concrete policy measures had been implemented, the public perception of these events had already triggered a measurable decrease in graduate student applications for universities in the United Kingdom and the United States. At the same time, universities in countries associated with more open policies, such as Canada and Australia, saw a significant increase in applications in the aftermath of these events, suggesting a redirection of mobile international talent in their direction.”

We are in the planning stages of a research-led project on the connection between immigration and entrepreneurship. If this is the sort of thing you or your company would like to get involved, drop me an email to find out more.

You can read the full e-bulletin here and sign up here

 

Press Coverage Round Up Q2

Following the launch of our annual report on female entrepreneurship we received a lot of media coverage on a range of different subjects. However, despite the successful launch causing celebration, we’ve not been lying idle.

Q2 kicked off with our Programmes Director, Sophie Jarvis, having a piece in the Telegraph comment section of the paper! She commented on the launch of BBC’s 50:50 project to get more women experts on panels arguing that, although the intention might be to empower women, the project will have the opposite effect.

Also, for the last month we’ve been very active on the recently launched Refresh, a new initiative by the Telegraph on their website providing comment pieces on the biggest problems facing Britain written by young people for young people.

Our founder, Philip Salter, and Sophie have both been in Refresh making calls for Britain, and Tories specifically, to embrace immigration if we want Britain to prosper. Sophie argues that the Tories can once again become the party for entrepreneurs as it was in the glory days of the late Margaret Thatcher if they endorse a new liberalised immigration system. By giving access to a broader pool of talents, entrepreneurs have the opportunity of scaling up their business. As Sophie also notes, scale ups are much bigger generators of economic growth than start ups, although focus should not be on one over the other. According to Philip, this could help detoxify the Tories and shake off their image as the “nasty party”.

On a different subject, our editor, Annabel Denham, was arguing in Refresh that young people have embraced the gig economy. Therefore, if the Tories want to recapture the Millennial generation they must stop implicitly conceding that Corbyn is right by killing off innovation with regulation. Not only will they scare of millenials with regulation, but it would hurt everyone else in the economy as well. In fact, as Annabel argues in the Women Mean Business section of the Telegraph, the gig economy is the future and women can lead the charge.

Those of you who’ve read our report (if you haven’t, you can read it here) know that mentorship is one of the best vehicles for encouraging and supporting entrepreneurship. If you want a slightly condensed version of the arguments, Jarvis was in the Women Mean Business section as well, making the case for why creating mentors are key for female entrepreneurship.

Our founder, Philip Salter, has also been busy on Forbes this month. He has done some interesting interviews with several entrepreneurs. He’s been chatting to co-founder and CEO of Coinfirm among other things, a company that is trying to professionalise the crypto industry.

Chances are you’ve not heard of mixed-reality marketing and you most likely haven’t heard of Landmrk, but Philip have been talking to their their co-founder and CEO to find out more on how mixed-reality can revolutionize marketing.

Ahead of Scale Up Britain, an event we’re hosting to highlight the importance of scale-ups to the British economy, Philip interviewed the co-founder, Chieu Cao, of Perkbox. Cao is not hedging his ambition, he wants Perbox to grow to be a £100m+ run rate business in 2020, followed by an IPO and Philip interviewed him to find out more.

Philip also talked to Kim Palmer, the founder of Clementine, an app helping women struggling with anxiety, low self-esteem or generally overwhelmed by life’s stress to become more confident. She tells her story of how she turned a dire situation into her first start-up.

Christian Owens, founder and CEO of Paddle, a one-stop shop for firms and developers selling software, also spoke to Philip on what lies ahead for his company.

The recently published report on AI by the House of Lords Artificial Intelligence Committee made Philip chip in with his thoughts on the subject. He thinks it’s important that the House of Lords don’t dismiss the risks of AI.

Annabel provides insight into the machinery of the UK’s second fastest growing business, Bloom & Wild. She tells the story of how the company managed to stay on top of the game and to make the step onto the international scene.  

If you’re unable to find Sophie in the newspapers, you’ll most likely find her on a radio station near you. This month she was co-hosting Hoxton Radio’s DE:CODE, a program talking about the latest tech news and our event at the International Festival Business in Liverpool on June 12th. She’ll appear around 16:30 min. in. She also went on BBC London to do a paper review with Vanessa Feltz. She’ll be on from min. 48:30, and has appeared on talkRADIO for paper reviews on the day of the Royal Wedding (from 6am to 7am) & earlier on in April (from 7am to 10am)!  

And last but not least, Sophie also spoke at Big Tent Ideas Festival Warm Up organised by George Freeman MP. She managed to come second in the finale! Her topic was on the equity funding gap. If you want to read some of her thoughts on the subject, she was in the Guardian this month writing about it. And if you have read all her articles and listened to all her radio appearances and you still want more, you can watch her talk here. In June she’ll be speaking at the RSA.