Call for honours system revamp to boost public engagement with invention and innovation

MPs and entrepreneurs back proposal for new “Elizabethan Order” to recognise achievements in science and technology

London, Monday 14 June - The UK needs a new order of chivalry specifically to recognise invention and innovation and elevate the status of entrepreneurship, science, and technology in the eyes of the public, according to think tank The Entrepreneurs Network. The proposal - outlined in a new report, Honours for Innovators, and supported by MPs and leading figures from the UK entrepreneurship and technology community - would see the “Elizabethan Order” honour up to 273 individuals each year for their achievements and contribution to innovation. The first awards would ideally be made in 2022 as part of the national celebrations to mark Her Majesty The Queen’s Platinum Jubilee. 

The report reveals that between 2015 and 2020 fewer than one in ten appointments (9.2 per cent) to the Order of the British Empire through the Queen’s New Years and Birthday honours lists were made for services to “innovation”, “technology”, “entrepreneurship”, “engineering”, “science”, “medicine”, “manufacturing”, or broader related terms such as “industry” and “business” - falling to just 6.7 per cent if “business” is excluded. Even when terms relating to invention and innovation were included in honours citations, it was often in the context of recognising philanthropic, charitable, or political activities and achievements, rather than invention and innovation itself.

The proposed new order would address this failure to give due recognition to inventors and innovators, said Dr Anton Howes, an author and historian of invention, who co-authored the report: “The UK has a rich history of recognising innovators, going back to the honorary medals and cash prizes awarded by the RSA, honours bestowed personally by monarch, now-defunct orders such as the Royal Guelphic, and the erection of statues and blue plaques to notable inventors and scientists. But we have taken backward steps since the Victorian Era, and no current dedicated awards have anything like the status and public profile of the Order of the British Empire, which often favours achievements in sport, the arts, and public life - activities that usually come with fame and prestige anyway. So it’s a shame to see entrepreneurs, inventors, and innovators so marginalised on the honours lists - we can correct this with a new order given equal billing.”

The Elizabethan Order - named in recognition both of the flourishing of science and innovation during the reign of Elizabeth I and of the second Elizabethan Age under the present Queen - would closely resemble the existing Order of the British Empire in its structure. Honourees would be designated Member (ME), Officer (OE), Commander (CE), or Knight (KE) of the Elizabethan Order, with Knights to be referred to as Sir or Dame. There would be up to 273 honourees each year - a reference to -273.15 degrees Celsius being the figure of absolute zero on the kelvin scale, Baron Kelvin having been the first scientist and inventor to be appointed to the House of Lords. Innovation and invention were also notable passions of the late Duke of Edinburgh, which would also allow the awards to recognise the contributions made throughout his lifetime.

The proposal has been received positively by leading figures in the UK innovation ecosystem. Matt Clifford MBE, co-founder and Chief Executive of Entrepreneur First, an entrepreneurship programme that helps founders build teams and businesses around their ideas and provides seed investment, said: “We know that everyone benefits when the most talented members of society apply their abilities to innovation. Raising the status and prestige of innovators is one of the most important ways to encourage invention, so I strongly endorse the idea of a new chivalric order. It could have a disproportionately positive impact relative to its cost."

Jess Butcher MBE, serial technology entrepreneur, angel investor, and Government advisor, added: “The ‘Elizabethan Order' is a fantastic initiative to highlight and reward the very specific contributions made by those individuals inventing the future. There is so much innovation of global importance coming out of the UK, and it is imperative to better recognise the contributions made - not only to celebrate their success, but to encourage future pioneers.” 

John Penrose, MP for Weston, Worle, and The Villages, the Prime Minister’s Anti-Corruption Champion, and Chair of Conservative Policy Forum, also endorsed the idea, saying: “Britain has always been better at recognising the achievements of people who rise to the top of established professions and industries, rather than the innovators who create new ones. But, ultimately, the power of ideas is what drives the technologies that create new jobs and economic growth, and that fuel our society and culture too. This is a creative and interesting idea to redress that balance.”

Emma Jones CBE, founder of Enterprise Nation, said “In view of the contribution they make to the economy and society, it would be wonderful to see innovators and entrepreneurs recognised in the way outlined in this proposal of The Elizabethan Order. Innovators set out to solve problems and stretch the art of what is possible and entrepreneurs do the same. Their efforts deliver results in the form of civil advancement, trade opportunities, and global partnerships. They do not do this work to be honoured but to honour them in this way would represent the ultimate recognition of their passion and toil”

The Entrepreneurs Network asked John Petrie OBE, who has designed national honours and decorations for several Commonwealth countries, to visualise insignia and medals of the Elizabethan Order. The choice of an owl references Athena, the ancient Greek goddess of wisdom, who is frequently associated with science and invention, and the motto “Merito et Industria” - “achievement and industry” - emphasises the virtues that the honour rewards.

The cost of implementing the proposal would be low, said report co-author Ned Donovan: “Including an up-front cost in the region of £15,000 to £20,000 for the preparation of dies, ribbon designs, and other elements of setup - and assuming a distribution of awards across the different classes that mirrors that of the existing honours system - the annual cost of insignia for appointees to the Elizabethan Order would be just £66,000, less than the annual salary of a single MP. The return in terms of increased public awareness and inspiration would easily be many times that. And we have the infrastructure to decide on appointments, with committees already in place to review public nominations for the Order of the British Empire in the fields of science and technology, health, and business and the economy, that could take on the role.”

-ENDS-

About the report

• Note on Methodology - Figures relating to the proportion of Order of the British Empire awards given to inventors and innovators exclude the 2020 Queen’s Birthday honours list and the 2021 New Year’s and Queen’s Birthday lists, the compositions of which were significantly skewed by moves to recognise contributions to the fight against Covid-19. Discounting these lists provides a more representative picture of the long-term trends in the awarding of honours.

• Download - The full report, Honours For Innovators, is available to read and download here.

About the authors

• Dr Anton Howes is a historian of invention, and head of innovation research at The Entrepreneurs Network.

• Ned Donovan is a writer and former national newspaper journalist, having worked as a news reporter and foreign correspondent. He is also a member of the Orders and Medals Research Society.

About The Entrepreneurs Network

The Entrepreneurs Network is a think tank for the ambitious owners of Britain’s fastest growing businesses and aspirational entrepreneurs.

Championing Europe

Last week The Economist led with a story that has got a lot of attention. Describing Europe as “a corporate also-ran”, the magazine asked: can it recover its footing?

The headline stats don’t make for pretty reading. In 2000, nearly a third of the combined value of the world’s 1,000 biggest listed firms were in Europe, as were a quarter of their profits. Since then, those figures have halved. In 2000, 41 of the world’s 100 most valuable companies were based in Europe – which includes Britain and Switzerland – today there are only 15. Apple alone is worth more than the 30 firms in the German blue-chip DAX index combined, and close to the value of all 40 companies in France’s CAC index. I won’t go on.

It’s a theme Tim Wallace also covers in an article for the Telegraph on ‘how Brussels’ complacency turned Europe into a corporate wasteland’. In it, he quotes our Senior Researcher Aria Babu and Adviser Sam Bowman.

The numbers don’t lie. But while I agree with the both articles, I think there are reasons for optimism.

In response to The Economist’s article, Patrick Collison, founder of Stripe, rebutted with a letter in defence of European optimism: “Europe’s tech sector is worth four times what it was just 5 years ago. Europe now attracts 15% of global venture capital, up from 4% in 2014.”

Things can get better too. Collison cites a lot of low-hanging fruit for policymakers, including streamlining the common market, fewer silly regulations (like website cookie banners), better legal treatment of stock options, and easier access to talent. For our part, we could add dozens more ideas to Collison's list.

So, while we can lament the decline of Europe’s corporate behemoths, the next generation is sitting pretty. UK and EU policymakers just need to go out for a spot of fruit picking. Is that really such a stretch?

Status game
On Monday, we’ll release a report from our Head of Innovation Research Dr Anton Howes and Ned Donovan. I don’t want to break our own embargo, but it’s on what we hope will be a popular upstream policy to make innovation, invention and entrepreneurship more aspirational – something that Anton has written about in his award-winning Age of Invention newsletter.

Members of The Entrepreneurs Network will get an email on Monday with a link to the report. It’s free to become a Member. You just need to fill in a form that lets us know what you’re interested in. With such a large and growing network, we’re increasingly just targeting Members in the first instance for events, so I would recommend signing up. You can do so here.

Just a minute
Talking of upstream policies, Nacue’s and Tata's annual varsity pitch has opened up. It’s for anyone currently studying, as well as those who’ve graduated since 2016. There is a prize pot of potentially £15,000 of equity free cash to win. The application only requires a 60 second video pitch and there is even a category for those who only have an idea. Make sure to alert any young people who you think might be interested, as may just be the spark to inspire the next great entrepreneur. Find out more here (more established entrepreneurs may want to scroll down to get details of The Barclays Entrepreneur Awards 2021).

Absolutist Unit

In the first of a flurry of new reports, yesterday we released a new paper with the International Centre for Law and Economics, arguing that the Competition and Markets Authority’s new Digital Markets Unit (DMU) risks chilling investment in UK startups and undermining competition.

While the new regulatory powers are aimed at the likes of Google and Facebook, we’ve heard from lots of tech entrepreneurs and investors concerned that by creating huge uncertainty around mergers and acquisitions, the new regime would cut off a potential exit for many startups. Just yesterday, an early-stage VC told me that making an IPO effectively the only possible exit for them would result in them passing on otherwise investable businesses.

As my colleague Sam Dumitriu writes in City AM: “Under the new regime, any deal involving a regulated company with a ‘greater than fanciful’ chance of reducing competition would be blocked, even if the CMA thought it would, on balance, increase competition. Entrepreneurs should be worried about this: attracting VC investment will be much harder if exit-by-acquisitions is taken off the table or made more difficult.”

As its remit expands, the DMU is likely to become a super-regulator. Sam Bowman, another of the report's authors, writes for CapX: “In a few years, the idea that there is such a thing as a distinct ‘digital market’ will be as meaningless as referring to a ‘market that relies on the roads’. Everything will be a ‘digital market’, and every firm that succeeds in these markets could fall under the control of the DMU.”

There is growing concern in Parliament too. John Penrose MP, author of the Penrose Review of Competition Policy, who wrote the foreword for our report said: “The DMU under its current proposed set-up risks becoming a bloated and unwieldy regulator which could be seized by vested interests and hold back innovation through over burdensome regulations. The government should be wary of this. We want post-Brexit and post-pandemic Britain to be the best place in the world to start a business. The DMU jeopardises this aim. We should not risk leaving the UK less competitive and with less successful companies, exports and jobs – making us a poorer country in the long-run.”

I recommend reading the report and articles linked to above for details of the wider concerns about the regulatory changes. We’re also hosting a virtual roundtable discussion on this topic with the DMU on Wednesday at 2pm. Just let me know if you’re keen to attend (as well as little about why).

James Croft
Over the bank holiday I learned the sad news that James Croft had sadly passed away. Most recently in his role as co-founder of Whitebeam Strategy, James wrote our Education Entrepreneurship Monthly newsletter, and a few years ago worked with us on the Business Stay-Up campaign with ABE.

I first got to know James when he set up the Centre for the Study of Market Reform of Education (CMRE), which later became Centre for Education Economics (CfEE). He was always incredibly modest about what he achieved, but for my money he was producing the best research on education policy of any think tank.

James delivered solid research because he was extremely thoughtful and a genuine seeker of the truth. He was also assiduous in everything he wrote and edited, and allowed others to flourish by giving them the freedom and funds to write.

But, first and foremost, James was an incredibly kind and generous man. He always had time for a chat and always looked for the good in others. While we only really saw each other when working on projects or at events, it’s proof that friendships can be made and strengthened through work.

Other people who knew him shared their thoughts – all of which are testament to his good character. Here are just a few:

– Dame Rachel de Souza: “So sad to hear this. James was a lovely man and will be sorely missed. Thoughts with his family.”

– Dr Nicholas Capstick, OBE: “An amazing man with an amazingly agile brain and such a gentle persona.”

– Sam Bowman: “Really sad news that James Croft has died. He was kind, intelligent and did great work in education policy. I'm really glad to have known him and been able to work with him.”

– Ryan Shorthouse: “A great loss. A lovely, thoughtful man.”

Our thoughts are with his family. He will be missed.

New tech regulator is threat to startups and online competition

A new report from The Entrepreneurs Network and the International Centre for Law and Economics argues that the Competition and Markets Authority’s new Digital Markets Unit may chill investment in UK startups and undermine the competition faced by Big Tech companies like Google and Facebook.

• The new tech regulator would put in place a de facto ban on acquisitions by tech platforms, severely limiting investment in startups and damaging the UK’s entrepreneurial ecosystem.

• Businesses like Google and Facebook would be forced to prove that product changes benefit consumers before they could introduce them, creating a new micromanaging bureaucracy ill-suited for fast-moving digital markets. 

• The regulator lacks clear aims and objectives. It has a wide range of goals including “fair trading”, “open choices”, and “trust and transparency”, but is unclear how it will rule on issues where these goals are in tension with each other or with the CMA’s competition mandate. 

• All markets are digital to some extent, and the regular could grow into an economy-wide super regulator with little democratic oversight, and few checks and balances, over its power unless strong limits are imposed.

The competition enforcer’s new regulator for Big Tech risks damaging competition and innovation in the UK, argues a report from The Entrepreneurs Network and the  International Center for Law and Economics (ICLE). The report argues that by limiting acquisitions, and implementing a series of burdensome regulations around product changes, the regulator will decrease the amount of funding going to startups, and hurt Big Tech firms’ attempts to compete with each other. Furthermore, without a proper appeals process or a clear remit, the regulator threatens to become an economy-wide super-regulator with unpredictable rules and little democratic oversight.

This new regulator, the Digital Markets Unit (DMU), has been set up by the UK’s competition enforcer, the CMA, and is intended to regulate the conduct of tech giants deemed as having “Strategic Market Status” (SMS) in some online markets. So far Google and Facebook have been proposed as firms to be regulated in this way, but it is likely that others like Amazon, Apple, Uber and some payments companies will be added in future. 

Instead of driving competition in these companies’ markets, which is the CMA’s statutory focus, the report argues that the CMA is moving to a model of static regulation that will make it harder to displace these companies, setting out Codes of Conduct that govern their behaviour.

The CMA is also proposing to lower the burden of proof required to intervene in mergers and acquisitions done by Big Tech firms to a new standard which will effectively ban them from acquiring smaller companies. Under the proposed regime, all deals where there is a “greater than fanciful” chance of significantly lowering competition will be blocked. This would be the case even if the deal is, on balance, deemed to be more likely than not to benefit consumers and competition.

British startups will, as a result, find it harder to attract VC investment as this proposed de facto ban on acquisitions by Big Tech companies would remove a key way entrepreneurs can exit their companies. This may drive startups to go overseas to jurisdictions like the United States, where it is easier to be acquired.

There is also a risk that the DMU damages competition between platforms. Some of the most intense competition online occurs in markets like cloud computing and video streaming, where established Big Tech companies compete with each other in these new markets. Companies would also find it harder to change and improve their products, and would require approval from the regulator before they could do so, hurting users and slowing down innovation. 

Over time, the report highlights the danger of the DMU growing into an economy-wide super-regulator without that being the government’s intention. All markets are digital to some extent, and many including groceries, taxis, retail, entertainment and others may someday fall within the DMU’s remit, along with many others. The CMA’s proposals may end up creating a much more powerful and sprawling entity than it or the government realises, without being designed with the checks and balances that such an entity would require to succeed.

The report argues that many of the problems with the DMU are inherent to its design, and cannot be avoided in its current form. However, it suggests some changes that could reduce the risks present in the current DMU proposals, including giving the DMU an unambiguous competition mandate, limiting its scope to avoid regulating the conduct of the entire businesses deemed to have strategic status, and including sunset clauses in all its interventions. 

The report concludes that the effects of the CMA’s proposals on the wider economy have gone largely unnoticed, and that there is a risk of inadvertently creating a powerful new regulator that weakens competition in digital markets and makes British consumers worse off, and that now is the time for the government to critically review these proposals before it is too late. 

John Penrose, Conservative MP for Weston-super-Mare and author of the Penrose Review of Competition Policy:

“The DMU under its current proposed set-up risks becoming a bloated and unwieldy regulator which could be seized by vested interests and hold back innovation through over burdensome regulations. The government should be wary of this. We want post-Brexit and post-pandemic Britain to be the best place in the world to start a business. The DMU jeopardises this aim. We should not risk leaving the UK less competitive and with less successful companies, exports and jobs - making us a poorer country in the long-run.”

Sam Bowman, Director of Competition Policy at the International Center for Law and Economics, and one of the paper’s authors, said:

“There is a huge danger that the Digital Markets Unit proposals end up making digital markets more sclerotic and less competitive. The kind of regulation the CMA is proposing is about “managing monopoly” - the sort of approach that we use in the energy and water markets that basically surrenders the possibility that anybody except Google and Facebook can offer great Search and Social products. That doesn’t fit with reality, where new entrants like TikTok are nipping at the heels of these firms, and it misunderstands that much of the competition faced by Big Tech will be from other Big Tech companies – like if Apple decides to build a search engine to compete with Google’s. 

“We shouldn’t give up on competition online. Instead of trying to regulate incumbents, with all the costs to innovation and dynamism that entails, we should be trying to support new entrants as much as possible. Unfortunately, although it uses the language of competition, that isn’t what the CMA is proposing.”

Sam Dumitriu, Research Director at The Entrepreneurs Network and one of the papers authors, said:

“If we’re not careful the DMU could make the UK a much less attractive place for innovators and entrepreneurs. Tough rules on acquisitions will make it harder for startups to get investment from VCs and make founding a start-up substantially riskier.

While forcing platforms to seek approval for product changes flies in the face of the principle of permissionless innovation, which has driven the growth of the digital economy.

Our best chance of success outside the European Union will come from adopting a radically pro-innovation approach. Unfortunately, we look content to copy the EU’s ambition to regulate businesses started elsewhere.”

-ENDS-

For further comments or to arrange an interview, please contact:

The Entrepreneurs Network

Aria Babu / aria@tenentrepreneurs.org / 07834 549299

The Entrepreneurs Network is a think tank for the ambitious owners of Britain’s fastest growing businesses and aspirational entrepreneurs.

The International Center for Law and Economics promotes the use of law & economics methodologies to inform public policy debates.

Cummings & Goings On

The global space sector is predicted to be worth £400 billion per year by 2030 – the Government wants the UK to have a piece of the action. Writing in the Telegraph, Secretary of State for Transport Grant Shapps argues that “Britain's space industry is ready for lift-off.”

While we aren’t eyeing up space colonies just yet, Shapps has changed regulations to allow the UK to launch satellites for the first time, claiming that now our “regulations are the most flexible in the world.”

Next year the UK will have spaceports, including in Cornwall, Wales and Scotland. The technological gains could be huge, but I like the fact that one of the potential benefits intersects with one of the most mundane and seemingly intractable policy problems out there: space-based wifi would help improve internet speeds in rural areas. This would help level the playing field for rural entrepreneurs.

Shapps compares his ambitions in the final frontier with the UK’s surprisingly successful vaccination programme. While it would be easy to criticise the comparison, I think there will be a lot that we can learn from the speedy creation and rollout of vaccines.

There will also be a lot to learn from the Government’s failures in responding to Covid too. Whatever you think of Dominic Cummings, the former SpAd's testimony is worth listening to. Not just to apportion blame, but to make sure we are better prepared for something like this in the future.

Some commentators mocked Cummings when he talked of solar flares and other potential catastrophic risks. But given what we’ve gone through with Covid, this seems short-sighted.

This all matters to entrepreneurs because with a better response to Covid, we would have seen a less dramatic impact on the economy. The first port of call for politicians, advisers and anyone unconvinced, should be 80,000 Hours. They predicted the severity of the pandemic earlier than most, and have been making the case for taking risks like this seriously for years.

This is a lot more important than any political score settling.

Sharp FAANGs
It’s not our job to defend ‘Big Tech’ – our focus is on startups and scaleups that may one day usurp them. But as Sam Bowman, Adviser to network writes in the FT, new regulation on acquisitions from Google and Facebook may make life harder for British startups.

As Sam argues, empirical evidence suggests investment in start-ups is sensitive to rules on acquisitions, with one paper finding venture capital activity grows by about 40-50% in countries that enact pro-takeover laws. And another finding that US states that introduced anti-takeover laws saw a 27 per cent decline in VC investment deals compared with those that did not.

Last month, the founders of Seedrs and Crowdcube put their heads above the parapet after facing the wrath of the Competition and Markets Authority (CMA) for suggesting a merger. Separately, tech startups have got in touch with us sharing their concerns as a sale to a large tech company would have been a likely exit for them.

It’s a topic we’ll be exploring in a forthcoming report, as well as a roundtable discussion next month. Please get in touch with me if you want to find out more about either.

Commanding Officers

This week I want to turn inwards, with an update on a few opportunities to get more involved in The Entrepreneurs Network.

On Tuesday, we held our virtual AGM for the All-Party Parliamentary Group (APPG) for Entrepreneurship. I’m pleased to announce three new Officers of the group: Saqib Bhatti MBE MP, Gagan Mohindra MP and Jerome Mayhew MP.

Saqib was previously President of the Greater Birmingham Chambers of Commerce; Gagan has a great deal of experience in leadership roles in local government; and Jerome was previously managing director of Go Ape. They join our chair, Seema Malhotra MP, Lord Leigh of Hurley, Dr Lisa Cameron MP, Baroness Kramer, Lord Cromwell, Lord Bilimoria, Bim Afolami MP, and Baroness Neville-Jones. 

We have exciting plans for the APPG over the next 12 months, building the programme around a number of key themes. So far we will be running three, on Levelling Up, The Sharing Economy, and Space Entrepreneurship (which I’m particularly excited about). For each, we are running webinars/events, putting out a Call for Evidence, and then producing a briefing paper. If you want to get involved in any of these, or if you’re keen to sponsor a theme, get in touch with me.

We’ve just put out the Call for Evidence on the Levelling Up theme. Entrepreneurs can find out more here, and researchers and business groups here. You don’t need to answer every question – just wherever you have something to add. We want the final briefing paper to be purposely and mercilessly brief, so that politicians and their advisers can easily digest them.

For the Sharing Economy theme, we have our opening webinar next week. We already have an awesome lineup of MPs and entrepreneurs, but we might be able to squeeze you in if you get in touch quickly.  

APPG for Entrepreneurship: Sharing Economy
25 May 2021
10am to 11am
Complimentary
The Sharing Economy is a large and growing part of the UK economy. Join a mix of MPs, Peers, entrepreneurs and policy experts to discuss the policy issues facing it.
 

On Wednesday, we are hosting a virtual drinks roundtable with Selaine Saxby MP and some of the UK’s most ambitious hospitality entrepreneurs. If you’re an entrepreneur in the industry please get in touch, as we have a couple of places still up for grabs.
 
Entrepreneurs' Drinks – with Selaine Saxby MP
26 May 2021
6.30pm to 7.30pm
Speak with the Vice Chair of the Hospitality and Tourism APPG on how to ensure the UK is the best place in the world for hospitality entrepreneurs.

On Thursday we are hosting our next Female Founders Forum webinar on Preparing for a Crisis. Given so many businesses are still trying to bounce back from the pandemic, you could be forgiven for not wanting to think about future problems. However, I promise this won’t all be doom and gloom, and will include some practical tips from the government’s National Cyber Security Centre on a few easy things you can do to mitigate cyber risks.

Female Founders Forum: Preparing for a Crisis
27 May 2021
10am to 11am
Complimentary
Sign Up
A webinar from the Female Founders Forum about how to prepare your business for a crisis.

Finally, we are always looking to grow our network of entrepreneurs – particularly with so many new businesses starting. To that end, if you find this newsletter useful, it would be great if you could share it with people you will too. Spread the word!

Half Baked

While perhaps we should forgive US journalists for their lack of understanding of the intricacies of how the Crown and Parliament work, it’s nevertheless amusing that many thought that on Tuesday the Queen stood up in Parliament and literally dictated to Boris what he now needs to do. If the Crown had really wrest power from Parliament, I suspect there wouldn’t be much room in her speech for ending the practice of ground rents for new leasehold properties.

Not that the speech was uneventful: there were relevant policy announcements for entrepreneurs. In our response, we think there are some positive moves, but it could, and should, have gone further.

The Advanced Research and Invention Agency Bill, for example, will help meet the UK’s 2.4% of GDP commitment, but we need to incentivise the private sector too. That’s why we called on the Government to get on top of the long-overdue expansion of the scope of R&D Tax Credits – which the Government is consulting on – as soon as possible.

We also welcomed changes to make procurement more accessible for SMEs, but as we will discuss in a forthcoming paper: “Too often, large companies with dedicated public sector teams win out because they are better able to navigate the labyrinthine bidding rules. But complexity isn’t the only issue. For small businesses, every activity has a major opportunity cost. Most SMEs cannot devote dedicated resources to scouring multiple outlets in search of public procurement opportunities, so it’s vital that bids are advertised in a timely manner on a single platform.”

One of the most under-investigated areas of entrepreneurship policy is the impact of planning policy on businesses (something we’re planning to correct). Again, we were cautiously optimistic about the potential of the new Planning Bill to build more homes where people want to live and work. As was Policy Exchange’s Ben Southwood, although our Adviser Sam Bowman is a lot less sanguine.

Our response expresses concern about the unintended consequences of the online harms announcements, and while it didn’t feature in our immediate response, the total ban on online advertising for products high in fat, salt and sugar (HFSS) by the end of 2022 may also be too blunt a policy tool to deal with a complex issue.

For context, on Thursday I gave out an award to the founder of Ma Baker, a micro bakery, for winning the Heart of Gold category in the Small Awards. However, businesses like this could be severely damaged, as No10 is unsure whether bakeries will be allowed an Instagram account. The Government’s own evidence shows that an online ad ban will cut children’s calorie intake by just 2.84 calories per child, per day. I’m sure this will be raised by some entrepreneurs on our upcoming virtual drinks event with Selaine Saxby MP, Vice Chair of the Hospitality and Tourism APPG.

Clearly promoting innovation is now high up the Government’s agenda – the challenge will be to do so without killing it with a thousand new regulations.

Spin country
This week I learned about Spinout.fyi via Nicolas Colin – a noble effort to crowdsource and openly publish spinout deal terms across every university. It’s like Glassdoor and Levels.fyi, aiming to shed light on deal terms to catalyse a rewrite of the spinout playbook in favour of future founders. They have a short survey for anyone with experience in spinning out companies. Along these lines, we will release a report on policies to support spinouts later in the year, so please get in touch with Sam Dumitriu if you want to share your ideas with him.

It's easy being
Building on the success of our Green Entrepreneurship report, we’re in the process of planning a Green Entrepreneurship Forum (a little like our Female Founders Forum). I’ll share more details in due course, but we are currently on the hunt for planet-saving entrepreneurs to contribute to the project. If that’s you or someone you know – get in touch with Katrina Sale.

On the Green Entrepreneurship front, the UK Government and PUBLIC have launched Tech For Our Planet this week. They are inviting innovators to pilot and showcase digital solutions to some of the most pressing climate issues, so check them out.

The government must commit to a pro-growth agenda, says The Entrepreneurs Network think tank

Policies outlined in the Queen’s Speech show that the government is pursuing a pro-growth agenda to aid the recovery after the pandemic but there are a number of measures which do not go far enough or may impede the good work elsewhere.

On the ARIA Bill and R&D Funding, Sam Dumitriu, Research Director at The Entrepreneurs Network, says:

More cash for R&D is key to helping the UK’s startup sector continue to grow and new models of funding such as ARIA are worth trying. But to meet the UK’s 2.4% of GDP commitment, private sector R&D spending needs to increase too. The government cannot afford to delay long-overdue reforms to R&D Tax Credits. It needs to be simpler for startups and cover all the inputs in the 21st century R&D process, such as data and cloud computing. 

On the new measures to change subsidy rules post-Brexit, Sam Dumitriu, Research Director at The Entrepreneurs Network, says:

New businesses are the number one driver of job growth, which explains why there are so many different schemes and tax breaks designed to support them. Outside the EU, there are opportunities for simplification making it easier for businesses to access private capital. It is clear why the government is keen to increase subsidies to areas of strategic interest and left-behind areas but they must be careful about what they do with this new-found freedom. We must not use it to burn tax-payer money to favour well-connected winners and subsidise businesses which would have never been profitable independently.

On the changes to make procurement more accessible for SMEs, Sam Dumitriu, Research Director at The Entrepreneurs Network, says:

It is welcome that the Government is trying to simplify the procurement process for SMEs. Too often, large companies with dedicated public sector teams win out because they are better able to navigate the labyrinthine bidding rules. But complexity isn’t the only issue. For small businesses, every activity has a major opportunity cost. Most SMEs cannot devote dedicated resources to scouring multiple outlets in search of public procurement opportunities, so it’s vital that bids are advertised in a timely manner on a single platform. 

On the potential changes to the planning system, Aria Babu, Senior Researcher at The Entrepreneurs Network, says:

High housing and office costs are among the biggest challenges facing the UK. Start ups have their costs driven up by office rents and they struggle to hire the brightest and most creative people because of the cost of living in the most dynamic and innovative places. Estimates for how much growth we are missing out on by allowing these problems to continue go as high as 30% of GDP. A more liberal planning system is necessary if we want the UK cities to remain hives of entrepreneurial dynamism. We have not seen the text of the new Planning Bill but anything that falls short of fixing the underlying issues will not go far enough.

On the measures to make the internet safer, Sam Dumitriu, Research Director at The Entrepreneurs Network, says:

Measures to tackle online harms need to be carefully designed. Everyone wants a safe and secure internet, but there’s a risk that ill-thought-out rules and regulations will crush competition. Startups with the power to disrupt the tech giants can’t afford to employ armies of moderators and lawyers. Well-intentioned policy could end up entrenching monopolies. This wouldn’t be the first incident. When the EU passed GDPR, the share of advertising spend going through Google and Facebook actually increased. 

Sam Dumitriu, Research Director at The Entrepreneurs Network says: 

“By increasing R&D funding through ARIA, pledging to install 5G and gigabit broadband, and planning reform it is clear that the government is keen to pursue growth to recover from the pandemic. However, there are some places where competing agendas may damage these good intentions. Changes to subsidy rules post-Brexit could result in the government wasting money propping up unviable but politically popular businesses.”

-ENDS-

Notes:

For further comments or to arrange an interview, please contact:

Aria Babu

aria@tenentrepreneurs.org / 07834549299

The Entrepreneurs Network is a think tank for the ambitious owners of Britain’s fastest growing businesses and aspirational entrepreneurs.

Cool Intentions

The evidence is mounting that the pandemic has spurred more people in the UK to want to become an entrepreneur, with the latest Global Entrepreneurship Monitor (GEM) report finding that the crisis has played a significant role in getting more people to think about starting a business.

The GEM report is probably the best resource for comparing entrepreneurship between countries. This year it reports that: “The United Kingdom was one of the few European economies to increase its entrepreneurial intentions rate, which is adults expecting to create a new business in the next three years, up from 7.6% in 2019 to 8.2% in 2020. Of those adults intending to start a new business, 80% indicated that this decision was influenced by the pandemic to some extent.” This represents the highest figure among European countries, and the same rate as the United States, which "suggests a level of adaptability to the pandemic that is rare among peer economies,” write the authors. When it comes to measures of entrepreneurial intentions, being more similar to the US and less like Europe is generally a good thing.

The pandemic has dented ambitions though. Only 1.3% of UK adults plan to hire six or more employees over the next five years, compared to 2.6% in 2019. And 4.2% plan on hiring no employees at all.

The report offers more notes of optimism, however, with the UK improving on a number of metrics between 2019 and 2020. Experts found improvements in: access to entrepreneurial finance; research and development transfers; commercial and professional infrastructure; government policy; and government entrepreneurship programs. And while the Government’s response to pandemic was only ranked 20th among GEM economies, on the entrepreneurial response to the pandemic the UK came fifth.

While the pandemic isn’t quite over, entrepreneurs and those supporting them should take a moment to pat themselves on the back. Then we must strive to support this new cohort of wannabe entrepreneurs realise their entrepreneurial intentions.

Really really want
We spend a lot of time talking to politicians and civil servants about policies to support entrepreneurship. We also spend a lot of time chatting to people like us who lobby the government on behalf of businesses of all sizes. In normal times we even have a group that meets for a drink to discuss this stuff after work. Alongside the research, consultation responses and media work, I think it’s fair to say we have a decent impact on entrepreneurship policy in the UK.

As the team has grown, and we’ve increased the number of Advisers, we’ve expanded our expertise. Collectively we know a lot about a decent number of things – or at least know an expert or entrepreneur who does. But there are still gaps in our knowledge.

I want us to get better at crowdsourcing your ideas, to take them to government. One way I’ll try to do that is asking for more policy ideas in this newsletter. To that end, on Wednesday we have a webinar with Paul Scully, the Small Business Minister. While there will be opportunities to ask questions on the day via Slido, it would also be great to get your questions in advance.

I can’t promise to ask them all, but I will read every suggestion and I’ll forward them onto our research team, which will help inform our work. The minister will be joined by Chris Hulatt, co-founder of Octopus, and both will be talking about ‘how to build a nation of entrepreneurs’. So what do you want the government to do differently?

Nothing Ventured

Getting more UK pension funds to invest in venture capital has proven far from straightforward, with both sides having noble, but different goals.

On one side, the pension fund industry wants to keep the cost of pension funds down. That is why we have a 0.75% fee cap (in practice averages are 0.46%). On the other side, the venture capital industry looks to the US, where pension funds contribute almost two-thirds of the capital in the much larger VC market (it’s just 12% in the UK), supporting the growth of the world’s most innovative companies. Sadly, the VC model two and twenty fee structure doesn't fit with the cap.

As Sam Dumitriu writes on our blog, the Government is looking to loosen the 0.75% ceiling on annual management fees for workers auto-enrolled into workplace pensions. It is something we have both argued for before. For example, in City AM I called for the cap to be scrapped: “It’s the law of unintended consequences that a seemingly sensible, minor regulation on fund charges is having such a significant impact. It’s not just investors who would benefit from a pension industry more open to venture capital: British businesses up and down the country would gain from this fresh source of capital.”

That said, I suggest reading the Pensions and Lifetime Savings Association’s submission to the Chancellor’s consultation on why they worry about getting rid of the cap.

In reality, compromise is probably the only way forward. Nest, who manages autoenrollment pensions, intends to allocate 5% of its funds to private equity. However, Mark Fawcett, Nest’s chief investment officer, believes that private equity will accept a deal where they pay lower fees in return for a large guaranteed stream of capital, saying “we won’t pay two and 20.”

Let’s hope for the sake of entrepreneurs that the two industries can meet somewhere in the middle. As Sam argues: “Soon, there will be £1tn worth of assets under management in defined contribution (DC) pensions. If just 3% of that was allocated to venture capital then that would be £30bn. This would have a transformative impact on the UK’s startup ecosystem.”

Sharing’s caring
We’re going to launch a new theme as part of the APPG for Entrepreneurship on ‘The Sharing Economy’.

We’re aiming to host the first roundtable next month, so please get in touch if you’re an entrepreneur, politician, academic, policy wonk etc with an interest in this policy area. As with all our APPG themes, this will include a virtual roundtable, call for evidence, briefing paper, then roundtable launch.

Next month we’ll be hosting the AGM. It will be a chance for interested MPs and Peers to become Officers of the group. Any MPs or Peers who want to get involved should get in touch with Katrina to find out more. Also, feel free to pass this on to any MPs and Peers you think should get involved.

Spooking you
The National Cyber Security Centre (NCSC) has asked us to share their resources with you. The NCSC is a government organisation that provides advice and support for the public and private sector in how to avoid computer security threats. It was set up in 2016 with the aim of making the UK the safest place to live and work online.

Cyber security is a policy area we’ve yet to really get our teeth into, but I remember coming away from one our Mishcon de Reya Leap breakfasts a few years ago in shock at the scope of the threat. It was led by one of the founders of Darktrace, whose successful IPO today is perhaps also testament to the challenge all entrepreneurs face.

Government is well aware of the threat (hence the NCSC) – new cyber security laws, for example, will ban insecure default passwords.

The NCSC has some great resources. For starters, check out their Cyber Essentials, create a Cyber Action Plan and sign up for their newsletter.

Sign up to future newsletters here.

Education Entrepreneurship Monthly – April 2021

Higher education. An open letter from Universities UK and others at the beginning of the month prompted the government to confirm 17th May as the date students could return to campus (i.e. not until the beginning of the next stage of lockdown easing). This came after the sector had already expressed considerable frustration about a lack of necessary support 

Many want to know why this is the case, when nurseries, schools and FE have all already returned to face-to-face teaching? And why was this decision taken despite the mounting survey evidence of the negative impacts of the off-campus/remote experience for learning, social life, wellness and readiness for graduate employment?

Students, it appears, have largely given up hope of getting any more face-to-face teaching this academic year according to the fourth and latest HEPI and YouthSight survey of how students are coping with pandemic conditions.

In March, the ONS Student Insight Survey had already indicated that as many as two-thirds of students may have experienced a decline in their mental health this academic year as social distancing, isolation measures and shut-outs have continued to plague a return to anything like normal campus life. 

Taking stock. In FE, a report from the Association of Colleges (AoC), based on a survey of 80 college responses, was published. All respondents suggested negative impacts for learning, while 75% indicated that their 16–18-year-olds were between one and four months behind compared with a normal academic year. Drawing on the survey’s findings, the Association called for a £1.5bn package of support to fund up to an extra year of study for those due to leave this year, and funded extra hours and support for those already in or about to join. 

To put this in perspective, the government’s current spending plans for catch-up across the board–from early years, through schools and up–hover at around £1.7bn - while the true need, according to the Education Policy Institute (EPI), is likely to be more in region of £10-£15bn. The level of shortfall means many of those young people who need catch-up/remedial provision the most will miss out, if not on access to support, then on quality. For private and third sector providers and responding entrepreneurs, the future is B2C.

Youth job market. The full impact of coronavirus and lockdown on young people has been masked by still-rising participation rates. This is a trend that the general decrease in youth employment opportunities during the pandemic will only have added to. The Institute for Employment Studies (IES) reports that the numbers of young people on payroll have fallen by 12.0% since the start of the crisis a year ago, while the fall for all other age groups has been just 1.4%. Its report also highlights that the numbers point to significant increases in long-term youth unemployment (defined as those unemployed for more than six months), which is now at its highest level in five years.

The government’s response has focused first on the introduction of incentives (enumerated in the last issue) to help stimulate demand for apprenticeships and traineeships, and second, post-18, on the Lifetime Skills Guarantee, which got underway this month. From next year, free access will be given to some 400 qualifications and skills bootcamps for eligible adults without a Level 3, funded through the National Skills Fund. 

News and Views

UK-based Guide Education raises £6 million for tech-based approach to teacher training (Finsmes)

UK Edtech Mindstone ‘compound learning’ tool achieves $2.2 million raise with Moonfire Ventures (Tech.eu)

La Salle Education, an online learning and assessment platform, completes £1m funding round for new Digital Tutor product (Ed Tranham)

Graduway named EdTech Company of the Year 2020 by CIOReview (Cision PR Newswire)

Angel investment in Scotland back to end-2019 level (DailyBusiness)

Will Zoom Apps be the next hot start-up platform? (TechCrunch)

The Creator Economy Boom: What it is, what’s driving it, and where it’s going? (Ollie Forsyth, Global Community Manager, Antler)

How are VCs handling diligence in a world where deals open and close in days, not months? (TechCrunch)

Fundraising: How long does it take to raise capital for a start-up? (BNN Times)

Startup 101: Knowing When You’re Ready For Venture Capital (Forbes)

Which founder would you rather be? (David Franel, Partner, Founder Collective)

Should workplace pensions fund entrepreneurs?

In the US, pension funds contribute almost two-thirds (65%) of the capital in the VC market. By contrast, they provide just 12% of the funding in the UK VC market. Soon, there will be £1tn worth of assets under management in defined contribution (DC) pensions, if just 3% of that was allocated to venture capital then that would be £30bn. This would have a transformative impact on the UK’s startup ecosystem.

It is understandable then that the Government is, and has been for a while, keen to understand why British pension funds invest less in venture capital than their US counterparts and to change it. 

One key barrier is the 0.75% cap on fees for workplace pensions. In my report Unlocking Growth, I noted that this poses problems for the traditional VC model.

“Venture Capital funds typically charge a 2% management fee and take a 20% share of the uplift when the fund closes. Unlike traditional investments in stock markets, VCs invest smaller amounts and take a hands-on approach.”

A higher cap would help solve this problem. Alternatively, regulators could treat carry (the 20%) differently to other performance changes.

At the Budget, Rishi Sunak announced a consultation on changes to the cap on pension charges. While it seem highly unlikely that the cap will be raised altogether (the DWP ruled this out in January) a range of options are on the table according to the FTAdviser:

“One such measure would allow schemes to “smooth the incurrence” of performance fees, which are often payable on illiquid investments, over five years. 

The use of a “rolling average” would allow schemes to exceed the 0.75 per cent charge cap occasionally through good performance without being penalised.”

For instance, a VC fund that saw three or four of its investments exit through lucrative IPOs in a single year might see fees spike and exceed the cap. A rolling average would make this less likely. However, it still might be insufficient as the FT notes: 

“But this might not solve the issue of performance fees for private equity, which tend to be lumpy and concentrated in the years when portfolio company investments are harvested.”

However, not everyone is in favour of a greater share of pension investment going to private equity. The Pensions and Life Savings Association downplayed the idea, arguing that a 5% allocation to VC would effectively double the costs of a typical pension portfolio.

It’s right to try to limit pension fees and protect savers, but having some exposure to VC is in the interests of most savers.

An Oliver Wyman analysis commissioned by the British Business Bank found “the asset class has delivered an average return net of fees of 7% points a year higher than that seen in public equity markets.” There’s also a diversification argument. VC exposes people to sectors that are underrepresented in public markets. As the investments have only a weak correlation to listed equities, it has the benefit of reducing volatility.

That’s why it was welcome to read that Nest, who manage autoenrollment pensions, intends to allocate 5% of its funds to private equity. They believe that private equity will accept a deal where they pay lower fees in return for a large guaranteed stream of capital.

The challenge, as noted in the British Business Bank report, will be creating new vehicles that spread risks across multiple funds. But the prize for savers and the UK economy as a whole from a step-change in VC investment is too large to pass up.

Female Founders Forum webinar - Trade: Accessing New Markets

How can female entrepreneurs break into international markets? Last Wednesday,the Female Founders Forum hosted a webinar on exporting. We had a very informative discussion, led by a panel of experts including Juliet Rogan, head of high growth and entrepreneurs at Barclays, and two entrepreneurs, Cécile Reinaud and Virginie Charles-Dear, the founders of Séraphine and toucanBox.

They had some helpful advice for the guests who tuned in. Here are their top tips.

Go for low hanging fruit

You should identify the markets which are going to be the easiest to enter. Séraphine makes maternity clothing, and founder Cécile Reinaud told us that they first targeted countries where the maternity fashion market was underdeveloped. She thinks you should only export to places where you know that you have some kind of competitive advantage over existing players. The costs for a foreign business will be higher so it would be difficult for a “me too” product to succeed.

Look at the regulation

toucanBox ships toys, which are tightly regulated. Their founder Virginie Charles-Dear explained that  you have a product which is highly regulated, it helps to export to places with similar rules so that each additional market does not add too many onerous approvals or slight adjustments to the product.

Network with entrepreneurs who are doing the same thing

Cécile said she gained the confidence to enter new markets by talking to other entrepreneurs who had gone before her. She found that they could tell her what the specific hurdles for that country and that sector were. She has also received advice about which software to use and where to find a good tax adviser, which proved very helpful.

Ask for help from professionals

Juliet Rogan advised female founders to actively seek advice. Female founders are more likely to seek advice from people within their network, whereas male entrepreneurs are more likely to ask for advice from professionals. Women should continue to seek out networks of other entrepreneurs, but it is worth female entrepreneurs making an extra effort to find professionals too; like lawyers, accountants, or even specialist trade advisers.

Reach out to UK Trade and Investment for support

The Gov.uk website offers a lot of resources to British entrepreneurs who are interested in exporting. Beyond information about how exporting to different countries works, they will also offer some grants to entrepreneurs. Cécile says they helped her to export to Japan and the UAE, and gave her grants to travel to the countries first.

Know and understand the market

Understanding consumers in new markets is vital. In the early days for toucanBox, Virginie stood outside schools and asked parents and pupils to test out her products. She believes that when you export you should make sure to hire people who know the local market because you can learn a lot of unexpected things.

Make a financial plan

Cécile cautions that there are some markets which are difficult to break into. She said that marketing costs in the US are very high, and that in her sector, maternity fashion, there was already a very competitive market. She said they only launched Séraphine in the US when they were financially secure enough to sustain a loss making business for several years.

Do not wait for everything to be ready

Virginie says that you should be wary of over-preparing. There is no point in waiting for the perfect moment to export because it doesn’t exist.

It was a fruitful conversation with a lot of actionable advice. If you would like to be invited to future Female Founders Forum events please sign up on our website.

David and Goliath

Lobbying is a dirty word. The unfolding story of former Prime Minister David Cameron’s Greensill shenanigans will serve to further muddy the practice.

But lobbying, in the broadest sense of the word, is a necessary part of a representative democracy. Politicians can’t know all of the ways that the laws of the land are impacting the country, so it’s an important part of civil society that individuals and groups are able to petition the government when things need changing. Banning lobbying isn’t really an option.

Lobbying is particularly important for the most innovative entrepreneurs, as there are plenty of regulations that aren’t fit for purpose or else become out of date when new technology is created. In an excellent article for Sifted (which inspired me to write about this topic), friend of the network Nicholas Colin mentions the 1835 Highways Act, which effectively prohibits anyone in the UK from riding an electric scooter on the road. Every entrepreneur, in every sector, has their own examples of changes that would support their business.

However – and it’s a big “however” – not all lobbying is good. Beyond the flagrantly bad examples of businesses trying to circumvent what should be open tenders, sometimes business leaders will call for more regulation of their sector as a strategy to stifle smaller competitors and increase the barriers to entry to deter new entrants.

Sector-specific lobby groups might be pushing for what’s best for their sector – say, manufacturing or tech – but their desired policies can come at the expense of other sectors and ultimately make taxpayers and consumers worse off.

Even sector agnostic business groups aren’t always acting in the public interest, as their job is to represent their members, not necessarily the best ideas. Lobbying for the special treatment or exemption for certain types or sizes of business often distorts the market and perverts competition-friendly incentives, once again making consumers worse off.

So while lobbying is necessary, it’s lopsided. And despite what you hear, the main issue isn’t between small and big businesses, but between large established cohorts and newer challengers. While large and small businesses have well established and effective lobby groups, innovative startups and scaleups still don’t get the same level of support. Their voice is important because their businesses have the greatest potential to scale and create wealth and jobs. And as they are trying to disrupt incumbent industries, they are also often the businesses pushing up hardest against existing regulations backed by organised lobbies.

While there is a strong case to be made for more business-friendly policies across the board, startups and scaleups need particular attention. As a think tank, we and other organisations have a role to play in this (I’ll share more details about how we will do this at an event with UKBAA next week), but politicians can help by working harder to seek out these innovative businesses, which still lack the institutions and resources to get their voices heard in parliament.

Dynamic systems
On the blog, Sam Dumitriu asks the question: Is declining business dynamism to blame for our productivity woes? Business dynamism relates to measures of birth, growth and decline of businesses and drawing on a recent presentation from Professor Mark Hart from the Enterprise Research Centre, Sam makes the case for why we should pay more attention to it.

I highly recommend reading it in full. And if you like the idea and would like to get involved in supporting a paper on this topic, please feel free to get in touch.

GB News
Rhys Gunter, a Senior Producer at GB News, has reached out to see if any entrepreneurs are open to being guests on the TV channel when it launches later in the year. If you would be keen to be added to their database to talk about business, startups, tech, tax, education – whatever your passions are. Just drop an email to Rhys with a little about you, your business and what you would like to talk about (include your phone number).

Sign up for the Friday Newsletter here.

Open for Business

The next few months promise to be an exciting time for businesses. Today, with lockdown easing, town centres are full of people hoping to revisit their old haunts. Queues have appeared up and down the country outside shops, hairdressers and beauty salons have run out of appointments, and if you haven't already booked you're going to struggle to find a spare table in a pub tonight. After a few months of being kept away, it seems that shoppers are keen to spend again. The past few weeks have seen a surge in hiring, as businesses (accurately) predicted this bounce back in demand.

Frances Bishop is the founder of a children's clothing shop, The Pud Store. Because of the pandemic, she had to restructure aspects of her business, and started trading online but she says that now things are open again, her customers are excited to “get back to some sort of normality – just to come and see the clothes."

As we identified in our Resilience and Recovery report, female-founded firms across the UK have been most impacted by lockdown. However, with retail and hospitality being disproportionately female-led sectors, and the UK's vaccine programme continuing to storm ahead, reopening presents significant opportunities for female entrepreneurs. We expect that they will be more than able to rise to the challenge.

Webinars & Programmes
Join us for our webinar on Wednesday.

Speakers: Juliet Rogan, Head of High Growth and Entrepreneurs at Barclays; Cécile Reinaud, Founder of Seraphine; and Virginie Charles-Dear, Founder of ToucanBox
Join us for our webinar on Wednesday
Free
10am to 11.30am
14 April 2021

Female Founders Forum – Trade: Accessing New  Markets
 

Juliet Rogan is Head of the High Growth & Entrepreneurs team at Barclays. She leads a national team of High Growth Relationship Directors focused on supporting companies to scale up.

Cecile Reinaud is the founder of Seraphine, an international maternity and fashion label. She grew Seraphine from nothing to a £50m company which she sold in 2020. She supports the Cherie Blair Foundation for Women and wants to use her experience to help many other women found and scale their businesses.

Virginie Charles-Dear is the founder of ToucanBox. It provides a subscription service which delivers a monthly package of activities for children and toddlers. They ship over 150 000 boxes every month, to people in the UK, Europe, and the US.

Female Founder Highlights
Here’s a quick round-up of the news:

• Announced on International Women’s Day, the government is giving £50,000 grants to 40 female innovators. The grants have been given to women who have started businesses with extra social benefits. Recipient companies include an app to help victims of domestic abuse access emergency services and an ocean plastic recycling company.

• Congratulations are due to another Female Founders Forum member Tugce Bulut. She, and the rest of her team at StreetBees have raised another £5m.

• Further congratulations are in order for Faye Holland, another member of the Female Founders Forum whose company cofinitive has been named the best PR and Communications agency in East Anglia.

• Huckletree runs regular "VC office hours" for female founders. Last year an entrepreneur raised £400K from one of these meetings, so it is well worth your while. This quarter they are partnering with SeedCamp. You can apply for a 30 minute slot here. 

Government Support

• HMRC has launched a series of live webinars covering customs arrangements on shipping goods between the EU and the United Kingdom. If you’re still getting to grips with the new arrangements you can sign up to a webinar here.

• Even though the end of the pandemic is in sight, you may still be eligible for business support from the government. Here is a quick test to find out what financial support you can receive.

• If you are going to be reopening physical locations soon, here is some advice on how to make your workplace more COVID-secure. The information is broken down for different businesses, with advice tailored to labs, retail, and even other people’s homes.

• The government has updated their new post-Brexit visa system and our adviser Zenia Chopra details how the different types of visa work.

• One of the most exciting announcements in the budget was the super-deduction, which will allow businesses to deduct 130% of investments from their taxable income. Our Research Director has written about all of the changes to corporation tax in a policy update here, and also about the super deduction in more detail here.

• Help to Grow is a new scheme from the government for SMEs, which, as the name suggests, is aimed at helping businesses grow. There are two streams, one for improving management and one for improving digital tools. The management programme is a 12-week programme delivered by business schools, which at a 90% subsidy, only costs £750. The digital programme delivers free software advice to participating businesses, as well as vouchers for technology which can help boost your business’s productivity. You can learn more about them here.

Barclays Support and Opportunities

Barclays Women in Business Hub
Barclays is dedicated to levelling the playing field for female-led businesses so that more female founders start up and run businesses across the UK. We are a founding signatory of the HM Treasury Investing in Women Code, a commitment from the financial services industry which was launched in 2019 to improve female entrepreneurs’ access to tools, resources and finance. You can read more about Barclays’ three-year commitments to provide ongoing and meaningful support for female entrepreneurs plus helpful tools, guides, checklists and the wider support that is available for female-led businesses on the Barclays Women in Business hub here.

Barclays Money Management Hub
With many customers facing turbulent times, and so many coming to the end of loan repayment holidays, Barclays has created a dedicated Money Management Hub to help businesses keep their finances healthy. It’s continually evolving with lots of useful tips to help businesses budget and plan cashflow, as well as articles and guidance to help consider challenges businesses may be facing. 

Barclays Marketplace
If you need to find new partners to help your business with payment services, pensions, insurance and funding for growth, visit Barclays Marketplace whose featured partners have a track record of delivering quality services in their field.

Eagle Labs Virtual Events
Barclays’ programme of virtual events covers a range of topics from cashflow management to building resilience to help entrepreneurs and start-ups navigate these uncertain times. Forthcoming events include a session on thinking differently about social media marketing and an event to demystify AI, machine learning, and machine intelligence. All events are free to attend and open to anyone. For more information visit the Eagle Lab event page.

Barclays COVID-19 Support Hub
The Barclays COVID-19 Support Hub provides the latest information, tools, and guidance to support businesses throughout the COVID-19 pandemic. This hub includes information about Barclays’ products, webinars, Facebook Live events, and more information on how to access government schemes.

Is declining dynamism to blame for our productivity woes?

Over the past decade, we have seen a historic slowdown in productivity growth. While there is some cause for optimism based on the rapid adoption of tech during the pandemic, boosting productivity should still be the top priority for any government. After all, more than anything else, it is what determines wages and living standards.

Over the past five years, policymakers have tended to focus on the UK’s long tail of underperforming SMEs as the main route to improving productivity. It’s not a bad idea per se, if we could close the productivity gap between our top performing firms and the rest then it’d boost UK GDP by £270bn and bring us closer to German and American levels of productivity. This is why a range of policies, including the recently announced Help to Grow scheme for SMEs, are focused on supporting more SMEs to adopt best practices in digital adoption and management. 

Yet, while our long tail may help to explain why we are less productive than Germany or the US, it doesn’t explain why productivity growth has slowed down across the West or why the slowdown has been sharpest in the UK.

At a recent meeting of the APPG for Entrepreneurship, Prof Mark Hart from the Enterprise Research Centre challenged the long tail narrative. He pointed out that since the financial crisis it’s been the long tail that’s added the most productivity growth, while the most successful firms have seen labour productivity fall or stagnate.

Part of the explanation is that the top 25% of the productivity distribution were more resilient and as a result were able to retain staff even when turnover was falling. The result was a fall in real wages and productivity. He made the provocative point that an exit of some of the UK’s most productive businesses might actually create the space for worse performers to improve their productivity.

There’s precedent for this. Creative destruction is a key driver of productivity. As economist Magnus Henrekson writes:

“Economic growth is not primarily about firms growing by a similar percentage or productivity rising in existing jobs because of technological change and more capital per worker. Rather, it comes mainly from churning (firm and job turnover) and restructuring— mostly shifts in production from less to more successful firms within narrowly defined industries, rather than from declining to growing sectors.”

Higher rates of job reallocation – that is the sum of employment changes from businesses starting up, closing down, expanding or contracting – are associated with higher rates of economic growth. The same is true for rates of worker reallocation, people moving from job to job. In other words, business dynamism is what drives growth.

A decline in job and worker reallocation may explain why productivity has stagnated in recent years. At the APPG meeting, Prof Mark Hart noted that the UK has not seen a US-style decline in job reallocation. Job reallocation rates in the UK have been essentially flat, though consistently lower than US rates.

It may be difficult then to blame job reallocation rates for the UK’s decline. However, there is still some evidence that business dynamism has got worse in the UK. Research from Nesta found that the allocative efficiency of the UK economy fell significantly between 1998 and 2007. In other words, we became worse at allocating resources i.e. workers and capital to our best businesses. The Nesta paper concluded: 

“If Britain’s productive resources were as efficiently allocated at the end of the period as they had been at the beginning, productivity would have been 7.6 percentage points higher among firms of this size. This is equivalent to around £79 billion of lost GDP.”

It is possible that job reallocation might have concealed the decline in dynamism. There might be a case for focusing on worker reallocation, people moving from job-to-job instead. A recent paper from Census Bureau economist Henry Hyatt highlights a worrying trend. Job-to-job flows in the US have fallen dramatically since 2000. This is interesting because while job reallocation fell consistently between 1980 and present, the decline only became linked to a fall in productivity post-2000. 

There are a few reasons to look at job-to-job moves specifically. Workers typically move to jobs that pay better and last longer. It is part of an efficiency-enhancing process where productive employers expand and unproductive employers cut jobs.

While the job reallocation rate has remained roughly stable in the UK, job-to-job flows do appear to have fallen.

Data from the Labour Force Survey shows that seasonally-adjusted job-to-job flows have not reached their pre-Financial Crisis level.

The above data only goes back to 2004. Earlier, slightly different data, cited by the Bank of England shows the decline began in 2001. Interestingly, this data seems to mirror the decline in allocative efficiency that the Nesta paper points to.

In Hyatt’s paper, he points to a range of explanations for the US decline, including:

• An ageing workforce: older workers move from job-to-job less.

• A decline in startup rates: startups have more job turnover.

• Increasing concentration: large firms have less job turnover.

• Higher levels of education: educated workers are less likely to change jobs.

His data suggests the first two factors are the most significant (explaining 9-21% and 8% of the decline respectively). But it’s clearly not the full story.

One factor he doesn’t mention is the high cost of housing in our most productive places. Could a decline in geographic mobility, documented in the UK by the Resolution Foundation and in the US by the Mercatus Center, be to blame?

The Resolution Foundation notes that although the population has grown by 11% since the millennium, the number of workers moving across the UK to new jobs has stayed the same. This is a 25% drop (0.8% to 0.6%) in the share of the population moving. Their data also reveals that the decline has been starkest among young graduates:

“whereas graduates under the age of 35 were almost 5.7 times more likely to move region and employer than non-graduates in the 1990s they are now just 3 times as likely.”

This decline in geographic labour mobility may have an outsized effect on productivity compared to other job to job flows. 

“People who change job consistently benefit from pay rises 5.5 times as large as people who remain in the same job, and those that move region and employer see typical pay rises 6 times as large.”

The issue could be that moving to a high productivity region such as London may improve your pay, but in real terms you could be worse off. This point is starkly made in a recent Economist article on what the author describes as Barratt Britain.

“In Cramlington, Richard, who works in sales, earns around £28,000 a year and his partner, a part-time administrative assistant, earns £12,000. That is enough for a four-bed house and two cars. “If I’d moved to London and got a graduate job, I’d probably be renting a shitty flat and I doubt I’d have two kids,” he says.

In other words, higher productivity work and high wages no longer always translates to higher living standards.

The Duke

One of Prince Philip’s greatest achievements and legacies will be The Duke of Edinburgh's Award.

At the request of Kurt Hahn, his educational mentor, HRH The Duke of Edinburgh first considered the idea of a national programme to support young people’s development in the autumn of 1954.

According to the DofE website: “His Royal Highness wanted to bridge the gap between leaving formal education at 15 and entering into National Service at 18, so that young men made the best use of their free time, found interests and acquired self-confidence and a sense of purpose that would support them into their future and help them to become well-rounded citizens.”

More than 4 million teenagers have participated in the scheme and over 140 countries and territories now offer DofE programmes. Just in the UK, last year 295,490 young people started a programme and a record 159,051 Awards were achieved.

While it’s very broad, the DofE Award is the sort of upstream intervention that we think will raise the confidence of young people so later in life they will have the confidence and broad skills to consider entrepreneurship. It’s a long-term investment, but one worth making.

My colleague Sam Dumitriu covers some of the more enterprise focused upstream interventions in the latest APPG for Entrepreneurs digest, which points people in the direction of the work of The Prince’s Trust’s Enterprise Challenge, which was founded by Prince Charles, and our friends at Ultra Education. Sam also cites some other great international examples in his report on Educating Future Founders, such as Teach a Man to Fish’s School Enterprise Challenge, ABE’s KidsMBA, and VIVITA. 

(As an aside, when writing his history of the RSA, our Head of Innovation Research interviewed Prince Philip. Here’s Anton’s great Twitter thread on what he learned about Prince Philip’s commitment to environmentalism and the convening power he was able to wield.)

Calling all Female Founders
The Female Founders Forum is back. Well, it never really went away, but we have now cemented our plans for the next 12 months. 

In partnership with Barclays, it’s going to be bigger and better than ever, and it kicks off on Wednesday for the first of four webinars. This one is focused on helping support your exporting ambitions and includes Cecile Reinaud, the founder of Seraphine, who recently sold her fashion label for £50m, and Virginie Charles-Dear, founder of ToucanBox, which ships over 150,000 packages of activities for children and toddlers every month to the UK, Europe, and the US. RSVP here.

Later in the year, we will host regional roundtables across the country, and we will release our annual data-backed policy report (check out previous reports here).

It would be great to see you on Wednesday (literally, I hope, as there will be time afterwards for virtual networking), and please forward this onto any female founders who you think would be interested in getting involved in our work. You can sign up to our quarterly Female Founder Forum focused newsletter here.

At Fives and Fours

The think tank Autonomy predicts that more than one million companies in Britain could move to a four-day working week after the pandemic.

Certainly, the pandemic has revealed all sorts of new ways of working that will remain in place when things go back to 'normal'. For example, Dr Matt Clancy argued, in a report for us on The Case for Remote Work, that even when it’s safe for us to all return to the office, a lot more work will be undertaken remotely than before the pandemic. There are policy implications for this. And not Deutsche Bank Research’s ludicrous suggestion of a 5% tax on those who work from home – but things like supporting better digital infrastructure.

Similarly, many of us are desperate to get off back-to-back video calls, but the idea that things will just snap back to pre-pandemic meetings is fanciful.

The same may be the case for more flexible working weeks. Employers and employees may have discovered by being forced to reduce days because of the economic hit of the pandemic that both have a preference for working less in future.

However, the thing about Autonomy is they aren’t just spotting a trend and then asking the government to think about the policy implications. They’re campaigning for a universal four-day working week – both directly and through the 4 Day Week Campaign.

We should always be wary when an organisation suggests a single policy change has the potential to solve all society's ills – even when it’s something you agree with (in fact, especially so). The 4 Day Week Campaign is a bit like that – promising all manner of benefits for our economy, society and environment. It even promises to help restore our democracy.

There is some evidence that 4-day work weeks can make some of us more productive, but the weight of evidence is far from overwhelming – and importantly isn’t satisfactorily broken down across industries and age groups.

A universal policy of a reduced working week runs against the rise and rise of entrepreneurship. Entrepreneurs and their founding teams readily spend closer to 7 days a week than 4 days a week when building their businesses. Of course, as they grow most of the workforce will expect less intense working practices, but without that initial intense push the company may not have grown or survived, to afford it. (Missing the initial start-up intensity as the company matures is one reason why founders leave successful companies to start again.)

But I don’t think this debate should really rest on economics. It’s really about choice. Many of us – particularly entrepreneurs – like what we do and while it’s sometimes hard it’s not without reward. Many employees like their work too and enjoy spending time with their colleagues, which may explain why John Maynard Keynes’s prediction of a 15 hour work week proved incorrect.

If the pandemic breaks down the expectation that people work 5-day work weeks when both employer and employee want to work fewer hours, that’s great. But the “universal approach” would take away our autonomy.

Oh when the saints
I may be a little biased, but our research is getting better and better each year. We can’t do it without the support from our sponsors, and our growing group of paid Advisers, who freed us to be able to write the recent AI report and our previous Copyright paper.

As well as corporate sponsors, a couple of entrepreneurs have also funded research that they’re passionate about. In recognition of this, we’ve created a new category of Patron to go alongside our Advisers and Supporters.

Our first Patrons are Chris Hulatt, Co-Founder, Octopus Group for support of our Future Founders report, which uncovered the views of the next generation towards entrepreneurship, and Sukhpal Singh Ahluwalia, Founder and Chairman of Dominvs Group, for his support of our influential Job Creators report, which set out the contribution of immigrant founders.

If you have a particular passion for an area of policy that you would like to support, just drop me an email.

Introducing Aria
Earlier this year, the Government announced the launch of a new research agency to support high risk, high reward science: the Advanced Research & Invention Agency (ARIA). Today, we announce Aria – a low risk, high skilled member of The Entrepreneurs Network’s growing team.

Aria Babu is a Senior Researcher and the Head of the Female Founders Forum, having written the Resilience & Recovery report before formally joining us. She has written a short introductory blog here and please feel free to drop her an email to say hello.

Sign up to future newsletters here.

Aria Babu joins The Entrepreneurs Network

I’m new at The Entrepreneur’s Network and thought I would introduce myself.

I’ve been around for a while. I’ve done some freelance work for The Entrepreneur Network and the Female Founders Forum. I wrote the Resilience and Recovery report in October, and I have also written a couple of newsletters and blogs.

I’ve had a reasonably varied career up to this point. My first full time role after university was at The Small Business Charter. The Small Business Charter works with business schools to encourage them to support small businesses, both providing support to already existing SMEs in their area and by encouraging their students to start their own businesses. While I was there I helped on a bid for BEIS funding for an SME leadership training programme, which was successful and is now a fully funded scheme with 20 participating business schools. The scheme includes peer-mentoring, which we included, partly because the evidence in The Entrepreneur Network’s report Management Matters.

After that I joined the consultancy Public First. On the policy side, I worked on tech policy, R&D, and pharmaceuticals. On the campaigns side we did projects based on public opinion and through that I have somehow ended up on the front page of The Times. (See if you can spot me.)

I have also worked at a European Space Agency funded start-up, making the world a better place by using satellites to monitor biodiversity.

If you recognise me for anything, it is probably because during the first lockdown I made a political compass quiz which went viral on British Politics Twitter and was mentioned in UnHerd and on the New Statesman podcast.

I’m hoping this eclectic background brings a lot to The Entrepreneur Network. It’s a small and agile team so I think the fact that I’ve done a little of everything is going to be very helpful.

I will be running the Female Founders Forum, and doing some combination of comms, policy, and operations. My main areas of interest are tech, feminism, and housing. My hobbies outside of work are incredibly lame. I’m learning to code, play every Taylor Swift song on the piano, and I run a weekly rationalist book club.

If after reading that last sentence, you still want to talk to me, shoot me an email at aria@tenentrepreneurs.org.

Education Entrepreneurship Monthly – March 2021

Welcome to the March issue of Education Entrepreneurship Monthly from The Entrepreneurs Network – our monthly update covering news, views, research and events of interest to entrepreneurs in education. You can read past updates here.

Human capital. This month’s budget made it clear that the Chancellor is convinced that human capital is integral to economic growth. He announced a new scheme, Help to Grow, to encourage small businesses to adopt management best practices and take fuller advantage of productivity-enhancing software.

Under the scheme, business schools will deliver a ‘what-you-need-to-know’ curriculum and practical peer mentoring programmes. Businesses will also be able to benefit from free advice on efficiency-improving software. Unfortunately, the voucher discounts, just as entry to the mentoring programmes, are closed off to businesses with fewer than 5 employees.

As The Entrepreneurs Network’s Sam Dumitriu noted in his response to the Budget announcement:  “Management practices explain almost a third of the differences in productivity between and within countries. And pre-pandemic data suggests that if the UK’s 1.1m micro businesses doubled their uptake of key digital technologies, it would lead to a £4,050 average productivity for the millions of workers they employ.”

If you’re interested and want to take part, you can read a recent Policy Update which breaks down the specifics of the scheme for entrepreneurs.

In a Budget boost for Higher Education student recruitment, employers, and start-ups, the promised detail of a new Graduate Visa has also been published. From July, graduates with the visa will be able stay in the UK for two years after graduation. Employment of graduate talent right out of university will become much easier, with less need to worry about visas, which is a vital step towards unlocking an important talent pool from which to resource our economy.

The government’s initiatives in Further Education and Skills were met positively. The Chancellor confirmed additional funding for “high quality” work placements and traineeships for 16- to 24-year-olds; a doubling of cash incentives for employers to hire new apprentices; and a new fund for “portable apprenticeships” to better prepare those destined for portfolio careers and project-working. All measures that will be positive for college recruitment and revenue.

Schools. In the midst of a general disgruntlement among teachers about the pressures of Covid-related safety compliance and learning catch-up, many school leaders voiced disappointment that there would be no extra funding for schools beyond existing planned budget increases and catch-up schemes already announced by the government. 

Nevertheless, a budget total of £705m, with a focus on the disadvantaged, £200m for secondary schools to run summer school activities, and roughly the same more for the National Tutoring Programme, is not nothing, and the questions quickly turned to focus on how the money should be spent and intervention design. The latter was argued to be particularly important by the Education Endowment Foundation (EEF) in regard to the value or otherwise of summer schools, which if well-balanced and put together can bring gains for some pupils (up to two months’ progress in some cases).

To maximise the impact, Head of Policy Jonathan Key argued, programmes should utilise trained teachers for small group tuition (potentially adding the equivalent of a further two months’ of progress in the summer school context).

Feedback. According to the EEF Toolkit, ensuring pupils receive high-quality feedback by comparison can be transformative (+8 months). There is broad consensus that well-thought out and explained homework activities, which enable specific and timely feedback, are important, but how this relates to other aspects of good teaching and learning is less clear. It’s an area that teachers know is in need of improvement. An indicator of this was given this month in a TeacherTapp survey of over 8,600 responses. The question focused on the new technology applications they’d used over the past year, and the results reveal a strong inclination to make changes to the way they approach homework and feedback.

Exams and assessment. Finally, even as the new Education Recovery Tsar, Kevan Collins was highlighting the need for renewed effort in the area of formative assessment, and for restoring faith in assessment more generally, a great confusion was erupting over arrangements for this summer’s 14-19 exams. While the government confirmed that teachers will have lead responsibility for determining grades, based only on what students have been taught, and drawing on a range of evidence that includes mocks, coursework and optional exam board set questions, educationists largely concurred that we are walking into a minefield. Multiple checks will be built into the system, including peer checking in schools, sign-offs and exam board moderation support.

While Ofqual published teacher guidance and information for exam centres on how teacher-assessed grades should be determined and submitted, one HMC head nailed the problem with the whole approach: what if students from different schools/exam centres start comparing their experiences and questioning whether allowing these diverse approaches is fair? “Plans will be thrown into chaos if pupils are permitted to challenge not only the decisions themselves but also the basis on which they have been made,” he said. Meanwhile, a poll conducted by The Student Room Group found students not far behind: 52% thought that exam grades this year would not be fair to them. 
 

News and Views

What did the 2021 Budget mean for the UK tech sector and COVID-19? Executives, entrepreneurs and investors give their views. BusinessCloud.

A year into the pandemic: Reflections on how education systems responded & where we are heading. Brighteye Ventures.

To raise funds or not to raise funds? Vadim Rogovskiy, serial tech entrepreneur and investor. TNW.

The 5 main reasons VCs reject start-ups. RLC Ventures.

UK tech investment hits record levels as TechNation’s annual report voices concerns about the sector’s increasing reliance on foreign investment at later stages. Relocate Global.

Europe suffers from lack of late-stage investors. Over 80% of later stage tech venture capital in Britain comes from overseas investors. It’s a Europe-wide problem. Suranga Chandratillake of Balderton Capital in Growth Business.

vc:20 – The Twenty Minute VC, with Harry Stebbings. Inside the world of Venture Capital, Start-up Funding and The Pitch. Harry Stebbings.

How to become an entrepreneur. The John F. Kennedy University's Institute of Entrepreneurial Leadership re-envisions its traditional class as a free, open-source, interactive online learning experience with CurrikiStudio. Details here.