Make Lockdown Switch to Digital Permanent to Secure Economic Recovery

A new report from The Entrepreneurs Network, commissioned by cloud accounting platform Xero, argues that small firms should make better use of digital technologies to tackle the sluggish productivity which characterised the pre-Covid economy and bounce back faster post lockdown.

Upgrade: Closing the digital gap and lifting productivity for SMEs reveals:

• If the 1.1m micro-businesses (0-9 employees) doubled their uptake of key digital technologies, the UK economy would get a £16.6bn boost.

• This would restore four-fifths of lost productivity growth since the financial crisis, and enable businesses to bounce back faster post-lockdown.

• The small business response to lockdown with shops switching to selling online and offices going remote shows that major digital transformation is achievable.

• As the economy reopens, it is vital that the switch to digital becomes permanent and more small businesses make the most use of the right digital tools.

• The report calls on the government to widen the scope of the R&D tax credit to make it easier for SMEs to invest in innovation.

• It also backs support for peer-to-peer learning initiatives so business-owners can overcome knowledge barriers by learning from entrepreneurs in similar situations.

• To tackle digital skill shortages, it proposes allowing tax relief for self-funded training and improving awareness of existing digital training programmes.

Upgrade shows many small firms are failing to make use of the right digital tools.  It finds that although the UK is one of the world’s most innovative economies hosting over 70 tech unicorns, over a third (38%) of small businesses are not adopting tried-and-tested tech.This is important because if the UK’s 1.1 million micro businesses doubled their uptake of key digital technologies it would lead to a total £16.6bn boost to the economy. This amounts to a £4,050 average productivity boost for the 4.09m workers employed by micro businesses, restoring four-fifths of lost productivity growth between the financial crisis and the lockdown. 

While the UK's productivity has on average underperformed relative to other major economies, top-performing UK companies are on par with the most productive businesses in the world. The problem is the large gap between the UKs ‘leaders and laggards’. Technology adoption is a similar story. Although the UK is home to world-leading tech businesses, many SMEs do not do the basics.

Over a third (38%) of UK SMEs have very low levels of digital adoption. According to the EU’s Digital Intensity Index, which measures the use of digital tech by businesses, many lack a website, social media presence, or fast broadband. By contrast, in Sweden and the Netherlands just over a fifth (23%) of firms have very low levels of digital adoption. In Finland, just one in ten (11%) have low levels of adoption.

Sam Dumitriu, Research Director at The Entrepreneurs Network and author of the report, says:

“Recent events have highlighted the importance of digital technology in enabling businesses to continue trading in the most difficult of circumstances. It is now time to take advantage of a massive opportunity to boost productivity by increasing the rate of digital adoption. “Britain is a world-leader in innovation, but too often best practices are not spreading to all SMEs.”

Gary Turner, UK Managing Director, Xero says:

“One of the achievements of so many small firms in recent months has been how they have been able to pivot their business models to operate differently. They are discovering new digital ways to achieve greater value, scale and resilience. 

“As the economy reopens and small firms look to rebuild, we must close the digital divide to help small firms bounce back more quickly. Hence, the lessons in this study on how we can encourage firms to make more use of the right technology are more important than ever.”

Policy recommendations

We identify three key barriers to digital adoption: knowledge, skills, and finance. The report recommends nine policies to ensure that businesses have the information to identify digital solutions, the finance to invest in them, and the skills to implement them:

Knowledge

1. Prioritise support for peer-to-peer learning initiatives. Peer-to-peer learning is a tried and tested approach for increasing SME adoption of business best practices.

2. Outsource the provision of advice to trusted groups. This should be delivered through trusted business organisations.

3. Do more to leverage relationships between SMEs and accountants. Accountants are often a trusted source of information to SMEs.

Skills 

1. Allow tax relief for self-funded training. This would make self-funded training cheaper and bring the UK’s tax-code in line with other OECD countries. It could be limited to pre-approved digital training schemes to ensure that the goal of increasing business productivity is prioritised.

2. Improve awareness of and access to digital training. The government should trial different approaches to see what best increases the uptake of different schemes

Finance

1. Ensure better awareness of tech grant schemes. SMEs often struggle to keep up with schemes on offer as they change so the government should make sure that the messaging on future grant schemes is effective.

2. Improve the impact of tech grant schemes. The government should increase the impact of these schemes by tying funding to participation in knowledge-sharing networks.

3. Allow R&D tax relief for user interface and user experience development work. Businesses should be allowed to claim R&D tax relief on digitisation projects.

4. Improve the promotion and access to R&D tax credit schemes. HMRC should provide clearer feedback on rejected applications.

Big Deal

Boris Johnson is promising to "build build build". Aping President Franklin D. Roosevelt, Boris has a ‘New Deal’, “to build the homes, to fix the NHS, to tackle the skills crisis, to mend the indefensible gap in opportunity and productivity and connectivity between the regions of the UK". 

Chancellor Rishi Sunak will put some more meat on the bones of this announcement in next week’s summer statement. As recommended in last week’s newsletter, he is expected to focus on efforts to support employment. 

The Chancellor is believed to be examining options to encourage companies to hire young people. The most straightforward way to do this would be a wage subsidy for companies taking on new staff or preserving jobs. An alternative could be a cut to employers’ national insurance contributions, although the concern will be that it might not translate into new jobs. Whatever is announced on Wednesday, we will let you know how it impacts entrepreneurs via our Policy Update (our latest on more support for startups can be found here). 

One tweak could be around the Apprenticeship Levy. Former MP Nick Boles is calling on the government to deliver an apprenticeship guarantee for young people by allowing employers to use apprenticeship levy funds to pay the first year’s wages for all new apprentices under 25, while Robert Halfon MP argues in the FT that the Prime Minister should offer an apprenticeship guarantee to every young person.

The Apprenticeship Levy certainly needs reforming. It requires employers with a payroll of over £3m to pay 0.5% of their wage bill to fund apprenticeships, but it’s not incentivising employers to take on apprentices. The government responded to its failings in 2018 by allowing levy-paying employers to transfer 25% of their levy payments to employers in their supply chain, but this didn’t go far enough.

We argued in Management Matters that companies should be able to transfer 50% of their levy along the supply chain and that the Levy should be rebranded as a more flexible general training levy to allow greater flexibility in terms of appropriate training – particularly shorter courses. Sajid Javid called for something similar in his recent, extensive Centre for Policy Studies report After the Crisis.

Putting the economy in stasis was exactly the right reaction when the virus hit. It’s now clear that we need to tap into the agility of entrepreneurs building products and delivering services to meet changing demands taking place across our economy. Whatever is announced next week, the focus shouldn’t be on stimulating demand for what people wanted before Covid-19 – it needs to be about empowering entrepreneurs to adapt to a world in flux.

Go with the flow
The British Library’s Start-ups in London Libraries delivers webinars and across 10 borough libraries. The aim is to provide information access and support for individuals and start-ups looking to start and build their businesses, especially focused on disadvantaged groups. They are looking for an expert to volunteer to provide a training session on cash flows and balance sheets for startups. If you willing and able to lend a hand – or you know someone can – drop them an email.

Spider, man
The Postcode Lotteries Green Challenge has announced the 25 start-ups that have made it through the first stage of the international competition supporting green entrepreneurs. Seven of the companies are British, including Jiva Materials, which is manufacturing the world’s first fully recyclable printed circuit board to easily and safely recover precious metals, and Spintex, which through a spider inspired process artificially spins the high performance silk fibres. If you like your glass half full, check out all the amazing nominees' innovations.

We believe entrepreneurs will be key to solving many of the world’s biggest challenges – including environmental ones. That’s why we’re busy undertaking a research project on green entrepreneurship with the Enterprise Trust. Find out more here and drop Eamonn Ives an email if you want to get involved.

Startup steps from h
Disruption, The Panoply and h Foundation have developed the Future Leaders Programme in response to coronavirus. It is focused on supporting 21 to 30-year-old entrepreneurs who are BAME, from a low-income background or who have a disability. The 9-week fully digital programme includes a £200 per week bursary, a mentor, workshops and a final pitch event. Apply here.

Read the whole newsletter here, and sign up here.

Diversity and the Future Fund

Back in April 2020, Emma Sinclair MBE, one of our Female Founders and Hephzi Pemberton started a petition calling on the HM Treasury to align the Future Fund with the diversity agenda. In their open letter to Rishi Sunak, they raised some serious concerns that the Future Fund could exacerbate existing inequalities for the UK’s diverse founders. Namely, that diverse founders are less likely to have raised at least £250k of funding already, less likely to have ‘warm introductions’ and therefore less likely to have access to the Future Fund. 

In an article for Sifted, John Glen MP, Economic Secretary to the Treasury, signalled his commitment to ensuring the Future Fund did not only benefit established, male-dominated, London-based businesses. He said that the Fund would support female founders by becoming a signatory of the Government’s Investing in Women Code and provide monthly reporting on the diversity of recipients, including regional spread. 

The British Business Bank has published its first set of data on the 252 companies who have been approved for matched-funding from the Future Fund.

So did the government’s efforts to support diversity work?

On a positive note, 79% of funding went to companies with mixed gender management teams. However, if we look at the data for all-women management teams, just 3 have received funding out of the total 252. By contrast, 66 all-male management teams received funding. 

As Amy Lewin noted in her Sifted article on the Future Fund’s first set of diversity data, it is worth mentioning that the data applies to the ‘senior management team’ - not just founders. By contrast, when we track the equity funding gap, we only focus on startups with female founders. This means that the headline statistics are slightly more favourable for the government.  

When it comes to ethnicity, 113 teams were of mixed ethnicity, 109 were all-white teams and only 12 were all-BAME. 

On the diversity of the fund, Deborah Okenla, founder of YSYS said to Amy Lewin in her Sifted article that “it’s a positive start to see The Treasury commit to collecting and publishing the data. We can see from the data that we still have a long way to go. And we need to understand what the data shows for specific groups, such as black founders within the BAME categorisation, and move beyond binary gender.”

The Extend Ventures and YSYS Report on the impact of COVID-19 on Diverse Founders Startups revealed that almost half (48%) of BAME business owners did not expect to access or qualify for any government support schemes.

In our latest FFF Newsletter, we covered Erika Brodnock’s thoughts. Erika is co-founder of Extend Ventures and one of our Female Founders. Speaking to Amy Lewin from Sifted, Erika said “For too long, minority entrepreneurs have remained unsupported and have needed to ‘fend for themselves’... we need to ensure this isn’t going to be the same for newer businesses”.

So how can we change the status quo? 

With support from Barclays, we are continuing in our efforts this year to provide female entrepreneurs with the support, advice and networks they need to succeed. We will be sending out invitations to our digital events in our FFF Newsletter, which you can sign up to here.

BAME entrepreneurship policy overlaps with some of our previous work on immigrant founders – and Sam Dumitriu has just written an excellent article making a powerful case for why we should let asylum seekers work – but, of course, it is also about British-born BAME entrepreneurs. 

With support from NatWest, we’re also putting together an APPG for Entrepreneurship Webinar on BAME entrepreneurship. You can register your interest by dropping us an email. We hope and expect that this will be the start of some more focused policy work.

Just the Job

As the economy slowly opens up, entrepreneurs will need access to workers with the right skills to drive the recovery.

To that end, the CBI has released a report on Building a World-Class Innovation and Digital Economy. It measures the UK against the other G7 countries and is packed full of familiar policies that we back. One that stood out, which I’ve not discussed here before, is transforming Job Centres (now Jobcentre Plus) into Jobs and Skills Hubs. 

Jobs and Skills Hubs would harness the expertise of colleges, universities, unions, businesses, and Local Enterprise Partnerships to provide the rapid matching of people to new job opportunities and sourcing high quality training in areas of future demand in the local labour market. As furlough is withdrawn, this could be vital for supporting the rising number of unemployed.

This brings to mind a recent article by Jonathan Portes and Tony Wilson, which calls for us to ape successful countries like Denmark in the way we support employment. But as with any reforms like this, the devil is in the implementation. As Heather Rolfe from the think tank Demos argues: “For this to work, the low-grade box-ticking ‘employment skills’ courses where participants repeatedly write CVs, need replacing by real training courses, leading to technical skills and designed and delivered in partnership with local colleges and employers.”

Job Centre reform won't grab as many headlines as a cut to VAT (which is looking increasingly likely), but it would probably be a better use of limited resources. As Ryan Bourne argues in The Telegraph: “the government would get far more “bang for the buck” diverting funds into actively encouraging new hires or at least offering retraining or job-matching services for workers who find their old roles defunct.” (If you're still not convinced about the limited economic benefits of cutting VAT, read Edward Troup's dissection of the idea).

Lunch and learn
On Tuesday, Viscount (Matt) Ridley and Dr Anton Howes will discuss how innovation works. I can’t wait for this one, as I grew up devouring Matt’s brilliant books. I would particularly recommend The Red Queen: Sex and the Evolution of Human Nature. He will be discussing some of the ideas in his new book, titled appropriately enough, How Innovation Works. 

Anton has started working with us as Head of Innovation Research, but he is first and foremost one of the UK’s experts on Britain's acceleration of innovation that gave rise to the Industrial Revolution. His first book has just been published. Arts and Minds tells the story of Britain's subscription-funded national improvement agency, the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA).

It’s bound to be a fascinating discussion. It’s at 1pm on Tuesday, so you might want to tune in over a spot of lunch. Find out more here.

Level heads
Levelling up investment across the country will require level heads. As Sam Dumitiru writes on our blog, for every success story like Israel’s famous Yozma programme, there are a dozen failed attempts where public money has been wasted with little to show for it. Drawing on the work of Josh Lerner, Sam details the common pitfalls of governments using venture capital to level up and concludes that we should limit interventions to match funding with the private sector. Read it here.

Design for life
The British Design Fund has got in touch about an opportunity to apply for the 2020 global Design Intelligence Awards, hosted by the China Academy of Art. These awards recognise innovation in four categories: cultural innovation, living wisdom, industrial equipment and digital economy, and are designed for both established businesses with products in market and early stage innovators with prototypes capable of being brought to market. 

Ben Griffin, Innovation Lead for Design at Innovate UK, is one of the judges. The deadline is 6 July and last year’s winner Open Bionics, which is developing the next generation of bionic limbs, took home 1 million Yuan (around £115,000). Find out more here.

Seeing the wood
Our friends at Enterprise Nation have announced the Amazon Small Business Accelerator, a major support package for 200,000 small businesses across the UK. By joining the programme you can access a bundle of business offers worth over £2,000. Find out more here.

Read the whole newsletter here, and sign up here.

Embracing Tech & Innovation

The COVID-19 pandemic has presented many challenges for the UK’s female entrepreneurs but it has also created an opportunity to lean into new technologies. FFF Member, Rt Hon. Baroness Kramer stressed this point in our recent APPG Webinar on The Economy, Technology and Bouncing Back. So how is the Government investing in the opportunities that will underpin the UK’s future economy? We cover the latest policy updates and some new highlights from our inspiring Members in this week’s FFF blog.

FEMALE FOUNDER HIGHLIGHTS

Here is a quick wrap up of this week’s news highlights, featuring some of our inspiring Members:

• Erika Brodnock, was quoted in a Sifted article by Amy Lewin, talking about a new report by Extend Ventures and YSYS into the impact of COVID-19 on Black and Ethnic Minority-Led Businesses. “For too long, minority entrepreneurs have remained unsupported and have needed to fend for themselves” said Erika, “we need to ensure this isn’t going to be the same for newer businesses”. You can read the full report here. 

• Streetbees, founded by our Member Tugce Bulut, has been selected by the World Economic Forum as one of the most promising Technology Pioneers of 2020. Many of the Technology Pioneers are using their tech to support COVID-19 responses around the world, like Streetbees COVID-19 Return To Life Monitor.

• “The industry must navigate an ethical way through this crisis by providing support not only for businesses’ immediate teams but also international and developing world partners” said Laura Tenison, founder of Jojo Maman Bébé, in her article for Drapers. Laura also spoke with Marc Smith for Director earlier this year on her commitment to achieving B Corp status and the company’s dedication to putting people and the planet above profit.

• “It’s important that we don’t lose many of the start-ups that are out there because they are our future”. Read the highlights from our APPG Webinar with Rt Hon Baroness Kramer on The Economy, Technology and Bouncing Back here.

GOVERNMENT SUPPORT

1. Future Fund Diversity Data Published

The British Business Bank has published data on the companies that have been approved to receive Convertible Loan Agreements since the Future Fund Scheme launched on 20 May.

The data reveals that 79% of funding went to companies with mixed gender management teams. Since the launch, more than 30 venture capital firms and angel groups have become signatories to the Government's Investing in Women Code, alongside the Future Fund. Read the full press release here.

Priya Guha, venture parter at Merian Ventures said in a Sifted article that “Whilst the self-reported stats for management teams are encouraging, using this as the measure for diversity data could be misleading. I would encourage the British Business Bank to publish the figures showing the percentage of BAME and female founders who were successful which will give a truer picture of the the diversity of the Future Fund”.

2. Future Tech Trade Strategy launch

In a recent headline policy announcement, Rt Hon. Liz Truss MP, Minister for Women and Equalities and Secretary of State for International Trade, launched the Future Tech Trade Strategy.

The strategy includes a package of interventions to attract more investment from around the world into the UK tech sector. Among the other measures, it includes:

• A Digital Trade Network (DTN) for Asia-Pacific, to help support UK SMEs break into the Asian market;

• The launch of a new Tech Exporting Academy, which will provide expert advice to UK scaleups;

• A new DIT platform (think virtual trade shows); and

• Creation of 25 tech export champions across the UK.

Diversity is at the forefront of this agenda. In order to help make the UK’s FinTech ecosystem more diverse and bring more female tech entrepreneurs to the UK, the DIT launched it’s Women in FinTech Global Initiative. You can find out more about this initiative here. 

3. Re-opening your business safely during COVID-19

The Government has developed a tool to help businesses in England reopen safely during COVID-19. This tool is designed to help business owners carry out a risk assessment and make adjustments to their workplace. Find out more here. 

4. Code of practice for the commercial property sector and further halt to business evictions

The Government has published a new code of practice to encourage landlords and commercial tenants to map out a plan for economic recovery. The code has been developed with leaders from the retail, hospitality and property sectors to provide clarity for businesses discussing rental repayments with their landlords and to encourage best practice. You can read the code of practice here.

The Coronavirus Act has also been extended to 30 September 2020, meaning businesses who miss a payment in the next three months will not be forced out of their premises. 
 
BARCLAYS SUPPORT AND OPPORTUNITIES

1. Barclays Entrepreneur Awards – now open for nominations!

The Barclays Entrepreneur Awards are back for the fifth year running and whilst the start to 2020 has been a difficult time for all, it's given us even more reason to celebrate entrepreneurs and recognise their achievements. So often it's their exceptional innovation alongside their drive for social change and to overcome challenges that keep the country moving forward. 

To find further information on the awards itself, please visit our website here and you can find further details on the award criteria and categories directly on our nomination website. Submit your nomination by Friday 3 July.

2. Virtual Event – with Nicky Goulimis (co-founder and COO of Nova Credit)

Nicky Goulimis, the Co-Founder and COO of Nova Credit will be joining Juliet Rogan, Head of Barclays High Growth and Entrepreneurs, for an informative discussion on how to rapidly scale and expand your business. In this session on Thursday 9 July at 5pm, you’ll find out how Nova Credit went from light-bulb moment to a $50m Series B funding round, and learn more about Nicky’s experiences as a successful female founder. To sign up for this event, please register here.

3. Barclays Coronavirus Support Hub

The Barclays coronavirus support hub provides the latest information, tools and guidance to support businesses throughout the coronavirus pandemic. This hub includes information about Barclays’ products, webinars, Facebook live events and more information on how to access the government schemes. You can also download Barclays’ coronavirus checklist to support your business resilience planning throughout this period. There is also an updated FAQs section on this hub.

4. Barclays Ventures Female Founder Events

Barclays Ventures has stayed committed to supporting the start-up ecosystem during the COVID-19 crisis and has delivered a variety of measures to support female founders. From roundtable catch-ups to live panel sessions with Barclays Business Bank to discuss financing options through COVID-19, the passion with which Barclays Ventures supports tech startups remains steadfast. Check out future events across Barclays Ventures here.

5. Barclays UK Investment Insights Podcast : A high growth digital future

Listen to Juliet Rogan, Barclays Head of High Growth & Entrepreneurs talking to Phil Attreed (Barclays Head of Investment Consulting) and Will Hobbs (Barclays Chief Investment Officer) about the pandemic, Brexit and current trade tensions, as well as the accelerating the transition to the UK’s digital future. You can find the podcast here.

We want to inspire female entrepreneurs across the UK. Do you know any inspiring female entrepreneurs? 

Connect them to jess@tenentrepeneurs.org and sign up to our Newsletter, which we send out every two weeks.

If you share content with the hashtag #femalefoundersforum, we will retweet you or repost it.

Can venture capital level up the UK?

For understandable reasons, the government’s flagship “levelling up’ agenda has not attracted much attention over the past few months. But as the debate shifts to recovery, policymakers will be on the hunt for ideas to close the UK’s large regional divides. 

High growth entrepreneurship will be key to improving productivity in cities and towns outside the South East. To that end, I suspect we will see more proposals along the lines of Lord O’Neill’s ‘Good Bank’ (see Philip Salter’s assessment) to invest in growth capital outside London and the South East.  And even if central government doesn’t bite, devolution and more financial freedom may prompt some Metro Mayors to try their hand. 

The temptation to try and kick-start a venture capital industry is easy to understand. After all, venture-backed startups have a disproportionate impact on innovation, job growth, and productivity.

But for every success story like Israel’s famous Yozma programme, there are a dozen failed attempts where public money has been wasted with little to show for it. If we’re to avoid repeating those mistakes, it’s worth studying what’s worked and what hasn’t in the past. Thankfully, a pithy new paper from Harvard Business School’s Josh Lerner identifies the common factors that explain why most attempts to boost venture-backed entrepreneurship fail.

Incentives

First, it’s worth recognising the limits of public officials. Lerner’s assessment is tough, but fair.

“Government officials may have many valuable talents and play incredibly important roles; but the skill sets associated with successfully identifying and funding entrepreneurial businesses are very different from those encountered in their typical daily work. The ambiguity, complexity, and specialization associated with these ventures makes these tasks quite challenging.

In many instances, officials may be manifestly inadequate to the task of selecting and managing entrepreneurial or innovative firms. Many examples can be offered of government leaders who did not think carefully about realistic market opportunities, the nature of the entrepreneurs and intermediaries being financed, and how the subsidies they offered would affect behaviour. Whether they were rules that affect the ability of firms to accept outside financing, offshore routine coding work, or respond to shifts in customer demands, well-intentioned officials can make rules that prove to be very harmful to those they mean to help.

One potential solution is to bring in outside talent. But in order to get the best you need to be willing to pay high wages. The issue is that being part of the public sector brings additional scrutiny. Take the case of In-Q-Tel, a venture fund set up by the CIA to give them access to more cutting-edge tech. To get the right people, it was set up as an independent, not-for-profit entity. This allowed them to pay high salaries and offer performance related rewards. However, negative coverage in the New York Post led to intense scrutiny over compensation and pushed many investment staff to leave.

Regulatory Capture

A further issue faced by public-venture schemes is regulatory capture. Take the Department for Energy’s Clean Energy Initiative. 

“…the Department of Energy had little transparency about the criteria used to select the awards to cleantech firms discussed in the introduction. Reflecting this lack of clarity, firms responded by hiring lobbyists to seek awards. For instance, more than half the cleantech companies in the portfolio of New Enterprise Associates, a large U.S. venture firm, hired lobbyists to seek to influence the rewards”

As well as leading to waste, there’s also a risk of missing out on the best ideas. Lerner notes “the most creative entrepreneurs are often outsiders”, so any process that ends-up favouring well-connected individuals will leave high-potential investments on the table.

Geography

But arguably the biggest concern for policymakers attempting to do regional policy through venture capital is the poor performance of public venture capital in areas without private venture capital.

Take the Small Business Innovation Research (SBIR) program. It’s the largest public venture programme in the US and spoken highly of by UK politicians such as Neil O’Brien MP. Its results are impressive – businesses that receive grants through SBIR grow faster than similar businesses who didn’t get SBIR funding. However, not all grants paid-off equally well. When Lerner looked at attempts to impose geographic fairness requirements on SBIR,  he found that in high-tech regions the average recipient added 47 jobs (effectively doubling in size), while recipients in other regions only added 13 jobs. 

Political pressure can force programmes to fund weaker companies. For instance, businesses in every one of the 435 congressional districts have received SBIR grants despite high-tech businesses typically clustering together. 

This isn’t to say that some regions wouldn’t benefit from additional public support, but there needs to be some already existing demand for venture capital or else funds will be forced to invest in weaker businesses.

On a similar note, there’s a tendency for policymakers to decide to invest based on hype rather than investment fundamentals. For instance, 49 out of 50 US states have started programmes to promote biotech. Yet biotech requires a skilled scientific workforce and access to patent lawyers that only a few locations in the US possess. Ignoring this economic reality will often have unintended consequences. For instance, often when promising biotech firms were funded, they swiftly moved to a region with an established biotech sector.

Avoiding waste

The best way to avoid the pitfalls discussed above, while supporting a nascent venture sector, is to provide matching funds. Israel’s highly-praised Yozma programme provided foreign venture investors with matching funds (typically on 60% private, 40% public basis). This created discipline and ensured that public money wouldn’t be invested in businesses with poor prospects for political reasons. It also reduced the risk of capture and lobbying as private investors with skin-in-the-game have a strong incentive to only invest in viable prospects. The government’s Future Fund programme, which matched private venture investment 50:50 to provide a runway for startups struggling to raise investment due to coronavirus, is another good example of a well-designed intervention.

If politicians want to replicate London and Cambridge’s recent startup successes elsewhere in the UK, then they should proceed with caution and avoid the many pitfalls of past schemes by limiting their interventions to matching the private sector.

Fair Dinkum

Jo Johnson, former Universities, Science, Research and Innovation Minister, has written a report on the future of international students. The headline recommendation is to double the UK post-study work visa offer (Graduate Immigration Route) from 2 to 4 years, which would have a hugely positive impact on both the university sector and UK entrepreneurship.

Universities have suffered more than most sectors from the pandemic. Many are anticipating a drop in international students of 50-75%, which would represent a significant reversal for one of the great boom sectors of the globalised economy.

Universities are reliant on international students. As Johnson argues in his introduction, Governments have long required universities to develop additional revenue streams to cross-subsidise research, which loses 25p in the pound, and the teaching of certain strategically-significant laboratory and studio-based subjects that cost more to deliver than the £9,250 fees paid by domestic students. As such, “far from squeezing out qualified domestic students, overseas students have made viable courses and research opportunities that would otherwise not be offered.”

The report references our Job Creators research (which Johnson wrote the Foreword to), and the headline stat that 49% of the UK’s fastest growing start-ups have at least one immigrant co-founder, including 9 of the list’s 14 unicorns.

It draws on the case studies of a couple of top entrepreneurs in our network: “A cursory examination of the country’s top start-ups illustrates the case for keeping the country open to international students. Take Joshua Wöhle, the founder of $100m+ Internet safety company SuperAwesome, who initially moved to the UK from Switzerland to study Computer Science at King’s College London, or Christian Nentwich, who founded his $100m+ fin-tech start-up after completing his PhD at University College London.”

In recent years, UK international student numbers have been flat, while Australia, which is on the verge of overtaking the UK in terms of total overseas numbers, has now seen steady year-on-year growth of around 14%. Increasing the post-study work visa offer will help ensure we don’t land up any further down under.

Good to GREAT
GREAT is the government’s flagship international marketing strategy which in light of covid-19 will be launching a new campaign.

It will shine a light on inspirational UK businesses that have gone above and beyond during the covid-19 pandemic to operate for their employees, customers or contributed to their communities.

They’ve asked us for recommendations of a broad range of businesses from across the UK. You’ll need to be able to tell an inspirational story related to your work during the pandemic. If you want to be considered for this, send me a brief note on how your business has adapted, with a link to your company website and a contact number and I’ll pass it to the powers that be.

On the Blog
Anton Howes has written about how to improve copyright to engender more innovation while protecting rights-holders. Under the status quo, law-abiding would-be users of copyrighted material face massive hurdles when they want to use content, for which the creator is now deceased. In order to conduct a ‘diligent search’ and track down the current rightsholder to avoid liability to infringement suits, creative entrepreneurs are forced to become expert genealogists. It creates a massive barrier for innovators and creatives.

To solve this problem, Anton suggests replicating the US system, whereby works have to be registered a certain number of years after the creator’s death, in order for the rightsholder to bring an infringement case.  This idea might be developed into a research paper, so do get in touch with him if you have any feedback or potential case studies to illustrate the problems with the current system.

I like big ideas, and there are few as big as the suggestion that the UK sets up a sovereign wealth fund. However, as I wrote this week, there are reasons to be cautious about political interference. The idea being mooted is for this fund to invest in key businesses outside of London as part of the Prime Minister's levelling up agenda. I argue we should tread carefully, as this is an unusual remit for a sovereign wealth fund, and we already have policy levers and established institutions to support the levelling up agenda.

Support Ultrapreneurship
Julian ‘The Ultrapreneur’ Hall got in touch to share details of his upcoming online kids business fair, which is normally a physical event. Ultra Education is a leading social enterprise, teaching entrepreneurship to children from 7 to 18. Julian's mission is to increase the life chances of the most disadvantaged children using the skills and mindset of entrepreneurship, and over the years he has been an impressive and active part of our work around enterprise education. He is looking for support and collaboration for his inaugural online business fair. You can get in touch with Julian here.

Read the whole thing here, and sign up here.

Should the UK start a sovereign wealth fund?

Among the big ideas that have been suggested to support the UK’s economic recovery is the creation of a sovereign wealth fund. As reported in the Daily Mail, officials are understood to be 'actively considering' a £25bn taxpayer-backed fund. “Under the plan, the Government would buy shares in key businesses outside of London as part of Prime Minister Boris Johnson's agenda to strive to 'level up' the entire country after lockdown ends.” Lord O'Neill, who is pushing this idea hard, has dubbed it the ‘Good Bank’ – but is this a good idea?

Levelling up is an unusual justification for the creation of a sovereign wealth fund. Traditionally, they’re used by commodity-rich nations to invest surplus income, diversify income streams and accumulate savings for when the commodity revenues dry up. It’s a way of counteracting Dutch Disease, whereby an increase in the economic development of a specific sector (e.g. the discovery of large oil reserves) can lead to a decline in other sectors as they sap talent and resources. With high government borrowing and North Sea oil production in steady and perhaps terminal decline, the traditional justifications don't make sense for the UK.

Even when they are started for the traditional reasons, sovereign wealth funds aren’t a surefire bet, but a few have performed well. Singapore’s GIC, the Abu Dhabi Investment Authority, and Norway’s Government Pension Fund Global are envy-inducing. But due to the logic of their creation, their remit is nothing like the proposed ‘Good Bank’. Singapore's GIC, for example, is diversified across multiple asset classes, invests purely overseas, and is mandated to beat inflation.

GIC is run with strict investment discipline, as chief executive Lim Chow Kiat explains: 

“So the team have to make a proposal that what they are going to do will be better than the beta that they have. Their job – their key performance indicator, their bar – is to do better than what they have foregone. There is a cost to it: the opportunity cost of foregoing beta and the riskiness of the investment. It’s not enough that you do better than beta. You have to deliver something risk-adjusted to account for the additional risk you have taken on.”

In Boulevard of Broken Dreams, Josh Lerner argues that sovereign wealth funds face the same problems as other government schemes to promote venture activity: “the temptation to invest too locally without considering broader options, a failure to assess performance, and pressures to invest in the ‘pet projects’ of political leaders and their associates.”

Lerner cites the example of the University of Rochester to illustrate the point that goals are often in conflict – for example, between supporting local economic growth and running a successful fund. In the early 1970s it had the third largest endowment in the country, after Harvard and the University of Texas. However, the administrators decided to invest locally in companies such as Kodak and Xerox, which suffered in the 1970s and 1980s. As a result, the university had to dramatically downsize in the mid-1990s. “In this case, the goal of supporting local businesses ran counter to the goal of buffering the university against financial shortfall,” says Lerner.

Looking at successful sovereign wealth funds around the world, it’s easy to think that imitation is the best policy. It’s particularly galling for some, as perhaps the UK could have used its bonanza from North Sea oil, or even its prizatizations, to endow what might now be a significant fund. However, there is a question of whether North Sea oil and privatizations helped fund tax cuts that had a greater positive impact on the economy than a fund would have. 

For GIC’s Lim Chow Kiat: “[T]he unique thing is not what most people see. The most unique thing is the governance arrangement. The government makes it very clear and is very disciplined about that – to leave GIC alone to just focus on making money. It is hard for a lot of governments to do that.”

At the extreme, a fund buying shares in key local businesses risks corruption, as Malaysia’s domestic-focused 1MDB scandal shows, but more likely it would be a sub-optimal allocation of resources like the University of Rochester. The UK already has a flourishing venture capital industry and UK Research and Innovation has a budget of £7 billion to fund innovation. There’s a lot the government can do to support more innovation – opening up pension funds to venture capital would be a small change with potentially large consequences. 

Sovereign wealth funds are a nifty policy solution for countries with surplus income and large oil reserves. They might also be a useful way for countries like Turkey, Romania, India and Bangladesh, who are creating a new breed of sovereign wealth funds whose role it is to support the growth of their investment industries, while potentially circumventing red tape and other local political challenges – although the jury is still out. The UK has neither the surplus income, nor the local problems that couldn’t be better circumvented through established institutions like Innovate UK and British Business Bank. A sovereign wealth fund shouldn’t be applied crudely to the UK without first considering if there are better policy levers and established institutions to meet our stated goals.

Burnt by Berne

The UK’s creative industries are a major success story - publishing, television, plays, movies, and video games, account for over 10% of all UK exports, despite accounting for about 5% of GDP. Yet the system they rely upon - copyright - is set up in a way that often harms both rights-holders and people who want to use the copyrighted material. While the sector is already extraordinarily successful, and widely considered world-beating, it could be better still.

The UK, along with most other countries, is signed up to the Berne Convention on copyright, which sets a minimum copyright duration of 50 years after the creator’s death. In the UK the duration of copyright is even longer than the minimum – following an EU Directive of 1993, for most kinds of work it is now 70 years after death, with only a few exceptions. 

At first glance, a duration for copyright of 70 years after death would appear to be a sign of very strong intellectual property rights. But the reality is that they are extremely weak. Copyright infringement is rife, to the detriment of creators, their heirs, and the people who commissioned the works. Indeed, almost every single person in the country has probably unknowingly committed copyright infringement and not even realised it. The weakness of copyright partly stems from the difficulty of enforcement – the onus is on the copyright holder to identify instances of infringement, ask for infringers to cease and desist, and in some cases to prosecute. But perhaps more importantly, it also stems from the significant obstacles presented to law-abiding would-be users of copyrighted material to even identify the relevant rights holders. Respecting copyright laws is often too costly.

When a creator is still alive, it is more straightforward to find their contact details and ask their permission to reproduce their content. In cases where they may have ceded their copyrighted material to another, the owners can also often easily be found - a book publisher, for example, is likely to record whether the author owns the copyright to the work, or if the author ceded those rights to the publisher. Yet after a creator’s death, it becomes significantly more difficult for a would-be user of content to find the rights holder. With a duration for copyright lasting 70 years after the creator’s death, it is entirely possible that the rights to the content might pass through three, four, or perhaps even more generations of a creator’s heirs. Indeed, the heirs by that stage may be totally unaware of the fact that they even own the rights to the content.

In such cases, the government’s current guidance for would-be users is that they should undertake a “diligent search” for the copyright holders. Assuming that the original creator can even be identified, the government currently recommends obtaining a subscription to genealogical services like Ancestry.co.uk, ordering wills to determine the creator’s heirs, contacting a range of professional organisations that the creator may have been a member of to determine the details of their lives, and conducting a variety of other searches. Essentially, it recommends turning yourself into an expert genealogist and private investigator. For example, it might take weeks of work to conduct a diligent search in order to use a single image created in the 1920s, which just happened to have been made by a creator who died in 1951 - just before the 70-years-after-death term was up. The time cost alone, even apart from the money cost of such a search, may be so high as to make it not worth the while of the would-be user to bother. That is, if they are strictly law-abiding. Given the cost and the possibility that the heirs of the creator have forgotten about it, the would-be user might simply infringe the content and hope that nobody notices.

To try to remedy this situation, the government in 2014 introduced an “orphaned works” licence and register, whereby a would-be user could demonstrate that they had undertaken a diligent search but had still failed to locate the rights holder, and thus pay the government for a 7-year licence to use the work for both commercial and non-commercial uses. But this policy has clearly been a failure. The onus has remained entirely on the would-be user to incur all costs in terms of money and time, and indeed to pay the government an additional cost on top of that. In the 6 years since the register went live, only 1,011 works have been registered – despite the fact that there must in fact be millions of such orphaned works. Indeed, a quick skim of the register reveals that the orphaned works list has sometimes been misunderstood, with museums, archives and public bodies obtaining licences for works that are clearly well out of copyright anyway (e.g. the manuscript journal of someone who died almost 300 years ago).

The overall effect of the law as it currently stands is that much of the creative output of the twentieth century is simply not used. This inevitably has a stultifying effect on the creative industries, and is also a disservice to past creators, whose works must go unused and forgotten, or else infringed upon. The very few exceptions are when long-standing and wealthy corporations, like Disney, are well aware of their creative content and have the resources to aggressively prosecute infringers. By analogy, the situation as it currently stands is like the country having vast estates of habitable buildings, of which the owners are often totally unaware, and which the would-be buyers cannot purchase because they cannot find the owners, leading to widespread squatting or else total dilapidation. 

The situation also leads to instances like that involving Google Books. Google, having scanned and published millions of the world’s written works from the twentieth century, hoped to spread that knowledge to the world at large. Yet many of the works have had to be restricted or removed from the web because it is too costly for even a behemothic company like Google to work out who now owns the rights to them. Although the work of scanning and uploading has all been done, the law makes it too expensive for the works to be revealed.

Removing these obstacles would help boost Britain’s knowledge economy. But how? Trying to shorten the duration of copyrights below 70 years after death is likely to meet fierce resistance – it is difficult to roll back rights without seeming expropriative or unjust. And even if copyright durations were to be successfully shortened for future works, it will likely only have any effect on the creative industries after well over a century, when the copyrights of still-living creators finally expire. To have a more immediate effect, we need something better.

Instead of changing copyright’s duration, the UK might implement a system whereby works have to be registered after a certain number of years after the creator’s death, in order to exercise certain aspects of the copyright. Such a system was in place in the US before 1989, for example, before it joined the Berne Convention. But the treaty unfortunately forbids such registration systems, and it seems unlikely that the UK could easily depart from it. Nonetheless, the US has come up with an interesting compromise: although registration is no longer a requirement in the US for holding the copyright, it is still a prerequisite to filing an infringement suit, especially if attorneys’ fees and statutory damages are to be recovered. Thus, the US technically conforms to the Berne Convention while also continuing to see the benefits from a registration system. Such a compromise may well be worth emulating in the UK, to cover works by creators who have been dead a number of years. The creators themselves would thus never have to worry about registering the work, continuing to own their copyright from the moment of creation, while their heirs and estates would have a very minimal administrative burden placed upon them if they chose to vigorously prosecute infringers. Creators, inheritors, and would-be users would all benefit from such a system, and would give a second life to the creative output of our ancestors.

BAME Founders

Current events and a few emails from entrepreneurs have spurred us into action to undertake more policy work on BAME (Black, Asian and minority ethnic) entrepreneurship. One founder who got in touch, has helpfully shared some links that I recommend reading:

– Sifted: We don't need your empty gestures; we need action
– Business Insider: Black founders speak out powerfully on the fight against everyday racism in the UK
– Pioneers Post: I hope we have hard, uncomfortable and honest conversations
– 100+ diversity in tech communities in Europe
– The work of YSYS

So what next? With support from NatWest, we’re putting together an APPG for Entrepreneurship Webinar on BAME entrepreneurship. You can register your interest by dropping us an email. I hope and expect that this will be the start of some more focused policy work.

BAME entrepreneurship policy overlaps with some of our previous work on immigrant founders – and Sam Dumitriu has just written an excellent article making a powerful case for why we should let asylum seekers work – but, of course, it is also about British-born BAME entrepreneurs. I’m keen to hear from anyone who wants to work with us on this. Let's make this as impactful and sustained as our Female Founders Forum project that we've been working on with Barclays for years.

Trade shows
Coronavirus has put a dampener on London Tech Week, which is normally abuzz with hundreds of events. It didn’t stop some serious headline policy announcements though, with Rt Hon. Liz Truss MP launching the Future Tech Trade Strategy. 

It includes: an £8m Digital Trade Network (DTN), a joint DIT-DCMS project for Asia Pacific to support UK tech businesses to internationalise and attract talent to the UK; the creation of a new Tech Exporting Academy, which will provide expert advice for high-potential SMEs; a new DIT platform (think virtual trade shows); the creation of 25 tech export champions across the Northern Powerhouse, Midlands Engine, London and the South; and quite a lot more. 

We’ll have a thorough Policy Update on all the details early next week, which you can sign up for here.

#Influencers
We’re in full swing with our APPG for Entrepreneurship Webinars. You can read pithy summaries and rewatch the webinars on YouTube:

– Disability and Entrepreneurship in the Time of Coronavirus, with Dr Lisa Cameron MP, Liz Johnson and Kush Kanodia.
– Economy, Technology and Bouncing Back, with John Penrose MP, Gary Richards (Mishcon de Reya) and The Rt Hon Baroness Kramer.
– Innovation, International Trade and Economic Recovery, with Katherine Fletcher MP, Chris Hulatt (Co-founder Octopus) and Andrew Griffith MP.

These wouldn’t have been possible without the support and expertise of Mishcon de Reya and Octopus. Incidentally, I recommend checking out Simon Rogerson blog from Octopus – particularly his reflections on leading a company during this challenging time, and signing up to Mishcon de Reya’s updates on areas that impact your business, which I find extremely useful.

As mentioned, we’re teaming up with NatWest on a BAME entrepreneurship Webinar, but we’re keen to undertake more – not least because MPs and Peers are champing at the bit to get involved. Just let me know if you or your company want to work with us on one or more.

Sage advice
I’ve been meaning to announce this for a while, but what with one thing and another, it slipped my mind. Sam Dumitru has put together an amazing team of Research Advisers, which really ramps up our capacity. Dr Vicki Belt, Adam Corlett, Dr Christopher Haley, Dr Robyn Owen, Dr Charlotte Reypens, Leo Ringer, Kajal Sanghrajka, Matt Smith, and Stian Westlake are all on board, supporting the planning and editing of all our research projects. 

If good management really is surrounding yourself with people smarter than yourself, I think I deserve a pat on the back. Just check out Stian’s excellent article with Jonathan Haskel on how a government should respond to a pandemic in an intangible-intensive economy.

BBB Diversity 
The British Business Bank is carrying out a significant piece of research with Ipsos MORI. They’re aiming to understand the experiences of people who have an idea for starting a business, or who have launched and run their own business, whether currently ongoing, or in the past. 

They're particularly interested in how diversity, such as gender and ethnicity, impacts and interacts with entrepreneurship. The results will be used to inform future initiatives aimed at supporting business ideas and founders beyond Covid-19, including improving diversity within the ecosystem. The deadline is 26th June, and it’ll only take 15 minutes. Have your say.

Read the whole newsletter here, and sign up here.

Let asylum seekers work

In April alone, the UK economy shrank by 20%, the largest monthly contraction on record. The Chancellor, Rishi Sunak, will have an overwhelming priority: enable a V-shaped recovery and prevent long-term damage to the economy. The fear is that as jobs are lost and businesses cease trading, workers will miss out on opportunities for career progression and won’t gain skills on the job. To avoid that bleak prospect, the government has rightly made a massive intervention into the economy, directly paying the wages of millions of workers and guaranteeing billions of pounds worth of loans.

Yet while the Chancellor uses every tool at his disposal to prevent economic scarring, his colleague the Home Secretary oversees a policy that inflicts it. Asylum seekers are banned from seeking work until they have been waiting for a decision on their asylum claim for over a year. Even then, they can only apply for jobs on the shortage occupation list.

As a result, asylum seekers are forced to rely on the modest benefits they qualify for. All the while, their skills decay through lack of practice and they miss out on the best possible opportunity to learn English and integrate.

A new study quantifies the impact of the ban. By exploiting the fact that different countries have imposed bans at different times and of different lengths, economists Francesco Fasani, Tommaso Frattini, and Luigi Minale are able to identify the long-term impacts of bans.

Their results are significant, if unsurprising. They find that the negative impacts of bans from working persist for a long time, with refugees less likely to be in work a decade on. They estimate that an asylum seeker work ban delays the integration process for refugees by 4 years. Their findings show that refugees exposed to bans are more likely to give up searching for a job altogether once they are allowed to work. 

Refugees exposed to a ban are less likely to be proficient in the host country’s language, less likely to be in a permanent or high-skilled role, and more likely to be in receipt of benefits. The authors suggest “being placed on welfare immediately upon arrival may generate a culture of welfare reliance, leading to lower motivation to engage in the labour market.”

Adding up the negative long-run effects of employment bans across Europe, the authors estimate a GDP loss of around €4,100 per banned refugee per year. It’s worth noting this estimate undercounts the harm of employment bans, as it does not include the output loss in the initial year of forced idleness. 

The case for ending the ban is overwhelming. That’s why over a year ago, we joined a coalition of 150 charities, faith groups, businesses and unions to support Refugee Action’s campaign to Lift the Ban. At the time, the then Home Secretary, Sajid Javid MP expressed interest in reviewing the ban. As Chancellor Rishi Sunak prepares to do whatever it takes to prevent long-term damage to the UK’s labour market, he should borrow a no-brainer from his predecessor.

Soft Law: A Brief Explainer

Regulation has its problems. It can take a long time to put it on the statute books, it is difficult to change and changes might then be politicised, it can require niche expertise which the government may not have and it can stifle innovations which no one has thought of yet. Governments which acknowledge these issues are faced with trying to protect people from problematic effects while also protecting them from the proliferation of red-tape. Soft law is a way of navigating this trade-off. Defined by legal scholars as “instruments or arrangements that create substantive expectations that are not directly enforceable”, it has been used recently for emerging technologies but has a long history of being deployed in a variety of sectors from healthcare to entertainment.

Soft law is usually created through consultation with stakeholders, including companies, trade associations, government organisations and charities. They usually take the form of voluntary self regulatory frameworks and they are enforced by mutual understandings or a complex system of accountability.

A good example of soft law in the UK is the advertising industry. The Advertising Standards Authority is an independent regulator. They do not interpret or enforce legislation. Instead, they have a code which ensures that advertisers do not mislead the public or cause harm and offence. The ASA enforces its policies by publishing lists of “bad advertisers”, sometimes by asking that their CAP Copy Advice team be allowed to review all adverts before they are launched, by contacting media owners and telling them not to take advertisements from problematic advertisers, or in cases where they believe breaches to be illegal, the ASA can refer marketers to Ofcom or the Office for Fair Trading who may then take legal action.

The main upside of soft law is that it allows more space for innovation. In fast developing fields technological change can outpace the expertise of government. In this climate, “hard-law” approaches may stymy innovation by prohibiting important activity or burdening companies with excess paperwork, applications and inspections. For example, when California first wrote their autonomous vehicle regulations they required vehicles to have steering wheels and human drivers. At this point Google had already developed a fleet of self driving cars which would have been illegal to test on Californian roads. Fortunately, these rules were later rewritten so they were in keeping with developments in the sector but the lag created unnecessary uncertainty, caused some trials to move state, and ultimately delayed the testing of these cars. Soft law avoids these problems by creating the space for new technology to develop while giving regulators tools to prompt industry to adjust their behaviour.

This has been effective recently when social media companies signed up to a voluntary code of conduct to combat child abuse. There have been growing concerns from governments who wanted access to encrypted messages to track down child abusers and other criminals. Tech companies have not wanted to provide this access, arguing that a “key” for governments could be exploited by hackers and would undermine encryption technology. As a result 25 of the biggest social media companies have signed up to a voluntary code of conduct which they negotiated with the governments of the USA, UK, Canada, New Zealand and Australia. This code commits the companies to addressing child abuse without hindering the development of encryption technology. 

It is not uncommon for industries to adopt a soft law self regulation approach when they see that public opinion and politicians are moving against them. In the early 90s the video game industry was under scrutiny by policy makers in the United States who were leading hearings on the subject of violence in video games and the corruption of society. In response to public outrage and the looming threat of “hard-law” bans on content, industry leaders created the Entertainment Software Ratings Board which gave content ratings to video games. The ESRB is primarily self-regulatory and retailers choose to enforce age checks. This means that video games are largely uncensored by law so that ratings are able to adapt with changes in social attitudes without these questions becoming highly politicised.

There are, however, drawbacks to the soft law option. Soft law, by not being formally codified, often leaves a climate of uncertainty. There are many new technologies which require investment long before they can come to market, and when it is unclear what regulation of that technology may look like that can be a risky proposition for investors.

It also means that regulations are weaker. In the above examples advertisers are still able to create adverts which some viewers may find offensive (even if in practice, they seldom do), companies are still able to make and sell video games which some groups believe cause violence, and when Facebook uses algorithms to detect child abusers they do not share the details of this process with authorities, so it is unclear whether they are more effective than traditional methods of catching people who share illegal material. As with most regulations, there are tradeoffs to be made, and people will have different preferences regarding certainty, enforceability and innovation. Soft law is no exception and cannot circumnavigate all these concerns, it is merely an extra tool which can be used instead of or alongside other forms of regulation.

Bouncing Back

This week, the Government has focused its attentions on the initiatives that will help the UK economy to bounce back from the coronavirus pandemic. In this week’s blog, we cover updates to the Government support schemes, the launch of recovery roundtables to unleash the UK’s growth potential and news highlights featuring some of our inspiring Members. 

FEMALE FOUNDER HIGHLIGHTS

Here is a quick wrap up of this week’s news highlights, featuring some of our inspiring Members and other female founders from the network:

• Mr & Mrs Smith, founded by our Member Tamara Lohan, has launched a crowd-funder to raise money for a night off for NHS and care home workers. The initiative is aimed at giving 1000 NHS workers a night at one of their hotels. To find out more and donate to the crowd-funder, click here. If you are an NHS or care home worker, you can apply for a free stay here. 

• Founder of Enterprise Alumni and our Member, Emma Sinclair has started #FounderHour with three guests joining each session.You can register for a #FounderHour Webinar here.

• June Angelides, founder of Mums in Tech spoke with Danielle Newhnan about lockdown life in London and the opportunities coming out of the coronavirus pandemic – “there has never been more accelerated innovation”. You can read the full interview here at Medium.

• Cofinitive, founded by our Member, Faye Holland, ran its #21toWatch Campaign and Awards this week. The campaign is run each year to showcase and highlight individuals and companies across Cambridge and the East of England who are setting the standards in innovation and entrepreneurship. 

GOVERNMENT SUPPORT

1. Self-Employment Income Support Scheme extended

The Government has announced a final lifeline for the self-employed. Those eligible for support under the Self-Employment Income Support Scheme (SEISS) will be able to claim a second and final grant in August 2020. The grant will be worth 70% of average monthly trading profits, covering three months’ worth of profits and capped at £6,570. For an update on the Scheme, check out our policy update.

2. Coronavirus Job Retention Scheme extended

The Government has explained how it intends to continue to support jobs as people begin to return to work. From 1 July 2020, businesses will be given the flexibility to bring employees on furlough back to work part time. In June and July the Government will continue paying 80% of furloughed wages, up to £2,500. From 1 August 2020, the payments will be tapered to reflect the fact that people will be returning to work as follows:

• August 2020 – employers will be asked to pay NI and employer pension contributions

• September 2020 – contributions will drop to 70%, with employers paying 10%

• October 2020 – contributions will drop to 60% with employers paying 20%

The scheme will shut in October/November. For more information, check our policy updates and our Twitter updates.

3. Business Secretary launches recovery roundtables

The Government has announced the launch of 5 new business-focused groups to unleash Britain’s growth potential and create new jobs. This is part of the Government’s plan to help the economy bounce back from the coronavirus pandemic. 

The ‘recovery roundtables’ will bring together businesses, business representative groups and leading academics to consider measures to support economic recovery. The roundtables will focus on 5 key themes: the future of industry, green recovery, backing new business, increasing opportunity and opening the UK for business. 

BARCLAYS SUPPORT AND OPPORTUNITIES

1. Barclays Back to Business Programme

Barclays has launched a free toolkit to help small and medium sized enterprises (SMEs) across the UK get back on their feet as they navigate the uncertainty created by coronavirus. The 'Barclays Back to Business' programme has been designed in partnership with the Cambridge Judge Business School and is open to all UK SMEs. The toolkit is designed to help business owners assess the overall health of their business, and create a tailored resilience plan for challenging periods. It is packed with practical tools including a working capital calculator, cash flow forecasts, and guidance on managing supply chain relationships.
 
Register your interest here. Cambridge Judge Business School will get in touch to confirm your place on the programme, including how to access the online platform, which launches on 22 June 2020. For more information, check out Barclays Back to Business Programme.

2. Barclays Entrepreneur Awards – now open for nominations!
 
The Barclays Entrepreneur Awards are back for the fifth year running and whilst the start to 2020 has been a difficult time for all, it's given us even more reason to celebrate entrepreneurs and recognise their achievements. So often it's their exceptional innovation alongside their drive for social change and to overcome challenges that keep the country moving forward.
 
To find further information on the awards itself, please visit our website here and you can find further details on the award criteria’s and categories directly on our nomination website. Submit you nomination by Friday 3 July.

3. Virtual Event – with Nicky Goulimis (co-founder and COO of Nova Credit)

Nicky Goulimis, the Co-Founder and COO of Nova Credit will be joining Juliet Rogan, Head of Barclays High Growth and Entrepreneurs, for an informative discussion on  how to rapidly scale and expand your business. In this session on Thursday 9 July at 5pm, you’ll find out how Nova Credit went from light bulb moment to a $50m Series B funding round and learn more about Nicky’s experiences as a successful female founder. To sign up for this event, please register here.

4. Barclays Coronavirus Support Hub

The Barclays coronavirus support hub provides the latest information, tools and guidance to support businesses throughout the coronavirus pandemic. This hub includes information about Barclays’ products, webinars, Facebook live events and more information on how to access the government schemes. You can also download Barclays’ coronavirus checklist to support your business resilience planning throughout this period. There is also an updated FAQs section on this hub.

We want to inspire female entrepreneurs across the UK. Do you know any inspiring female entrepreneurs? 

Connect them to jess@tenentrepeneurs.org and sign up to our Newsletter, which we send out every two weeks.

If you share content with the hashtag #femalefoundersforum, we will retweet you or repost it.

Is energy ripe for entrepreneurship?

If the UK is to meet our ambitious net zero target by 2050, then we will need to substantially reduce the emissions associated with heating our homes, powering our appliances, and fuelling our cars. If entrepreneurs and innovators are not able to find affordable low or zero-carbon options, then it will require us to make dramatic changes to our lifestyles. 

The good news is we have made real progress over the past decade. In fact, this past month for the first time since 1882, we went more than 28 days without using coal and greenhouse gas emissions from energy have more than halved since 1990. By taking coal off the grid, we have picked the low-hanging fruit of decarbonisation. The next phase will be more difficult and will require more entrepreneurial ingenuity.

Historically, innovation in the energy sector has been slow and start-ups have played a bit part. But that may be changing. A new paper assesses the prospects for innovation and entrepreneurship in the energy sector and finds that innovation is traditionally sluggish. R&D in the sector is low relative to almost any other industry and startups face a number of hurdles.

• First, there are large economies of scale in energy. Start-ups will typically require lots of up-front investment in capital before they can break-even.

• Second, energy is a commodity. In other sectors, start-ups can compete on cost or quality, and differentiate their product. In the energy sector, consumers will go for whatever’s cheapest.

• Third, there are long time lags between idea and commercialisation. Venture capitalists typically expect a return in five-to-seven years, but breakthroughs in energy may take decades. 

• Fourth, green innovators face a double externality problem. Knowledge spills over, and so their innovation benefits rival companies who can copy their new methods. Compounding the problem, without government intervention (e.g. carbon pricing), the social benefits of cleaner energy are not captured by the innovator, reducing the incentive to invest in green R&D. 

Stimulating green innovation will require us to overcome the above problems.  Understanding the obstacles to green entrepreneurship will also be key to finding the right policy responses. 

On the first three fronts, the authors argue that: “New energy technologies are often smaller and modular (e.g. solar panels, smart meters for homes), reducing the need for large capital costs. While energy remains a commodity, the popularity of products such as Nest thermostats suggests that product differentiation is possible for end-use technologies that improve energy efficiency and potentially improve grid management.”

However, while patenting and VC investment in the renewable sector increased substantially the first decade of the millennium, it has fallen off since 2010. It isn’t clear why this happened. It could, for example, be a result of researchers having picked off the low-hanging fruit. Or, we may simply have shifted from a research phase to a deployment phase. Innovation may still be happening but it might be the sort of incremental innovation that’s hard to patent and better kept as a trade secret.

We can’t ignore the role of pricing either. Unless polluters bear the full social costs of emitting carbon, then consumers will have little incentive to switch to cleaner forms of energy, and nor will innovators have as much incentive to create emissions-saving technologies. In an older paper, for example, one of the authors finds that a “10 percent increase in energy prices leads to a 3.5 percent rise in the number of U.S. patents in 11 different alternative energy and energy efficiency technologies”. The finding is corroborated in another paper from 2017: “A 10 percent higher fuel price is associated with about 10 percent more low-emission energy patents and 7 percent fewer fossil-fuel patents.”

However, it’s important to look at where high or low prices come from too. The paper cites research finding that “consumers are more responsive to changes in taxes than market-generated fluctuations in price, as tax increases are perceived as more persistent”. So while a carbon tax or a ULEZ charge might get you to switch to an electric vehicle, an increase in oil prices won’t.

There’s loads more in this paper, and I’ll probably revisit it in a future blog. Read it here. 

We’ve just kicked off a “Green Entrepreneurship” project that will look at how entrepreneurs, and their innovative technologies and ideas, can help deliver a more sustainable future. 

Regulation, Regulation, Regulation

It was just three weeks ago that I wrote about regulation, so I’ll try to keep it brief as I appreciate that for many it’s a surefire cure for insomnia.

Nevertheless, regulation really does matter for entrepreneurship in the UK. Good versus bad regulations can result in a business or sector being able to flourish or being stymied – it can be the difference between the UK becoming a laggard or a leader in a new technology.

We have been asked by the Better Regulation Executive to represent your views on regulatory changes to ensure an entrepreneur-led economic recovery. If you fill in this survey we will pass all views directly to them and pull out some to deliver in our presentation. It’s an opportunity to have a direct say on the future of regulation. There are no required questions apart from an email (we don’t like unnecessary regulations here), so answer as few or many as you want. But feel free to get into the nitty gritty of what’s impacting your business or industry as that’s where the real gems will be. We welcome expert input from non-entrepreneurs too.

Separately we’ve started work on a project considering broader regulatory reforms (you can get a hint about what this might look like here). Your views will also help inform this work and we may ask to use your insights as a case study for it. If you have any questions about this report get in touch with our research director Sam Dumitriu.

H is for
Today is World Environment Day. “One of the few benefits of the Coronavirus lockdown has been the dramatic improvement in air quality. To continue enjoying this unexpected bonus, we need to speed up the transition to zero-emission vehicles – like electric cars or hydrogen-powered buses,” argues Eamonn Ives in a report out this yesterday on how hydrogen can fuel a transport revolution.

As Eamonn makes clear, despite extremists on either side of the debate, we don’t need to choose between economic growth and environmental protection – both can go hand-in-hand. 

Even if we electrified all of Britain’s cars tomorrow, other modes of transport would still be emitting 56.2 million tonnes of carbon dioxide equivalent – 45% of transport emissions, or fully 12% of total emissions. Eamonn suggests innovation in hydrogen technologies will be part of the puzzle for these heavier vehicles for which electric batteries might never be suitable. 

Regulation matters (sorry, I can’t help myself today). We currently have some very perverse incentives at play. As the report details, each year the Government doles out around £250m to bus operators as part of the Bus Service Operators Grant (BSOG). Payments are based upon the volume of fuel consumed – paying operators 34.57 pence per litre of diesel burnt. What the BSOG strictly incentivises, therefore, is fuel consumption, as opposed to distance travelled – disincentivising reduced fuel consumption. This can be easily fixed.

More broadly, Eamonn calls for hydrogen to be given a much bigger role in transport decarbonisation by using the UK bus fleet as a testbed for the technology. “Embracing hydrogen would also give Britain an opportunity to lead the world in a vital sector and create thousands of green jobs – at a time when other economies are moving quickly to seize the global hydrogen market.”

Eamonn has written about the report for City AM and CapX, and is writing a report we’re undertaking with the Enterprise Trust on entrepreneurship and the environment. You can drop Eamonn an email to find out how you can get involved.

Starting Gates
Many of the world’s best companies were started in recessions. While access to finance can be a challenge, the disruption in talent may push the next Bill Gates into starting a business (Microsoft was started in the midst of the mid-1970s oil crisis). Gates famously dropped out of Harvard, but many great ideas are started or spun out of universities. 

The National Association of College & University Entrepreneurs – better known as Nacue – has been supporting entrepreneurship among students in higher education and further education for over a decade, and has opened up applications for students and graduates across the country to participate in its annual competition: Tata Varsity Pitch 2020. The competition is open to any current student studying at a UK based institution or anyone who has graduated since 2015. The application process starts with a 60-second video pitch and the deadline is 24th July.

If you know a student who has a business (or even just a great idea) – let them know about it.

Read the whole Newsletter here, and sign up here.

Level Best

The Chancellor has just announced changes to the furlough scheme.

As expected, in June and July the government will continue paying 80% of furloughed people’s wages, up to £2,500. From July, earlier than planned, employers will have the flexibility to bring back employees for a set number of days per week.

But furlough is being unwound. From August employers will be asked to pay national insurance and employer pension contributions, and from September taxpayer contributions will drop from 80% to 70%, with employers paying 10%. In October this will be 60% and 20%, after which the scheme will shut. 

Rishi also announced a final lifeline for the self-employed, following intense lobbying, including from 113 cross-party MPs. Those eligible under the Self-Employment Income Support Scheme (SEISS) will be able to claim a second and final grant in August. The grant will be worth 70% of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.

How to spend it
It can’t have escaped anyone’s attention that prior to coronavirus this Government’s main platform was ‘levelling up’ – that is, rebalancing the economy between London (and the South East more broadly) and the rest of the UK. There are plenty of policy levers that could be pulled to try to bring this about, but there are no quick fixes.

One lever that could be particularly powerful in the medium to long term is increasing R&D funding. The government has a target of increasing total R&D spending to 2.4% of GDP. This is expected to mean an increase of public sector funding from 0.55 per cent of GDP today to at least 0.75 per cent of GDP.

But how should public R&D be spent? There are a few key choices the government must make. Should the government spend equally everywhere? Should it spend where research is already excellent (i.e. Oxford, Cambridge and London)? Should it spend where businesses already spend on R&D? Should it spend where the economy is weakest? Should it spend where manufacturing is strongest? These are the questions explored in a new paper from Nesta (they have produced a nifty interactive tool that lets you see how these decisions would impact different regions).

The report calls for substantial devolution of innovation funding to remedy the regional imbalance in government R&D spending; the creation of new science and technology institutions outside London, the South East and East of England to create a more balanced distribution of research infrastructure across the nation; and UK Research and Innovation (UKRI) to take a lead in driving regional R&D rebalancing, addressing the systematic factors that have led to the current geographical concentration of R&D spending. 

On Tuesday, Nesta is hosting a webinar on the report, and Tom Forth, co-author of the report, has a useful Twitter thread that will save you reading the whole report. One chart that really stands out shows that UK regions like The West Midlands and North West England are almost unique in Europe, having high business spending on R&D, but very little public spending. Similar regions in France and Germany enjoy two to three times the state investment. 

Silicon what?
Coronavirus might also drive levelling up as companies change the way they work. Early survey data suggests that a majority of US hiring managers think workers are more productive working from home: 32.2% thinking it has increased versus 22.5% who think it’s decreased, and the likes of Facebook and Twitter announcing that they’ll offer a permanent option to work from home to most employees. 

Matt Clifford has written for Wired on how coronavirus might spell the end of tech hubs – and why that’s a good thing. While there are fears that not being present will lead to less innovation (due to less knowledge spillover and serendipitous meetings), Clifford is more optimistic: “far from breaking innovation clusters, remote work, if executed well, can create a new model for collaborative innovation – one that overcomes the limits of existing clusters and unleashes human potential around the world.”

Specifically, Clifford argues that remote working will overcome the diseconomies of scale of tech clusters, that new tools and practices will make collaboration at a distance more effective, and that opening up companies to more talent from around the world will outweigh any friction. This could be transformative for overall economic wealth, levelling up regions and giving individuals around the world greater equality of opportunity and freedom to live where they want.

Read the whole thing here, sign up to newsletter here.

Getting Back To Business

This week, our Female Founders have been at the forefront of a number of amazing initiatives, from developing new apps which track the social impact of the COVID-19 crisis, to sharing stories about mental health, in the hope that it will help others. It’s inspiring to see our Female Founders banding together in uncertain times and championing inclusive and diverse innovation. 

In this week’s FFF Newsletter, we cover the latest policy updates you should know about and share practical guidance to help you stay resilient in these uncertain times.  

UK GOVERNMENT SUPPORT

1. Innovative Businesses and Start-ups competition

The UK Government announced an additional £40 million funding package to support the UK’s next generation of innovative businesses, doubling their investment in the Fast Start Competition. The competition aims to fast-track the development of innovations, borne out of the coronavirus crisis and support the next generation of UK cutting-edge start-ups. 

2. Future Fund goes live

The Future Fund scheme went live last week and has opened for applications. Following the Save Our Startups campaign, the Government announced the Future Fund, a matched convertible loan scheme for startups looking to raise between £250k and £10m.

In last week’s Newsletter, we covered the open letter written by Emma Sinclair and Hephzi Pemberton, urging the Chancellor to set an “aspirational target” for backing diverse founders. Signatories included our Female Founders, Sam Smith, Tamara Lohan and Kathryn Parsons. 

The British Business Bank published new guidance ahead of the launch. You can read the FAQ here. For an update on the Future Fund, you can check out our policy update.

3. Updated Guidance: Holiday Entitlement and pay during Coronavirus

The UK Government has published new guidance on how holiday entitlement and pay will operate during the coronavirus pandemic. It is designed to help employers understand their legal obligations, in terms of workers who continue to work and have been placed on furlough, as part of the Government’s Coronavirus Job Retention Scheme (CJRS). You can contact the Advisory, Conciliation and Arbitration Service (Acas) if you have further questions. 

4. Updated Guidance: Statutory Sick Pay

The UK Government has published new guidance on how to claim back Statutory Sick Pay (SSP) paid to employees affected by coronavirus. The online service went live on 26 May 2020. The Coronavirus SSP Rebate Scheme will repay employers the SSP paid to current and former employees. The repayment will cover up to 2 weeks starting from the qualifying day of sickness.

5. Updated Guidance: National Cyber Security Centre advice for Sole Traders and SMEs 

The National Cyber Security Centre (NCSC) has launched advice and practical tips to help SMEs move their business online. The advice comes, as many SMEs have had to adapt their organisations to remote working environments. If you are self-employed or a sole trader, you can find useful advice here. If you are an SME, advice here may be useful.

BARCLAYS SUPPORT AND OPPORTUNITIES

1. Barclays Coronavirus Support Hub 

The Barclays coronavirus support hub provides the latest information, tools and guidance to support businesses throughout the coronavirus pandemic. This hub includes information about Barclays’ products, webinars, Facebook live events and more information on how to access the government schemes. You can also download Barclays’ coronavirus checklist to support your business resilience planning throughout this period. There is also an updated FAQs section on the hub.

Barclays is also developing further digital content, including Q&A videos with our Members, which will go live on our new YouTube channel. We will update you via Twitter, Instagram and LinkedIn when the Q&A videos go live.  

 2. Back to Business Live Broadcast

As lockdown is lifted and we all continue to adapt to the situations around us, Barclays is hosting a ‘Back to Business’ live broadcast as part of its wider Business Banking live streaming series on Thursday 28 May, 10:00 – 10:30.

Join the discussion on the Barclays Business Banking Facebook and LinkedIn channels where a panel of experts will be exploring the support currently available for businesses as well as the opportunities and challenges for SMEs during this time.

3. Barclays Back to Business Programme 

Your toolkit to build for tomorrow with the help of Barclays’ free online learning platform. Developed with Cambridge Judge Business School, the Barclays online programme is free for SMEs who are existing Barclays SME clients including Business Banking, Barclaycard Business, RISE and Eagle Labs tenants.

You’ll get practical frameworks to help you create a plan to sustain or grow your business during a period of uncertainty such as the current pandemic, downloadable workbooks, and you’ll be able to bounce ideas off a range of specialist from Barclays to finalise your plan at the end of the programme. 

Register your interest here from 28 May, and subject to availability, Cambridge Judge Business School will get in touch to confirm your place on the programme, including how to access the online platform, which launches on 22 June 2020. For more information Search ‘Barclays Back to Business Programme’

4. Barclays Eagle Lab headline RE-Defined

Barclays Eagle Labs are this year’s headline sponsors of RE-Defined. A virtual conference celebrating the successes and resilience of female founders and underrepresented women in business across the UK. Taking place on Friday 29 May the conference will include practical workshops, curated talks and a panel session featuring inspirational female founders and leading women in business. This is a ticket-only event – to secure your place click here.

5. Highlights from Barclays Ventures Panel

Barclays ran a Ventures Panel with two fabulous female founders – Michelle Kennedy, founder of Peanut and Amber Atherton, founder of Zypher. The panel ran on 14 May and covered actionable tips, how the founders have pivoted during the pandemic. It included inspiring stories of how they’ve done this whilst managing remote teams and battling with personal challenges.

FEMALE FOUNDER HIGHLIGHTS

Here is a quick wrap up of some of the news highlights, featuring our Female Founders. 

• Buddi, a company founded by our Member Sara Murray, has been selected by the UK Government to support the NHSX against COVID-19. Member June Angelides, founder of Mums in Technology, spoke to Squiggly Careers in their podcast 'Stories from the front line – managing my mental health'. 

• Our Member, Tugce Bulut, founder of Streetbees spoke with EU-Startups about how the current pandemic has impacted Streetbees. Streetbees has recently launched a COVID-19 Human Impact Tracker which is already being used by several consumer brands. Streetbees has also given free access to a number of non-profits including Amnesty International, the NHS and the London Mayor’s office

• Marta Krupinska, Head of Google Startup, Co-Founder of Azimo and one of our FFF Members, discussed with Spark how Google Startup, governments and NGO’s can partner to support entrepreneurs in the coronavirus crisis, so that we can come out of it stronger and more connected.

• Sam Smith, founder of FinnCap and an FFF member, wrote a letter in the Financial Times, making the case for better funding support for UK SMEs.

• Our Member, Annabel Karmel took part in Maternal Health Week, speaking about how she is dealing with lockdown and sharing her advice and tips for taking care of your mental health, during this crisis

• Last week, Liz Johnson, gold-medal winning Paralympian and Co-Founder of The Ability People, spoke to Dr Lisa Cameron MP and Kush Kanodia about the key issues impacting disabled entrepreneurs in the APPG for Entrepreneurship Webinar.

We want to inspire female entrepreneurs across the UK. Do you know any inspiring female entrepreneurs? 

Connect them to jess@tenentrepeneurs.org and sign up to our Newsletter, which we send out every two weeks.

If you share content with the hashtag #femalefoundersforum, we will retweet you or repost it.

Bringing the Future Forward

When we finally see the easing of lockdown from the pandemic, the government will be looking for ways to jumpstart the pace of economic recovery. Ideally, in addition to businesses reopening and people going back to work, it will want to do something about innovation. So one of the things we’ve been exploring here at The Entrepreneurs Network is what kind of policies might constitute a “Big Bang” for UK innovation.

Here’s one: the patent buyout. A patent buyout involves the government buying a patent from its owners and making it open and available for the public to use. The best-known example is the French government’s 1839 purchase of Louis Daguerre’s patent for photography. By making the technology freely available to all, it unleashed a burst of creativity in the industry. Strangely, however, the policy has been very rarely used since, even though there’s some evidence that the expiry of key patents can have a similar effect.

Take 3D-printing. Although many 3D-printing techniques were invented in the 1980s, the industry was only truly unleashed in the 2010s when many of the original patents began to expire. So the impressive maker movement might have occurred decades earlier had the key patents been bought out and released. While the key, bottleneck patents were still in force, the number of 3D-printing patents in the US never exceeded 3,000 per year - typically minor improvement to the key processes. But since those key patents expired, the number of patents in the industry has grown to almost 45,000 per year. And that does not even capture the now flourishing movement to create open-source improvements to the technology too. So just imagine what might be done with a few judicious uses of the patent buyout in other key industries that are currently being held back. By effectively bringing forward the expiry date of a few bottleneck patents, the pace of change might be accelerated by up to two decades - the maximum duration of a patent.

When it comes to buying out patents, however, the main issue is in how to price them. It’s this problem that perhaps explains why the policy has not been more widely adopted. If the government sets a price that is too low, then inventors will be unwilling to sell their patents. If too high, then it might be seen as rent-seeking and become a waste of taxpayer money - what if they overpay for a near-worthless invention? But there is an ingenious solution to the problem, suggested in 1998 by Nobel-prize-winning economist Michael Kremer: to use auctions to discover the patent’s true value. Through this price-discovery mechanism, the government can identify the highest-value patents - those that are more likely to represent true bottlenecks slowing innovation down. And it can even discover how much it should offer to buy them out.

The idea is that a large number of different patents are auctioned for private sale, without the bidders knowing which of them the government will offer to buy. Thus, the bidders would still have an incentive to provide accurate valuations for all of the patents, as there would be a chance of them actually being able to buy them. To prevent collusion, the bidders would submit their bids simultaneously, and the second-highest would win. Thus, the private bids would allow the government to discover the patents’ market prices. Then the government would step in for some of the more valuable patents – ideally randomly selected, again to prevent collusion – and offer an amount that is a fixed percentage more than the third-highest bid.

So far so good. But another issue to figure out is which patents to even consider buying as part of an auction. In the UK alone, over 3,000 patents are granted every year, with tens of thousands being granted by the European Patent Office and thus effective in the UK, not to mention the hundreds of thousands of patents that cover the UK as part of international agreements. Nonetheless, the vast majority of these are unlikely to be bottleneck patents. So perhaps one way to narrow it down would be for the government to identify the key sectors that it already wishes to encourage as part of its current innovation strategy, and to then consult with industry leaders to identify a very large number of patents that they think are slowing the industry down - the larger the number of patents to get on this long-list, the lower the chance of collusion and rent-seeking through industry lobbying. It might then be a matter of whittling down that list randomly, again to prevent rent-seeking, to a shortlist of those that will actually be invited to participate in the auction.

Lastly, in terms of value for money, the private returns to innovation are almost always only a small fraction of the social returns. The spillovers from innovation are, on average, truly massive. So even if the government were to overpay for a patent relative to market prices, it would almost certainly still pay only a fraction of the expected social returns. (In fact, Kremer was so confident in this, that he suggested that the government pay twice as much as the third-highest bid, which would still be only a fraction of the social value).

Rather than trying to replace patents, the patent buyout would be a useful supplement to the current system. As such auctions would be entirely voluntary for the potential sellers, they would not affect patents’ usual incentives. But at the same time, even conducting a few buyouts would give an opportunity for a Big Bang moment for British innovation. The government would be able to immediately announce that it had blown wide open some of the key bottlenecks at the cutting edge of certain sectors, and thus brought the future forward by decades.