World's Safest Museum

As Philip is on a well-deserved break, our Researcher Derin Kocer took over today’s newsletter. 

In his annual presentation, technology analyst Benedict Evans revealed that he refuses to talk about artificial general intelligence because – like anybody else – he “doesn’t know” what it can be. 

Frankly, this is true for most AI talk. Although there is a general feeling that this novel technology has the potential to change our lives, the consensus fades when it comes to what that change may look like. 

At the extremes, 'doomsters' think that one day somebody will ask a chatbot to handle their taxes and the AGI will conclude that destroying humanity is the best way to complete the task (the only two things certain in life: superintelligence and taxes). 'Boomsters' assume that any day now it’ll cure cancer for us. Nobody knows who is right. 

Other than European policymakers. EU lawmakers have been awkwardly boasting about writing the world’s first comprehensive AI regulation framework. Debate on how to regulate this novel technology matters a great deal. It’s not a coincidence that American conglomerates are spending so much money to shape the debate or that European startups are hiring former ministers to lobby on their behalf. 

However, regulation shouldn’t come at the expense of killing innovation. Europe should’ve been aware of this: compared to the US in market value, Europe’s tech sector is just a blip. No wonder why some worry about Europe turning into an open-air museum. Moving to America is part of the business plan for many successful European startups. Regulations aren’t the only reason, but they aren’t helping – that’s for sure. 

The AI Act risks being a part of this negative story. The EU could have produced a rulebook for startups to follow in the use cases of artificial intelligence, but policymakers went further. If this Act becomes the law of the continent, AI companies that build foundational models will need to “adhere to transparency requirements, including technical documentation and compliance with EU copyright law; conduct model evaluations, assess and mitigate systemic risks, conduct adversarial testing, report to the Commission on serious incidents, ensure cybersecurity and report on energy efficiency.”

It is estimated that compliance may cost around €300,000 for a 50-person startup. It will inevitably mean more lawyers and fewer AI engineers. While agreeing that a regulatory framework is needed for this technology, DigitalEurope’s Director General Cecilia Bonefeld-Dahl asks the right question: “At what cost?” 

Rule Britannia
If we play our hand well, all this can be good news for Britain. 

The UK is already Europe’s leading technology hub; it has a few of the world’s best universities and research institutions and, according to our survey with Mishcon de Reya, British entrepreneurs see more opportunities in AI than risks. The foundations are there to lead Europe on this novel technology. 

Putting more barriers in front of our startups’ access to talent is the only thing we shouldn’t do. However, the government doesn’t seem to agree. 

As I wrote in the New Statesman this week, the newly proposed immigration rules – which will increase the salary threshold for workers’ visas to £38,000 (£4,000 higher than the national average) – will disproportionately impact startups and research institutions. Most growing firms don’t have the financial resources to afford high salaries and, currently, a postdoc researcher starts at £36,000 at the University of Oxford. 

Before changing immigration rules for good, the government should do three things to make it work for our inventors and innovators: 

• The salary threshold for recent graduates of British universities should be lowered;

• Equity ownership should count towards the salary threshold;

• Academic institutions and research facilities should be kept outside the new salary thresholds. 

If you have any other policy suggestions to make the new immigration policy work, get in touch!

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Small Wonders

This shouldn’t be a controversial opinion, but in some quarters it is:  we as a society should back businesses, no matter their size.

The vast majority of businesses are delivering the goods and services that make us healthier, wealthier and happier, even if there will be a few headline-grabbing bad apples from time to time. Good businesses are good businesses, whether they’re a sole trader or a multinational conglomerate.

Perhaps most controversially, we should defend large businesses because their economies of scale mean they deliver at low cost, ensuring that the poorest in society can afford things that were unimaginable luxuries for previous generations. We should back medium-sized businesses that are often the drivers of the most radical innovations, as they scale to become large businesses. And we should support small businesses that provide a level of service and human connectedness that can only be delivered at a local level. We think all these businesses can be entrepreneurial. 

Tomorrow I’ll be celebrating the smallest, as it's Small Business Saturday. It was founded by American Express in the US back in 2010, with Small Business Britain launching it with them in the UK a little later. The campaign shines a huge spotlight on the UK’s small business community, generating mass media coverage and gaining high-level support from across the political spectrum. Many small businesses take part in the day by hosting events or promotions, and joining in with the conversation online using #SmallBizSatUK hashtag.

Find out more about Small Business Saturday here, and find out if their tour across the UK will be visiting your town or city here.

Value Creation
I’m delighted to announce that Steve Rigby has joined us as a Patron. As I wrote earlier today for Forbes, “over the last ten years he has helped create over £500 million of value for his family business Rigby Group – one of the UK’s top ten wholly-owned private companies.” Now, he  wants to lend a hand to help the rest of the UK build and grow.

He is already doing a fair amount. Among other things, he is on the Board of Family Business UK, a national judge this year for EY Entrepreneur of the Year, chair of the Rigby Foundation, and a long-term supporter of Place2Be, most recently as Chair of the charity’s development board.

He recently wrote for The Times on what the UK needs to do to support family businesses, but his interests are even broader. He wants to answer questions like: How do we encourage entrepreneurialism? What is the role of venture capital? Where are our universities and IP? Do we as a country embrace capitalism?

Patrons are vital for supporting key policy areas. The great thing is seeing how our shared vision translates into change. Whether that’s Emma Jones CBE partnering with us on our Small Business Forum and the multitude of Access All Areas reports we produced together; Chris Hulatt, co-founder of Octopus Group, our first sponsor with whom we’ve worked with on multiple reports over the years, including Future Founders; Sam Smith who built finnCap and backed our ongoing efforts to imbed enterprise education in the curriculum; or Sukpal Singh Ahluwalia, who arrived in the UK in 1972 as a refugee, and went on to build and sell a company for £280m before sponsoring our influential Job Creators report. 

Smarter Regulation
The Department for Business and Trade has been in touch for us to share a couple of upcoming roundtables and call for evidence on smarter regulation. If you’re in or near Salford on 11 December 2023, or Cardiff on 12 December 2023, then register here. The call for evidence can be accessed here, and you can get in touch with any questions here.

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Statement Piece

As regular readers will know, we aren’t afraid to criticise the Government, or opposition, when we think they’re doing the wrong thing. However, it would be churlish to not give them a metaphorical ‘pat on the back’ when they get things right. As we responded: “To his credit, the Chancellor put the long-term interests of British businesses front and centre of the Autumn Statement.” 

I wrote about the impact on entrepreneurs for Forbes, and I was quoted alongside many others in UKTN. Following up on last week’s predictions, we welcomed the Government’s decision to make full expensing permanent, to extend the sunset clauses of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs), and to offer some compromise on R&D tax credits.

All the way back in 2018, we made the case for full expensing in a report for the APPG for Entrepreneurship unimaginatively titled Tax Reform, while the APPG more recently produced the much better named Funding to Flourish report, which called for the extension of the sunset clause for the EIS and VCTs.

We weren’t the only organisation calling for these and other things announced in the Autumn Statement. But Sam Dumitriu, our previous Research Director and now Adviser must surely take a lot of credit – along with Sam Bowman, another of our other Advisers, and Tom Clougherty of the Centre for Policy Studies – for convincing those in power that full expensing is as important as the headline rate of corporation tax. When it comes to EIS and VCTs, Christiana Hambro of the EISA deserves a special mention, alongside Will Fraser-Allen (Albion Capital) and Justine Duggan (Octopus Group) of the Venture Capital Trust Association (VCTA).

This is a long way of making the obvious point that all policy successes have many mothers and fathers, but it’s also testament to the fact that the UK’s civil society of think tanks, business and trade groups work well at educating and holding the Government to account.

Also of note, the Autumn Statement also accepted the findings of the spinouts review, which recommended  more standardised equity terms, clearer timeframe expectations and increased public funding for proof of concept funds. Our Head of Research Eamonn has an X thread for the tldr. While it didn’t go as far as we called for in Academic to Entrepreneur, it went as far as we could have expected.

As Sifted reported: “Founders will own more of their spinouts and will be free to focus on building breakthrough companies, rather than negotiating with TTOs,” says Nathan Benaich, the founder of Air Street Capital. “Today’s review is a significant victory for founders and the UK’s science and tech ecosystem.”

There was certainly some devil in the details (most obviously the fact that freezing income tax thresholds will more than offset the NICs reductions), but there were also a couple of angelic details that didn’t get picked up by many.

For example, Stian Westlake revealed that there will be funding for a new metascience unit, which will fund research into important questions about what sorts of innovation funding works, and how to improve them, and conduct experiments on funding methods.

While The Economist dug deep to uncover news that could transform the cutting-edge of medicine: “Medicines and Health-care products Regulatory Agency (MHRA) is working with Genomics England, Oxford University and Mila’s Miracle Foundation, a charity, to develop a regulatory pathway to allow one-off drugs to be designed and approved for use in individual patients in less than a year.” This is a big regulatory win, and added to the recent news that the UK is the first to approve CRISPR treatment for diseases, it is encouraging that the UK could be on the verge of fulfilling our call to become a Testbed Nation.

There is much more to unpick over the coming weeks, but I’ll summarise with the conclusion from my Forbes article:

“With the OBR’s growth forecasts down, Hunt was right to focus on Britain’s businesses as the key driver of future prosperity. It’s just a shame that this long-term thinking has not always been present in other fiscal announcements made in the last 13 years. With Brexit, the pandemic and crippling energy prices, the last few years have been incredibly tough for entrepreneurs. As our recent Risk Readiness Report with Mishcon de Reya showed, a significant proportion of entrepreneurs (39%) believe the overall level of risk in the business environment is higher now than it was 12 months ago, and the same proportion (39%) think the level of risk will only increase in the coming year. A bit of good news was well overdue.”

Wise Purchase
James Wise of Balderton Capital has just published Start-Up Century. It is based on two observations: more people than ever are choosing to, or having to, start their own businesses and become self-employed. But at the same time the obstacles to scaling a business and thriving as an entrepreneur are as prevalent as ever. This book is his attempt to address this challenge, to point out the many positives of having a more entrepreneurial economy, and to weave a way through the regulatory, financial, educational and cultural changes we need to make to seize on this renewed interest in entrepreneurialism.

I was lucky enough to have an early sight of the book. Recommended reading.

Join Us
On the 24th of January from 6pm to 8pm, OakNorth is hosting an informal drinks event for our Patrons and Advisers. In 2024, we’re going to host events every couple of months just aimed at our Patrons and Advisers. The second will be a more formal roundtable with the British Business Bank.  If you want to come along, just let us know. And if you want to find out more about becoming an Adviser, drop me an email.

You can read the whole newsletter here, and sign up for the newsletter here.

Our Response to the Autumn Statement

Overall verdict for entrepreneurs

The Entrepreneurs Network’s Founder, Philip Salter, said: 

“To his credit, the Chancellor put the long-term interests of British businesses front and centre of the Autumn Statement. 

Entrepreneurs will be particularly encouraged to see the sunset clause for the Enterprise Investment Schemes and Venture Capital Trusts, which have been such important drivers of UK startups, extended until 2035. With Labour also backing the policy, making full expensing permanent will give businesses the incentives and certainty to invest. And while it’s not perfect, the compromise on a merged R&D tax credits scheme is long overdue and will hopefully give clarity to businesses that have been disrupted for years by so much chopping and changing.

With the OBR’s growth forecasts down, Hunt is right to focus on Britain’s businesses as the key driver of prosperity. It’s just a shame that this long-term thinking has not always been present in other fiscal announcements made in the last 13 years.”

On steps to commercialise more academic research

The Government announced it would be accepting all of the recommendations of the Independent Review of Spin-outs. Among these recommendations are calls for: academics and their institutions to agree spin-out deals on market terms which avoid unnecessary negotiations; greater disclosure of deals to increase transparency; and the ability for universities to use funding to cover the costs of university technology transfer offices.  

Responding to the announcement, The Entrepreneurs Network’s Head of Research, Eamonn Ives, said:

“Ensuring that as much of the research as possible which takes place in Britain’s universities can be turned into dynamic companies will be essential for growing the economy and tackling problems such as climate change or our ageing population. In theory, the recommendations made in the Independent Review of Spin-outs represent a good first step for enabling academic entrepreneurs to build investable startups of their own, but it remains to be seen how they work in practice. If problems continue to persist, the Government should not be afraid to go further when it comes to boosting Britain’s spinout landscape.” 

[Note: In Academic to Entrepreneur, published by The Entrepreneurs Network this July, we set out how the status quo is failing academic entrepreneurs.]

On full expensing 

The Government announced it would be making its policy of full expensing permanent. 

The Entrepreneurs Network’s Derin Kocer said:

“Full expensing gives businesses what they need: incentives to make long-term investments. Making this policy permanent will offer certainty to invest and drive businesses to upgrade the nation’s capital stock, boosting our productivity and unlocking new opportunities for entrepreneurs and innovators across the country.” 

[Note: In June 2018, the All-Party Parliamentary Group (APPG) for Entrepreneurship was one of the first organisations to make the case for the full expensing in the UK in June 2018.]

On planning reforms

The Government announced it will progress the National Infrastructure Commission’s (NIC)

April recommendations on planning by delivering reforms to return the Nationally Significant Infrastructure Project regime, that it will strengthen the capacity of the planning system to deliver a better service for businesses, and that it will bring forward plans for authorities to offer guaranteed accelerated decision dates for major developments in England in exchange for a fee, ensuring refunds are given where deadlines are not met and limiting use of extension of time agreements.

The Entrepreneurs Network’s Head of Research, Eamonn Ives, said:

“Britain’s sclerotic planning system makes new infrastructure and housing more expensive to build and longer to develop. This hurts businesses who can’t otherwise make use of it, and denies opportunities for those who want to build it. Meanwhile, agglomeration is curtailed as people are prevented from moving to more productive areas to fulfil their potential. We therefore welcome the incentives for local councils and other reforms to speed up development.” 

[Note: In Strong Foundations, we highlighted how the UK’s rigid planning system drives up the cost of housing, office space, and lab space, and explained how this holds back our startup hotspots around the country.]

Shadows of Doubt

Entrepreneurs are uncertain about the future of Britain. That was a key finding from our inaugural Risk Readiness Report with Mishcon de Reya. It found that the challenging economic climate, supply chain disruptions and our unfavourable tax regime to be the most common risks impacting entrepreneurs’ businesses. And they expect things to get worse: not even a quarter (23%) of entrepreneurs believe the level of risk in the business environment will be lower in 12 months’ time. 

As Beauhurst revealed this week, equity funding has dropped off a cliff, with just 491 deals announced in Q3 2023. That’s a 17% decrease from the same period last year, and a 37% decrease in the amount invested. In fact, it’s the lowest number of completed deals in a quarter since Q3 2018.

This lack of business and investor confidence makes next week’s Autumn Statement all the more important. There is enough risk out there already without the added weight of political risk exacerbating things. 

A glimpse of a silver lining comes in hearing that the Chancellor is considering extending full expensing – which allows firms to deduct the full cost of any new investment in productivity-enhancing equipment from their corporate tax bill – into the next parliament. He should make it permanent.

As our Adviser Sam Dumitriu notes, between 2010 and 2019 the Annual Investment Allowance changed six times. “A ‘use or lose it’ time limited sale might be a great way for DFS to shift some sofas,” he writes, “but it is a terrible way to get business to make multi-million pound investments.”

The need for business certainty extends across many areas of policy. It’s why Hunt really needs to confirm the future EIS and VCTs on Wednesday, and why he should also take heed of Startup Coalition’s warning to offer stability and compromise around R&D tax credits, which have been chopped and changed to the deep detriment and distrust of entrepreneurs. 

Call Him Cameron
Who could have predicted it? However, like everyone else, we have written about the former PM’s return to politics. But more importantly, we’ve also dissected the wider reshuffle, and its impact on entrepreneurs, in the latest All-Party Parliamentary Group for Entrepreneurship monthly newsletter. Check it out.

Justice for the Young
Those of a nervous disposition should look away now. First shot: To keep pace with the cost of the welfare state, the UK will need to see annual economic growth of 2.9% over the next 50 years – a rate it has hit just twice in the last two decades, excluding the post-pandemic rebound. 

Second shot: By the end of 2026, the UK will have more people aged 65+ than under 18 for the first time in its history. 

Third shot: On current trends, the workforce is set to start shrinking in absolute terms as soon as 2043, potentially ushering in an era of negative growth. By 2072, the UK will have 1.9 potential workers per pensioner, down from around 3.3 today.

Chaser: Eamonn Ives, our Head of Research, and others have written for the CPS about how to fix things. Eamonn’s chapter in Justice for the Young is on the Power of Entrepreneurship and covers everything from planning policy, transport, culture and immigration. Recommended reading.

More Chaser?
Valentina Kristensen, Director of Growth and Communications at OakNorth has joined us as an Adviser. Valentina has been a big supporter of the ecosystem, most recently by supporting some solid research on scaleups by the Social Market Foundation – Full Scale and The Scale of the Opportunity.

We ask all our Advisers to let us know why they think the UK is an attractive place to grow a business. Valentina quotes OakNorth’s co-founder and CEO, Rishi Khosla: “The UK has so much to offer: we have world-class research universities (four of the world’s top 10 universities are here); forward-thinking regulators with an open approach to innovation; a strong framework of common law and a common language; and a timezone that allows true global operations across EMEA, APAC, and the Americas. The result is that the UK has created more tech unicorns than any other country, bar the US and China, and is a world leader in terms of attracting investment. London is particularly unique being home to a global finance centre (including the London Stock Exchange), a tech centre, and a policy / regulatory centre all within a few tube stops of one another, making it an exceptional place for innovative companies to be born and thrive.”

Get in touch if you want to find out more about becoming an Adviser.

And relax.

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Nature's Course

In partnership with

Nature has a great article making the case that postdocs “need improved career guidance and programmes that teach them about entrepreneurship, expanding their career options and increasing their capacity to tackle the many problems facing humanity today.”

This is spot on. While 65% of postdocs are planning careers in academia, there are nowhere near enough jobs for them. We should harness their talents for entrepreneurship. 

Nature profiles Canada’s Invention to Innovation (i2I) programme. Developed in 2015 at Simon Fraser University in Burnaby, it provides academic assistance and financial help to graduate students whose research has the potential to be commercialised. To simplify: it’s an entrepreneurship course for researchers. It’s since expanded across the country in partnership with other institutions. 

Surprisingly, the article doesn’t mention Innovate UK’s ICURe, which, when I last looked at the promising programme, had equally impressive stats and was estimated to have created £3.94 of economic benefits for every £1 invested. 

But beyond the big numbers (which probably deserve a bit more interrogation), we want to hear from those with experience of the UK’s or other systems. Given how open this Government has been to shaking up spinouts, this might be another fruitful area for reform.

Delicious! Excelente!
I’ll have more details in the coming weeks, but we’re scoping out some research into entrepreneurs’ experience of British embassies and consulates around the world, when it comes to getting help with exporting and internationalising. If you have any experiences to share, get in touch with Derin.

Lilac Review
Michelle Ovens CBE, founder of Small Business Britain, is campaigning for a Government-led independent review aimed at making the UK the best place for disabled entrepreneurs to start a business: The Lilac Review. Mich has a post on LinkedIn where you can pledge your support.

Phoenix Founders
Our friends at Beauhurst are conducting research on "Phoenix" founders. (It’s a new term to me, but I think it works.) Phoenix founders are entrepreneurs who had an earlier business that failed but who are finding more success in a subsequent venture. They're keen to hear from founders who are willing to talk about how what they learnt the first time round helped them achieve success. Drop Henry an email if you want to share your story.

It’s a truism that bears repeating, but in the UK we don’t talk enough about failure; nor are we as accepting that it is inevitable if you want a dynamic, competitive, innovative and risk-taking business environment. Past research has found that even after failure, second, third, or even tenth time founders are more likely to be successful. But seeing Beauhurst’s data brought to bear on this question will add a lot more weight – as will any insights you can provide on how you bounced back. It could also serve an inspiration.

Natural Intelligence
Progress in artificial intelligence rests on some of the world’s smartest people’s natural intelligence. Currently, the UK, alongside the US and China, is one of the best places in the world to work in AI. But if we fail to bring in more elite talent, it’ll only get harder to compete. As our researcher Derin Kocer argues in City A.M., an optical obsession with ‘overall migration figures’ has made talking about any kind of immigration an uneasy subject, but this silence needs to come to an end.

Derin’s article was picked up by International Business Times, which highlighted Canada’s work in trying to poach talent from Silicon Valley. A point not new to us. 

And it’s not just AI. As I wrote about Nazim Valimahomed, co-founder of Kroo – this week’s newsletter sponsor: “Originally born in Uganda, Nazim and his family fled to the UK as refugees following Idi Amin’s seizure of power. They then moved to Canada, where Nazim spent the rest of his childhood growing up before going to university. After graduating, he relocated to Moscow as Russia was opening up economically. In 2015, Nazim became a permanent UK resident using an Entrepreneur Visa.”

There are lots of policy levers for getting more talent like Nazim into the UK, but if you were to just give me one it would be tweaking the incredible High Potential Individual (HPI) visa – which currently gives graduates of the top 100 universities a two-year work permit – by expanding the list of universities and higher education institutions it includes. As Derin points out in relation to AI talent, the current list doesn’t include highly selective research facilities such as Carnegie Mellon and the Indian Institutes of Technology. It really, really should.

Message from our Partners
Kroo has launched a round of crowdfunding in partnership with Crowdcube. With £72m raised from private investors, including £14.5m in Kroo’s B+ round, crowdfunding opens the investment opportunity for Kroo’s customers and the wider public. Since launch, Kroo has opened 145k current accounts and acquired £765m in deposits with an average acquisition cost of £31 over the last 6 months. 

Early access for this crowdfunding round opened for current customers on 1 November, with public access beginning 15 November. Supporters can invest from £10 to £500,000. This low threshold for investing is designed to ensure as many people can be part of the community Kroo is building to change banking for the better. The funds will support Kroo’s ambition to put money and power back into customers’ hands, and become the first bank people trust and love.

Those interested in supporting the crowdfunding round can head here – public access will go live on 15 November.

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.

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Accelerate to Excel

Yesterday we launched Accelerate to Excel, the latest annual report from the Female Founders Forum, which we have run with Barclays for many years. It was covered in The Times, CapX, UKTN, and elsewhere.

I’m afraid the headline data doesn’t make for pretty reading: just 3.5% of equity investment for the first half of 2023 went to female-led businesses, while 85.1% went to male-led firms, and 11.4% went to startups co-led by women and men. To put that into context, according to Beauhurst data, since 2013 that 3.5% figure is fourth lowest of the last 10 years (chart here). You would have to squint incredibly hard to see a trend going in the right direction.

It’s not for want of female founders. In February, we learned that more than 150,000 companies had been started by women in 2022, which means they now represent 20.5% of all UK businesses, up from 16.7% in 2018. And there is a pleasing (if moderate) trend towards the number of deals going to female-led firms. But ultimately, female founders aren’t getting the cash.

We know the policy around this isn’t easy. That is why over the years we’ve looked at this from a number of different angles – always backed up by hard data – from first revealing the extent of the equity funding gap, the role of networks and mentoring, the importance of the education system, the impact of the pandemic, the breakdown of female founders in high-growth sectors, and the insights of female founders who have raised in excess of £1 million. One in A Million was one of my favourites: it showed the breadth of challenges faced by some of the UK’s most fearlessly ambitious founders, alongside the incredible success stories too.

As Annabel Denham, founder of the Female Founders Forum, said in her speech at the House of Lords yesterday, hard-fought progress has been made on things like childcare reforms, but as Caroline Nokes, Chair of the Women and Equalities Committee made clear in her speech, there is much work to be done.

“It is immensely rewarding to see the positive progress made from the concerted efforts across the financial services industry, education institutions and government to lower the barriers to female entrepreneurialism,” said Juliet Gouldman of Barclays. “However, the systemic issues identified will not be resolved overnight, so an ongoing determination will be required if we are to achieve lasting change.”

The title of the latest report is about the need for speed when it comes to closing the gap, but also references the positive role that accelerators are playing in supporting female founders – 56% of entirely female-founded high-growth companies have attended an accelerator, compared to 27% for men. And in 2022, our friends at the Centre for Entrepreneurs uncovered over 400 active incubators and 300 accelerators, representing a near doubling of provision since the last comparable survey was conducted by Nesta in 2017.

To this end, Barclays Eagle Labs and AccelerateHER have launched the Female Founder Accelerator for which applications are open. Alongside policy change, we need practical efforts like this too.

So what next for the Female Founders Forum to move the needle? That’s the question we’ll be asking ourselves in the coming weeks and months, as we draw up plans for 2024. This isn’t a rhetorical question. We’re keen to hear your ideas about both policy and practical support we can offer.

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Running with Risks

As Eamonn discussed last week, we recently released the first Risk Readiness Report with Mishcon de Reya.

There is a lot in the report, but Eamonn, and the media at large, understandably focused on the fact that our survey revealed that Labour politicians received a net approval score of +17% on the question of whether entrepreneurs thought they understand the needs of their businesses. This is versus +5% for Liberal Democrat politicians, -2% for Conservative Party politicians, -2% for Greens and -3% for SNP. While it’s easy to be popular in opposition, it’s even easier to forget how far and how quickly Labour has come since the days of Jeremy Corbyn.

Nevertheless, whoever wins the next election has their work cut out, as the report makes clear.

A significant proportion of entrepreneurs (39%) believe the overall level of risk in the business environment is higher now than it was 12 months ago, and the same proportion (39%) think the level of risk will only increase in the coming year. Less than a quarter (23%) of entrepreneurs think the level of risk will be lower in 12 months’ time.

The most common risk affecting entrepreneurs’ businesses right now is the difficult economic climate – with 49% of founders stating it is impacting them. This is followed by supply chain disruptions (38%), and Britain’s unfavourable tax regime (27%). Entrepreneurs expect these three challenges to remain as the biggest risks impacting their businesses in 12 months’ time.  
Despite this, nearly three fifths (59%) of entrepreneurs believe it will be easy to attract the funding their business needs or to achieve an appropriate market valuation within the next 12 months in Britain, against 13% who think it would be difficult. We will wait to see whether this optimism on funding is misplaced.

I urge you to read the report in full (or at least scan the charts). For example, it may surprise you that potential investors were seen very positively by entrepreneurs (+50% net positive), and regulators are looked upon kindly too (+35% net positive). Universities, in contrast, have some work to do (+14% net positive) – we expect the government will go some way to helping this by implementing some of our recommendations for overhauling the spinouts regime.

As Ed Turner, Chair of Mishcon Future writes in his foreword: “Entrepreneurs are pivotal actors in ensuring that we continue to innovate and grow. Their ability to do this, however, is limited if they’re preoccupied with battling headwinds. Some risks are inherent, but many others can be reduced, and we hope this research gives policymakers a better idea of how to go about doing that.”

Coding Enigma
The inaugural Risk Readiness Report also finds that 76% of founders see AI as an opportunity for their current business model. Which is why it was great to see Startup Coalition, Onward, and Tony Blair Institute for Global Change join forces to release The UK’s AI Startup Roadmap. 

It won’t surprise you to know that we agree with much in the broad-ranging report. One area it touches upon is the lack of clarity over copyright. It’s a genuinely thorny issue, as Benedict Evans shows in this typically insightful essay. Some questions he asks:

• What happens if I “make me a song in the style of Taylor Swift” or, even more puzzling, “make me a song in the style of the top pop hits of the last decade”? 

• What if I use an engine trained on the last 50 years of music to make something that sounds entirely new and original?

• ​​Ultimately, if you put all the world’s knowledge into an AI model and use it to make something new, who owns that and who gets paid?

Behind the scenes, Dr Anton Howes has been working for months on trying to crack the code. We’ll have more to say on this next week to coincide with the Bletchley Park AI Safety Summit.

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Betting on Red

Spirits are rightly running high in the Labour Party. Victory in the Tamworth by-election, victory in the Mid Beds by-election, and most importantly of all, victory in our latest batch of opinion polling. Specifically, we asked entrepreneurs for their views on which politicians best understand what their businesses need to succeed – and by far and away, it was those with red rosettes pinned to their chests who came up on top. 

Forty-three percent of founders agreed that Labour politicians know what they require, against 26% who disagreed (giving a ‘net approval’ score of +17%). To rub salt in the wounds of their Conservative counterparts, more entrepreneurs believed Tory politicians do not understand what their businesses need (37%) than do (35%), giving a net negative figure overall (-2%).

Before they get carried away, however, it’s perhaps worth pausing for a moment. Despite Labour’s impressive lead, still less than half of entrepreneurs believe that the party which looks set to lead the next government properly gets business. What’s more, we also found out that scepticism about all parties’ entrepreneurial acumen dwindles when we look specifically at responses from founders running smaller operations. If our polling tells us anything at all, it’s that entrepreneurs still feel there’s a disconnect between their world and Westminster – encouragement enough to us that we need to keep banging the drum for policy reforms to ensure Britain’s startup scene is as vibrant and successful as possible. (More on this later.)

The numbers above were the results of just one of many questions which we asked to underpin our latest publication. Alongside the leading law firm Mishcon de Reya, we launched our inaugural Risk Readiness Report – which will be an annual fixture, aiming to better understand entrepreneurs’ thoughts and feelings towards various aspects of risk. As well as the political stuff, we quizzed founders on AI, raising investment, regulators, future risk expectations, and more. You can read the report in full by clicking here, get the TL;DR on X, and I’ve written about it for CityA.M. if you’re still keen for more. (As ever, we’re eager to hear what you think about our work, and please do consider sharing among your own networks – it really does help us to get the message out.)  

Smarten up

Regulation can make or break a startup. In extremis, if what you’re selling is prohibited, your business simply cannot operate (not legally, at least). Short of this, regulations can still fatally encumber entrepreneurs – by raising the costs of doing business and making otherwise viable ventures uneconomical. 

Of course, plenty of regulations exist for a reason. Well-designed rules protect consumers, workers, the environment, and so on, and society as a whole is better off for them. But others have less logical origins. Decades of academic work from ‘public choice’ economists have, to my mind, convincingly explained why we tend to get the regulations we do, which serve special purposes rather than the collective interest. Less cynically, regulations often get introduced with the best intentions, but can quickly end up backfiring. (Our Adviser Sam Dumitriu wrote a great piece on this last year.)

Successive governments have long sought to bear down on red tape, and the current one is no different. This week, the Department for Business and Trade issued a call for evidence about delivering a smarter regulatory landscape. They “are particularly interested in success stories and areas for improvement on regulatory agility; proportionality; and consistency of approach,” and want “to understand any further steps we can take to reform the existing stock of regulation on the UK statute book.” 

As followers of our work will know, recommending regulatory tweaks to enable easy win-wins is something we pride ourselves on, so we’re looking forward to feeding into the consultation. But we can’t do it alone – many of our best ideas come from the entrepreneurs we work with, who are at the coal face of abiding by rules which hold them back for no apparent reason. 

So, if there’s a regulation that’s stifling your success, do let us know. Readers will also remember last week’s call for ideas to go into our manifesto for entrepreneurs – consider this a reminder to drop us an email with your thoughts. 

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Building Up Hopes

Regular readers will know that building more homes in the places where people want to live is something we’ve been campaigning on for a while. While it might not be the first thing people think of when it comes to supporting startups, a coherent housing policy is critical for entrepreneurs to flourish. 

As things stand: “Talent is priced out of our most productive cities, threatening the position of the UK’s entrepreneurial ecosystem. British startup employees have to face long commutes, over-crowded conditions, and lower disposable incomes. They are discouraged from taking entrepreneurial risks, and the growth of their businesses is curtailed. They struggle to hire and retain the best and brightest.”

In Strong Foundations we made the case for more housing in detail, with some of the UK’s leading entrepreneurs signing a letter to back it. We think new homes would make the country more dynamic, more productive, more entrepreneurial and a much nicer place to live. Over the years it has amazed me that the majority of business organisations fail to campaign around this elephant in the room.

The Entrepreneurs Network is both a business group and think tank, and as a think tank we are just one of countless voices making the case that this is an absolutely critical issue. I couldn’t name a think tank – from the rightest of right to the leftist of left – that didn’t agree that our lack of homes where people want to live and work is holding us back. Of course, they have different remedies, but we all agree that the patient is sick. 

Which is why ‘think tankers’ were buzzing following Keir Starmer’s conference speech and his later claim that he is a Yimby.

So far, Starmer has promised to build 1.5 million homes if elected, to build a wave of new towns near English cities, echoing the likes of Clement Attlee who built Basildon, Stevenage and Slough, to encourage Georgian-style townhouse blocks, and to restrict the ability of councils to stop developments on under-used urban land.

It’s not just Labour. Michael Gove burnished his Yimby credentials earlier in the year, when he announced plans for a new urban extension from Cambridge that would include both mid-rise residential and commercial lab space. 
Of course, when it comes to promises on housing, government after government has proved that talk, unlike housing, can be incredibly cheap.

Nevertheless, as Ant Breach from the Centre for Cities argued even before Starmer’s announcement, there are reasons to be optimistic: “The Conservatives have a clearer vision about where the new housing should go and the importance of cities to doing so. But the politics shaping their proposals is dominated by the next election. Labour is currently much more vague on detail, but is more confident than the Conservatives talking about the political choices that have really driven the housing crisis – the planning system’s broad restrictions on new housebuilding and the damage that does to the national economy.”

There is a great deal of ruin in a nation. Experience teaches us that whoever wins the next election has the option to kick the can down the road some more. But not forever.

It Ain’t Broke
Our very first report back in 2014 was a manifesto for entrepreneurs. In 2019 and 2022 we joined forces with our pals at Startup Coalition to produce a couple more. As we head towards another election, it’s time, once again, to publicly make the case to the UK’s political parties that our policies should be in their manifestos.

Your think tank needs you.

You don’t need a fully formed policy solution. Maybe you’re an entrepreneur who has a persistent challenge that you know could be tackled – but you’re too busy running your business to know how. We can devote some time to finding and promoting a solution.

You don’t need to be an entrepreneur. Maybe you work advising or supporting founders and have unique insights on where the stumbling blocks really are. Or maybe you have an issue in your large company that also impacts startups.

You don’t need to be original. Maybe you’ve seen a policy idea that you think we should also champion (we’ll give due credit), or you have experience of things working better in another country that we should copy.

We aren’t short of ideas, but we don’t want to miss a thing. Thousands of people receive this email – and please forward this opportunity on to anyone who cares about making the UK the best palace in the world to start and grow a business.

Drop me an email with what you think should be in our manifesto.

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Proof of Burden

It was the Conservative Party’s turn to put on their conference this week. If you want to dig a little below the headline announcements of the scrapping of HS2’s northern leg, the new post-16 qualification, or the plan to phase out smoking, you can read Sunak’s, Hunt’s, Donelan’s, Badenoch’s, or any of the other major speeches here.

You won’t find much in the way of new policies though. Conferences are primarily about energising the base, which is why so many of the speeches look so odd to outsiders: the base of most political parties is, in the kindest possible way, a little weird.

Back in the real world, Britain’s entrepreneurs are busy working hard and paying (plentiful) taxes. Dan Neidle has crunched the numbers and can say with some confidence that UK companies will pay more tax in 2023, as a percentage of their profits, than at any time since the 1970s, and plausibly more than at any time since 1946.

Remember, corporation tax was at 52% in 1984 before being cut to 35% under the Conservatives, further reduced by Labour to 31% in 1997, 30% in 1999, and 28% in 2007. The Conservative-Liberal Democrat coalition lowered the rate further to 27% in 2010, then 24% in 2012, with the Conservatives cutting it to 20% in 2015 and 19% in 2020. Boris/Rishi hiked it back to 25%; Truss/Kwarteng reversed it; then Rishi/Hunt reversed the reversal back to 25%.

Taking the long view might suggest that businesses must be paying less. However, at the same time the tax base expanded dramatically, particularly through the abolition of the allowances. So hiking our corporate tax rates means we’ve been leapfrogged by the likes of Switzerland, Latvia, Iceland, Finland, Estonia, Sweden, Slovakia, Norway, Greece, Denmark, Turkey, Israel and Luxembourg.

Of course, there are plenty of early-stage companies that don’t pay corporation tax, and there are lower rates and reliefs for smaller companies, but in living memory the incentive to get bigger has scarcely been less appealing.

If taxes on business are to come down, whoever ends up forming the next government will need to make some tough decisions on cutting spending – not just scrapping HS2 and using the money elsewhere, but actual cuts. Or they could raise taxes elsewhere, but not through personal taxes, which are already pushing founders to offshore before exiting. Or they could deliver a laser-focused growth agenda of the sort we and others push for.

Reporting for Business

On the topic of tax, another week, another report. This time on making it simple with Intuit and Enterprise Nation. In it, we argue that HMRC needs an upgrade.

As Mark Neild, entrepreneur, academic and small business adviser, says: “Finding help on the HMRC website is difficult and generally counter-intuitive. Things are unnecessarily complicated. Why does it take two forms and several hours on the helpline to claim back overpayment of National Insurance when the surplus is clearly showing on the agent’s portal? Why does it take over £500 of admin costs to manage a £60 tax liability as trustee of my niece’s will trust? Why do I need six Government Gateways?”

Meanwhile, Susan Holmes, founder of Bluebears Allsorts, told us: “Making Tax Digital is a good thing because it’s all online. However, on Government Gateway, I don’t think enough people know how to get on it. If you have a business as well, you’ve got two identities – I think that could be clearer. It’s sometimes really difficult to get through to HMRC – it took me four hours one week.”

Susan has been undergoing cancer treatment and is on Universal Credit and ESA, so she must submit her expenditure to the government at different times, due to the payment period she is in. These do not tie in with the VAT submission dates for the business, which is like having to do it twice – once for Universal Credit and once for HMRC.

It doesn’t need to be like this. We can just copy Sweden’s whole-of-Government approach, Hungary’s support for startups and new taxpayers, and Australia’s virtual tax assistant ‘Alex’.

This is one area where spending a bit on fixing things would quickly pay off. First and foremost, we need to ensure HMRC is able to deliver a reasonable level of service for business owners. At the same time, we need to make sure that the extension of Making Tax Digital (MTD) isn’t further delayed. Second, Government Gateway needs a serious upgrade and data shared across government (the once-only principle will get this done). Third, we can and should lead the world on the use of virtual assistants and artificial intelligence.

You can read the full report here.

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Nudge zero: can we save the planet with behaviour change?

On Monday (2nd October, 2023), I spoke at the Conservative Environment Network’s panel discussion entitled ‘Nudge zero: can we save the planet with behaviour change?’ – alongside the Minister for Energy Efficiency and Green Finance Lord Callanan, Katherine Fletcher MP, Nesta’s Katy King, and Smart Energy GB’s Mark Lund. It was brilliantly chaired by CEN’s Sam Payne, with some excellent questions from the audience.

For those who couldn’t make it along, I’ve written up a rough version of my opening remarks – let us know what you think! 

Let’s cut straight to the chase: can we save the planet with behaviour change? My answer, unfortunately, can only be a straightforward “no – absolutely not.” 

While there will be some people in society who are happy to change the way they live their lives in order to help cut emissions, that appetite is simply not shared by anywhere near enough of us to make a meaningful difference. 

More to the point, even for those who say they would be happy to change their lifestyles, I’m sceptical that they’d be willing to do so in such a way that genuinely mitigates their contribution towards climate change.

Now to be clear, I am not saying we shouldn’t discourage those who do engage in behaviour change, and there certainly are small tweaks we can embrace to make a difference at the margin.

But to put it bluntly, to think we can rely on behaviour change to plot our way out of this problem is utterly fanciful.

So that poses a second question: what’s the alternative? Or do we have to accept that we’re condemned to an ever warmer planet?

I like to think not, and that’s because I believe in the power of human ingenuity and innovation to invent technological solutions which allow us to maintain our ways of life while meeting our climate objectives.

Just as we created the technologies that got us into this mess, we can create ones which help us to overcome it – without getting rid of all the wondrous conveniences we gained along the way.

And the good news is that to a large extent, we’ve already invented many of the technologies we will need on the path to net zero.

We’ve driven coal out of our electricity mix by installing solar and wind power; we’re decarbonising our vehicle fleet at a reasonable clip; we’re slowly but surely swapping out gas boilers for heat pumps. Even with things like our diets, the advent of lab-grown meat and alternative proteins mean that I’m confident that we can begin significantly cutting emissions from agriculture as well.

But with all of these things, further progress is still needed. Clean alternatives must become the natural first choice for consumers – which means they must come at a price point that makes the net zero transition not just the right thing to do environmentally, but economically too. 

So you might detect that I’m optimistic that we can meet net zero without massively upending the economy or society at large. But I’m not saying that we can just sit back and wait for these technologies to magically come along.

We do need government to step in and play a role – and I think there’s a range of different things it can do. But as time is limited, I’ll begin by throwing out a few general ideas which will have the biggest impact. 

First, we need to take seriously the idea of carbon pricing – where we make polluters pay for the emissions they create, which would put polluting and non-polluting activities on a more level playing field, gently nudging people towards green options and away from dirty ones.

Most economists agree that carbon pricing will allow us to decarbonise in the most economically efficient way possible, and it would mean we do not have to rely as much on top down bans and mandates, which recent events show us are subject to political whims of the day. 

Second, we need to embrace pro-climate deregulation: this ranges from the specific to the more nebulous, but we need to look closely at what rules and regulations are holding back green entrepreneurs.

In the past, I’ve written about how companies working in the alternative proteins sector are stifled by nonsensical red-tape, as are heat pump installers, but it’s probably best if I save those for the discussion later.

Finally, investment in innovation will be essential. Developing all of the answers to the climate crisis won’t come cheap, and we have to support the scientific and entrepreneurial community in researching, developing, and commercialising the technologies we require to cut emissions. 

That means funding innovation research properly, and it means allocating that funding effectively too. I’m encouraged by the creation of ARIA, and the government’s wider plans for spurring technology and science. But there’s so much more to we can do to increase the attractiveness of the UK as a place to carry out research – from having a welcoming immigration system to top talent, to ensuring lab-space can get built in the areas where it’s needed most.

So to conclude, no – we cannot get to net zero on behaviour change alone. Rather, what we must do is to provide people with the tools and technologies to make decarbonisation the natural first choice. We need to make the reason for getting to net zero not just a great moral ambition, but because it’s simply the common sense thing to do.  

Grey Matters

Over the years we have focused a lot on the next generation of entrepreneurs, but up until now we’ve been missing a trick. There is a wealth of entrepreneurial talent latent among the UK’s older people that is being left untapped. That’s why our latest Access All Areas report with Enterprise Nation focuses on ‘older workers’.
 
As the Chancellor said earlier this year: “No country can thrive if it turns its back on such a wealth of talent and ability. But for too many, turning 50 is a moment of anxiety about the cliff edge of retirement rather than a moment of anticipation about another two decades of fulfilment.”
 
The number of people aged 50 to 64 who are economically inactive grew from 3,267,000 in the first quarter of 2020 to 3,556,000 in the first quarter of 2023. That’s an increase of 289,000, or roughly equivalent to the entire population of the city of Milton Keynes.
 
We live in a free society (well, sort of), so if someone has the money to retire to play tiddlywinks every day there is nothing to be done; and we live in a charitable society (well, sort of), so we should look after those who are too ill to work. However, there are plenty of over 50s who would like to return to the workforce.
 
People like Cambridgeshire-based Chris Dunn, who set up his consulting business the day after his 50th birthday in 2014 following years of working in senior commercial roles across UK manufacturing and technology industries. “There are thousands of over 50s just like me who are not ready to retire but instead are actively supporting the next generation of business leaders by sharing their knowledge, skills, and experience in a variety of different ways,” he says.

The report has recommendations for government, business and older people. We think the government needs to improve support for older people who want to get back into work or self-employment and further reform childcare regulations to free up older people who are acting as carers. We think businesses should tackle ageism in the workplace and during hiring processes and consider allowing more flexible working arrangements for the people who need them. And we think older workers should consider entrepreneurship as an opportunity.

Compared to whippersnappers, older people can make great entrepreneurs because they have a wealth of experience, general skills, industry-specific knowledge, and strong networks. Little wonder then, that the average age of a successful startup founder is 45.

We often hear that it is ‘never too late’, but Henry Oliver is writing a book on late bloomers, or opsimaths, to show it to be true:

“Once you start looking, these people are everywhere. Siphiwe Baleka nearly became an Olympic swimmer aged fifty. He was denied the chance because of a technicality. Rani Hamid started playing chess aged thirty-four and became Bangladesh’s first International Woman Master. Frank Lloyd Wright did more than half his life’s work after the age of sixty-eight. Barry Diller didn’t work independently for the first thirty years of his career: then he took over QVC and became a phenomenal success. The philosopher Mary Midgley wrote her first book aged fifty-nine, saying, ‘I didn’t know what I thought until then.’”

As Emma Jones CBE concludes in her foreword: “Let’s capitalise on this moment and unleash the knowledge and productivity of these individuals back into the economy.”

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Port in a Storm

Despite the Government doling out £500m to fund the installation of new electric arc furnaces at Port Talbot, 3,000 job losses are expected at the Welsh steelworks. This follows news earlier in the week that the unemployment rate in the May-to-July period was up to 4.3% for the first time in nearly two years. 

There may be trouble ahead. As the Institute for Fiscal Studies has shown using OBR projections of public spending up to 2070, health, social care, and pensioner benefits are going to push public spending off the chart – look at the so-called ‘graph of doom’, if you dare – while we suffer the stagnating effects of an ageing population. Short of another Baby Boom (and a time machine as a lot of this is now inevitable) or mass immigration, there’s only one solution: increasing productivity.

“Enter stage right”: entrepreneurs and innovators.

This week ARIA has announced its Programme Directors, who are hoping to answer some mind-bending Ted Chiang-like questions, such as: Can we create edible vaccines made by plants? What if all diagnostic tests could be done directly in the GP office within the initial appointment? Can we develop the capability to control the weather and climate on a regional and global basis, to mitigate or obviate hurricanes, droughts, floods and heatwaves? How complex could a robot be and still biodegrade completely into non-toxic components?

The future is potentially incredible, but it will also be incredibly disruptive. And not just for people working in steelworks. Goldman Sachs predicts artificial intelligence could replace 46% of administrative positions, 44% of legal positions, and 37% of engineering jobs – and while new jobs will be created, this won’t be an easy task for governments to cope with (there aren’t that many pots of £500m to go round). 

We know how to mitigate a lot of the headwinds (or know someone who does). Perhaps you do too. If so, our friends at TxP have a new £5000 blog prize, in partnership with Civic Future and New Statesman Spotlight for young(ish) people to share their ideas on how to bring about a golden age. Good luck! We’ll need it.

Disability & Entrepreneurship
Off the back of their excellent survey-led report, our friends at Small Business Britain are determined to take forward practical and policy support for founders with a disability. This may include policy work, mentoring, peer-to-peer support, access to experts, and much else besides. If you want to find out more, get in touch with them.

One question that I’m pondering is the role of technology – something I'm chatting to Martyn Sibley about. He is the co-founder and CEO of Purple Goat and “a regular guy who happens to have a disability called Spinal Muscular Atrophy (SMA).” 

Jacques Carolan at ARIA will be looking at: “What new technologies would enable high-bandwidth brain-machine interfaces for speech or motor control, so people living with disabilities could use the devices in their own homes?” But it strikes me that there must be other great work being undertaken, with potentially huge spillovers, even beyond those with disabilities. Or if there isn’t, why not? Get in touch if this is your area of expertise. We are keen to learn more.

Be the Change
We’re busy writing our latest Female Founders Forum paper, which we run with Barclays. It’s our longest-running project and could easily be a think tank in its own right. If you’re a female founder who has an opinion on any of the following questions, please share your thoughts with the author.

• Are there any obstacles you encountered at the beginning of your career as a founder which continue to present challenges, either for you or for other female founders you know?

• The past few years have brought so much change – giving rise to new industries, shifting more work remotely, presenting new tools and technologies to change how we work. How have female entrepreneurs been impacted by and responded to these changes?

• Where do you believe there is still great progress to be made? What would you hope to see change in the next five years?

• Are there any issues not being talked about enough when it comes to discussing barriers to female entrepreneurship? What areas need more focus?

While I can’t guarantee they will all make it into the final report, they’ll definitely help inform our thinking and we’ll make sure you’re invited to the House of Lords launch

Mad Skills 
Seema Malhotra MP has been handed the Shadow Skills brief. Seema is chair of the All-Party Parliamentary Group (APPG) for Entrepreneurship, which we are the Secretariat of. In his monthly newsletter, Eamonn Ives, our head of research, updated on some of our relevant research on this topic – both for Seema, as well as her counterpart across the aisle, the Rt Hon Robert Halfon MP. 

If you don’t get it, you can sign up for the APPG newsletter here.

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Passport to Progress

If you were at the House of Lords on Wednesday for the launch of Passport to Progress: A Blueprint for the World’s Most Pro-Innovation Visa System, I hope you’ll forgive me for banging on again about it. We can only fit a few hundred people on the Cholmondeley Terrace, but we have a network of thousands to update.

This is our second report on immigration reform in as many weeks. While Job Creators 2023 was a shorter UK founder focused briefing paper, in Passport to Progress Derin Koçer takes a broader approach, analysing international visa frameworks to make a series of recommendations for improving migration systems worldwide.

Give it a read to find out how Canada is realising the benefits of positioning international graduates as the future of its workforce; Ireland’s Critical Skills Employment Permit allows Irish firms to attract talent; Israel’s Innovation Labs programmes provide migrant entrepreneurs with access to critical technological infrastructure; and New Zealand’s Global Impact Visa creates training, investment and networking opportunities for migrant entrepreneurs.

As Derin said at the launch, “the talent race is more fierce than ever. Countries aren’t only competing with rivals but also allies.” It’s all to the good though, as it's a battle that unlocks the talent of individuals, driving forward human progress. As Rob May, CEO of ABE Global said at the launch:

“Although humanity is locked in almost 200 distinct countries and economies, human societies have always interacted intensely, as ideas, talent, and enterprise flow to where they can have the most impact. At the same time, we recognise that immigration is a divisive subject, but the whole topic of talent migration is in danger of drifting into the wrong lane. This report, Passport to Progress, grabs the steering wheel and brings us back to a reasoned debate on the way forward. It provides powerful evidence; a comparative analysis of visa policy interventions that are working successfully, around the world, and it offers clear advice for changemakers on what we are doing well and what we could do better.”

It would be great if you could share our report far and wide (if it’s on social media use the hashtag #Passport2Progress so we can like and reshare it). If you missed the launch and don’t want to miss another, it's time to join us.

Taxing Times
We’re working with Enterprise Nation on a paper on tax simplification. We agree with HMRC’s now redundant tagline that ‘tax needn't be taxing’. If you do too, you can help us by filling in Enterprise Nation’s short survey. And if you’re a tax expert who wants to feed into the report, book 15 minutes in my diary next week to share your insights.

When You’re 64
Age isn’t just a number. We’re busy writing a paper on the untapped potential that older people can bring to the UK – as both entrepreneurs and employees. We are looking for case studies of founders. If you started your first business after the age of 50, get in touch.

Checking it Twice
Labour has been reshuffling. Perhaps most relevant for entrepreneurs is Peter Kyle becoming Secretary of State for Science, Innovation and Technology, but there are some interesting changes happening off the shadow front bench too.

With MPs back in Westminster, we’re busy planning events with politicians of all stripes, including the recently shuffled. If there is an MP who you think needs to hear from our entrepreneurs let our Head of Partnerships, Katrina Sale, know. We’ve got a very long list of our own, but we’re always open to your insights.

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Immigration is A Story About Opportunities

We launched Passport to Progress, our attempt at sketching out the world’s most pro-innovation visa system, in partnership with ABE Global, an education non-profit, with an event in the House of Lords on 6 September 2023.

As the author of the report, I delivered the following remarks hoping to summarise the report while tying it with my experience of immigration:

Our recent report, Passport to Progress, is a special thing for me. Not only because it’s my first solo project for The Entrepreneurs Network or because I met so many cool people thanks to it.

But because I’m an immigrant myself.

Don’t get me wrong, I am not saying this as a clingy cliche as if I’m talking to Oprah. Since the UK is one of the most welcoming countries there is, if not the most, my story of migration is nothing dramatic. Well, this might be me getting used to the British culture of taking nothing too seriously. I can’t be sure.

This project became special when I was in the middle of it. Because, conveniently, my residence permit expired. With my dad, I had to make a joint application to renew it. Gathering thousands of pages of documents, including tax records, criminal records showing that we have been only victims of phone thief, and a billion other things that the Government already has.

When we went to the application centre, we had to wait in a room for an hour, which was followed by a self-check-in in which a computer took pictures of us and our passports to prove that we were really us.

And then this was followed by an actual person checking us in – after another hour of waiting – taking our pictures, and pictures of our passports. Stuff we have already done. Why, you might ask. Because, apparently, we were smiling at the pictures we took at self-check-in!

If this report can contribute to no one else getting pictured for the second time because they were happy in the first one, I will count it as a success! That’s why it’s so special…

I don’t want to go through the whole report here and turn this into a lecture. So let me summarise the story in four principles only. Four principles that I argue policymakers should follow to design immigration systems fit for this age.

The first one, competitiveness.

The transformation of the economy, the rise of big cities and the service sector, and the change this triggered in the world of work made talent more valuable than ever. Professions like artificial intelligence developers or deep tech researchers weren’t familiar to anyone just a decade ago. Normal professionals of today like software engineers were seen as superhero-like individuals early in my lifetime, which was just a couple of years ago.

However, interestingly enough, many developments that came with these, from the accessibility of education to self-learning capabilities, also made skills and talent spread all over the world.

Talented people are now sought after by every country that wants to innovate and grow.

This means that the talent race is more fierce than ever. Countries aren’t only competing with rivals but also allies. Canada has been offering easy visa options to skilled foreign workers in the US, advertising them in Silicon Valley.

It’s not a coincidence. Economic growth in many Western countries has been exceptionally slow since 2008; almost stagnating in the UK. This also coincided with a time when innovation became something we talked more about but practised less. To innovate, countries need potential innovators – and they are racing to get them.

In this environment, offering a few visa schemes cannot put countries ahead of the game; that’s only the starting point. That’s why investing in further capabilities – such as easing access to capital or technological infrastructure and easier routes to permanent residency – will differentiate some countries from others. For instance, Israel has been offering lab spaces to entrepreneur migrants meanwhile New Zealand provides them direct connection to local investors.

Competition by nature requires moving things further. The more creative the offer, the better for the country.

Secondly, proactivity.

Until now, migration policies have been based on building visa schemes to simply let people arrive. In this competitive environment, governments should be going to the builders first – let them be entrepreneurs or STEM researchers – rather than waiting for them to come.

That’s why building bureaucratic capabilities to recognise and recruit international talent will be essential going forward.

This is actually nothing new. The US actively recruited engineers and scientists from Europe after the Second World War with Operation Paperclip. Some of them went on to lead America’s space program. There is no reason for policymakers not to actively look out for STEM talent, chipmakers, AI researchers or other individuals with strategic skills and offer them easy migration paths.

Thirdly, flexibility.

Static migration schemes of the past restricted skilled workers to their employers by linking their visas directly to them. This restrains talented people’s career prospects.

Standard procedures such as migration caps and sponsorship requirements disincentivise employers to hire entrepreneurial talent, make emigration harder for entrepreneurial individuals and work against innovative startups and scaleups.

Most of the talent countries need are actually already within them. They come as students. They come as professionals. But, for instance, the UK lost 83% of students who graduated in 2016 five years after their schools ended. Only 5% of them have workers' visas today. When it comes to professionals, they arrive here to work for big firms and their visa schemes don’t allow them to establish something of their own.

The lack of flexibility is the main reason why these talented individuals are underutilised. That’s why we propose that international graduates – at least of top schools – shouldn’t require sponsorships to work in the UK and they should be given an easy path to permanent residency. To be even more compelling, why not give permanent residencies to advanced STEM Master’s graduates or PhD students? For professionals, their visas should be flexible enough for them to work at startups or establish one of their own.

To achieve bold aims, like becoming a science superpower, the UK should match bold rhetoric with bold policies. Otherwise, they’ll stay as aims.

Lastly, holism.

This connects all the other dots.

Even though tailored visa policies for entrepreneurs or students can attract talented individuals, policymakers should see migration from a holistic perspective.

In the end, migrants’ journeys evolve over time: students turn into STEM researchers, STEM professionals turn their research into companies and high-skilled professionals build innovative businesses. Innovation does not come from a single source and nobody should expect it to.

That’s why the world’s most pro-innovation visa system isn’t the one attracting any of the mentioned sub-groups of immigrants – it’s the one giving opportunities to all of them.

Let me go back to my own story to tie things up.

Being an immigrant in this country is truly great. The most discriminative comment I received from anybody is that I don’t look Turkish. Which, objectively, is a statement of fact not discrimination.

And here I am, speaking at the Mother of all Parliaments about the policies my host country should implement to welcome more people like me. I really can’t complain.

Immigration is a story about opportunities.

We need more of those stories and Passport to Progress is our contribution to how.

A Sensible Conversation on Immigration and Innovation

We launched our international report on high-skilled immigration, Passport to Progress, in partnership with ABE Global, an education non-profit, with an event in the House of Lords on 6 September 2023.

ABE’s CEO Rob May delivered the following remarks at the launch:

Back in 1973, business leaders from the Ford Motor Company, Unilever, and Macmillan Publishing called a meeting with a group of senior academics to lament the fact that there was very little in the way of practical training in international business skills, for the managers dispersed across their far-flung global operations. Out of that meeting, ABE was created, and in the 50 years since, we have been guided by a simple idea; that the transference of skills and ideas across borders is the key to productivity and prosperity.

We delivered our first courses in London, Hong Kong, and Singapore, and then we set our sights on the profound challenge of stimulating a ‘great circulation’ of talent. We focused on exporting standards and qualifications to the emerging economies of the global south. Through the power of education, we have worked to develop a global community of practice in which business methods at all levels are consistent, reliable, ethical, and conducive to how we do business. This has enabled people across the world to enjoy access to inclusive economic opportunity, we know this because as ABE expanded its operations across four continents, we have been delighted and honoured to support hundreds of thousands of personal journeys. These journeys have enriched the lives not just of individuals, but of whole communities, and in turn, inspired further opportunities for invention and innovation.

So, you could say that talent mobility has been our concern and our passion for five decades.

Therefore, we feel bound to respond when we notice a worrying trend; the ramping-up of anti-immigration attitudes, provocative and polarising rhetoric, and restrictive policies, leading to fewer bright and talented individuals thinking about coming to Britain to start a business. 

By definition, immigrants bring diverse experiences and perspectives to our companies, surely an advantage in our global marketplace. They can also expand economic horizons by strengthening commercial ties between their host country and their homelands. But above all else, faced with a burning platform of economic stagnation, ecosystem damage, public health crises and technological disruption, there is an urgent imperative to foster better international, and multi-cultural, integration, if we are to confront these challenges successfully.

Although humanity is locked in almost 200 distinct countries and economies, human societies have always interacted intensely, as ideas, talent, and enterprise flow to where they can have the most impact. At the same time, we recognise that immigration is a divisive subject, but the whole topic of talent migration is in danger of drifting into the wrong lane. This report, Passport to Progress, grabs the steering wheel and brings us back to a reasoned debate on the way forward. It provides powerful evidence; a comparative analysis of visa policy interventions that are working successfully, around the world, and it offers clear advice for changemakers on what we are doing well and what we could do better.

I encourage everyone to read this report, embrace its recommendations, and share these ideas widely. I hope that we can come together to create a firebreak against the creeping entanglement of migratory issues, and in turn, unlock a sensible conversation on the vital link between immigration and innovation. 

Disrupting Class

Twitter – or X, if you must – can be brutal. It’s one reason most entrepreneurs use it sparingly. That, and the fact they’re too busy building a business. (Whatever you think of Elon Musk, his ability to post cringe while running half a dozen world-leading companies defies logic.)

Think tankers have to get used to the brutality of Twitter. Sebastian Payne, director of the centre-right Onward, got ratioed yesterday, after tweeting (no way is it Xing): “We have a major crisis among Britain’s young generation: they’re unhappy, unskilled and unmoored. It’s time to look at what a new Great British National Service would look like to reengage them with society.”

I was ready to dust off Milton Friedman’s destruction of Congressman McCloskey, before realising that he is just calling for more opportunities to volunteer, rather than forced labour. As Onward's polling makes clear, the majority of people oppose a mandatory scheme, including nearly two-thirds of young people. However, Onward is calling for young people to be auto-enrolled unless they opt out, which is a bit of bureaucracy we don’t need.

To the extent that Payne is right that Britain's young people are particularly “unhappy, unskilled and unmoored” than previous generations – evidence not cited in this report suggests we should at least be selectively concerned – I doubt more government is the answer? Surely the state already has plenty of time to help make young people happy, skilled and moored.

I think the late, great management thinker Clayton Christensen presented a vision of the future that the government realise. Disrupting Class calls for disruptive innovations in the classroom. It argues that a "one-size-fits-all" approach is ineffective and that education should be customised through technology to fit the pace of individual students, helping reduce educational inequality. It would also free up teachers' time to support young people in the way politicians often claim to want.

Entrepreneurs have the technology to deliver this if the government could get its act together. Check out ArborBridge, an online tutoring company co-founded by Tim Urban of Wait But Why fame, or Beauhurst’s list of 25 top edtech companies for innovations happening in the UK.

Over the years we’ve built up a large and growing corpus of work on entrepreneurship and enterprise education. We’re planning a roundtable to discuss what we should do next. If you want to register your interest, get in touch.

Taking Care of Business
We’re hosting a private tour and drinks reception at the Migration Museum in Lewisham for champions of migrant entrepreneurs. Their exhibition, Taking Care of Business, is set to end on 30 September 2023, so this is one of the last chances to see it. It is an immersive exhibition shining a light on the central role that migrant entrepreneurs have played in shaping our lives – and Britain. I hope to see some of you there.

Kir Royale
In other Onward news, they’re joining forces with our friends at the Startup Coalition and Tony Blair Institute on a project supporting policies around AI startups. Kir Nuthi has written about the project here:

“How policymakers harness and guide the development of AI will be key to our success or failure. Government has made a good start – from the entrepreneur Ian Hogarth’s appointment as Chair of the Foundation Models Taskforce, leading research into AI safety – to the UK’s hosting of the Global AI summit this winter. But there’s also been a lot of confusion, noise and chaos that threatens progress. Startups can sense this. And while all work on the big meaty topics – like safety – is welcome, the shared vision for what progress looks like should come from everyone in the market, not just a minority.” If you want to be involved, you can get in touch with Kir here.

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Talent Shows

This week we released Job Creators 2023: The foreign-born founders building our fastest-growing businesses. This may not be news to you. After all, among many other places it was featured in The Times, Sifted, Forbes, City AM, and directly with those in the know. The headline stat is one you’ll hear a lot more of: 39% of the UK’s fastest-growing companies have at least one foreign-born founder.

This is a follow-up to our original Job Creators report, which as I claim in Forbes, helped change the way people thought about immigration. I think reasonable people can disagree about various points around immigration, but our research proves beyond doubt that immigrants are the driving force behind many of the UK’s most innovative companies.

When we last looked at this data back in 2019, that figure was 49%. This raises the reasonable question that John Thornhill asks in Sifted: “Is the UK losing some of its pull for foreign founders?” For me, the answer is both yes and no: ‘yes’ because Brexit has ended free movement, which no visa can trump; ‘yes’ because some EU countries like France and Portugal have improved their offering for entrepreneurs; yet ‘no’ because the data shows that the UK still dwarfs other European countries in key areas like funding; and ‘no’ because the UK has become more open to talent from outside the EU, including through the High Potential Individual (HPI) visa.

At The Entrepreneurs Network we want even more reasons to say ‘no’ to John’s question. And we have ten ideas for doing exactly that. These include expanding the HPI visa and Youth Mobility Scheme, trialling a Global Talent Exam, copying the Canadian policy on H-1B visa holders, reviewing visa fees to ensure they are in line with other countries, and allowing applicants to make use of the fast-track option for free when the Home Office fails to meet its own estimated times for approving applications.

Read our Researcher Derin Koçer to learn more about the eye-watering fees: “Visas can cost nearly three times what they would in Australia, around 12 times in Canada and around 43 times what they would in Germany.” And read our Head of Research Eamonn Ives to know how we can copy Canada: “In July, the Canadian Government offered anyone with a lucrative US H-1B visa, which enables employers to hire foreign workers with specific skills to work in America for a specified period, the chance to apply to come north of the border with an open work permit for up to three years. The number was capped at 10,000 – which was duly filled within just two days of the scheme going live. In this way, Canada received an influx of highly skilled immigrants for virtually no effort at all, simply piggybacking off the bureaucracy of their American cousins.”

Returning to John’s question, if we’re going to be able to answer him properly – to understand if that 10-point drop is a blip or trend – we will need to expand the sample size and do it every year. If you want to partner with us on Job Creators 2024 – or know someone who does – now is the time to get in touch.

The 39%

We couldn’t have produced this report without Beauhurst. That 39% is based on their data, and it was their data that revealed the 49% back in 2019. It was also their data that first revealed the equity funding gap between female and male founders for our Female Founders Forum report, which pre-dated and inspired the Government’s review into female entrepreneurship. That’s why we’ve invited them to partner with us on this newsletter.

Ambassador's Reception

Sticking with the theme of migrants. Ahead of International Migrants Day on 18 December 2023, the charity IMIX and the International Organization of Migration have got in touch to see if migrants from our network might want to become Ambassadors.

Ambassadors will come from different walks of life in order to share stories about the migrant experience in the UK media. The individuals must be interested in learning more about speaking to the media and be happy to be named and pictured. They can be someone who recently moved to the UK or someone who moved decades ago, but who is happy to reflect on their experience over time. Successful applicants will be invited for a two-day residential (expenses paid), receive media and social media training, and feature in a film marking the day.

They would particularly like to highlight the role of people from a migrant background in business, innovation and the economy at large, as well as the additional bureaucratic hurdles they face. If you want to get involved, drop Julia Rampen an email.

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Risk Perceptions

Risk is inherent in entrepreneurship. After all, something like 20% of new businesses fail during the first two years, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.

But while the businesses might no longer exist, many will have created significant value (in every sense of the word) while they were running, many will be acquired and merged giving the founder an exit, and many of the entrepreneurs go onto bigger and better things. And while we often hear about the risk of starting a business, there is also the risk of never trying: never taking a swing.

Contrary to popular belief, research suggests that entrepreneurs are only moderate risk takers – higher than the general population, but no higher than leaders in other fields. They are, however, more tolerant of ambiguity, where outcomes are hard to estimate. Ultimately, entrepreneurs take a personal risk for the same reason investors back them. Both are looking for opportunities where others have mispriced the risk and opportunity, or where only they have the right vision, skills, knowledge and connections to succeed.

We’re working with the law firm Mishcon de Reya on a report on the role of risk in entrepreneurs’ decision-making. We want to know how entrepreneurs think about risk. From this survey we will better understand how starting a business changes founders’ attitude to risks; whether it’s tax uncertainty, cyber-attacks or supply chain disruption which are keeping founders awake at night; the way entrepreneurs access the risk versus reward for AI technology; and even which political party is seen as the riskier choice in the upcoming election.

I know how much everyone hates filling out surveys, but this is a genuine chance to feed into our reports and policymaking. If you’re a startup founder, please support us by filling in our short survey. 

Exhibiting Greatness
The Business Department on Victoria Street – whether BEIS, BIS, BERR, or even DTI – used to be pretty good at showcasing the best of British innovation. At some point that stopped, and it started to look like any other office.

It’s pleasing to hear that the mantel will be picked up by the Department for Science, Innovation and Technology (DSIT), with plans to showcase innovations as part of the department’s work to champion UK industry and academia. Based in the Admiralty Buildings, each exhibit will be in place for around one month. It’s not quite as ambitious as our plan for a modern day Great Exhibition, but it’s a start.

If you are interested in exhibiting, contact exhibit@dsit.gov.uk for more information.

Taxing Times
After last week’s critique of HMRC, I was planning to take a break from critiquing it. But needs must, as more entrepreneurs and the Chartered Institute of Taxation (CIOT) have been getting in touch about its crackdown on R&D claims.

The CIOT made the case back in July that HMRC is rejecting legitimate claims and stone-walling other genuine claimants with a bureaucratic system driving them to give up on their claims. If you want to get a flavour of what’s going wrong, read their 12-page letter to HMRC’s Director of Wealthy & Mid-sized Business Compliance. For further reading, Lord Leigh and others have raised concerns in Parliament.

It goes without saying that HMRC needs to crack down on genuine cases of fraud, but there are legitimate doubts about the widely reported estimate that the overall level of error and fraud was higher than previously reported. As the ICAEW state: “It has been widely reported that some claimants have decided that the time and costs involved with defending a claim outweigh the benefits. Although these may be entirely justified claims, they will be recorded by HMRC as an error.” For further reading, MSC R&D has some legitimate questions for HMRC.  It’s a huge shame that this attempt to get better data has led to more questions than answers. Get in touch if this is impacting you or businesses you work with.

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