APPG for Entrepreneurship Digest: January 2023
/APPG for Entrepreneurship Digest: January 2023
For many of us, the arrival of a new year might herald a fresh exercise regime, abstinence from alcohol, or the adoption of some other virtuous habit. I don’t know whether Rishi Sunak chose to set any personal goals for himself coming into 2023 (already being teetotal rules out Dry Jan for a start), but the Prime Minister lost no time at all in setting his Government five resolutions to get to work on. They are:
Halving the rate of inflation;
Growing the economy;
Reducing national debt;
Cutting NHS waiting lists;
Passing new laws to stop small boats.
Excluding the last ambition – where opinions divide sharply – I think it’s fair to say that few could dispute the intention behind these priorities. And, perhaps excluding the small boats objective again, they are all areas where entrepreneurs and innovation will be indispensable.
Sunak seems to acknowledge this fact. He devoted a good chunk of his speech to lavish praise on the importance of innovation – saying we need to put it “at the heart of everything we do.” He noted that it accounts for about half of Britain’s productivity growth in the last 50 years, while also helping to increase wages, and holding down the costs of goods and services.
The Prime Minister then proceeded to set out the four cornerstones of his Government’s approach to ensuring the UK is the most innovative economy in the world.
First, public funding for R&D will be increased to £20 billion a year by 2024-25 – as was first set out in the Autumn Budget in 2021. This is certainly praiseworthy, especially given the fears that it would be an easy pot for the Treasury to raid. (Though critics will point out the £20 billion target was actually a watering down, from an original £22 billion a year goal.)
Yet while the Government can give with one hand, it can just as easily take with the other. At the Autumn Statement last year, reforms to R&D Tax Credits – a lifeline for many of the UK’s most innovative businesses – were announced. These changes were largely aimed at reducing the amount of fraud in the system, which is clearly an issue worthy of scrutiny. But some fear it risks making perfect the enemy of the good, and almost as soon as the idea was unveiled, startups were voicing their concerns. (If you haven’t seen it already, Coadec is also surveying startups on their use of R&D Tax Credits.)
Second, Sunak promised to seize “the opportunities of Brexit to ensure our regulatory system is agile and pro-innovation.” One needn’t be a dyed-in-the-wool Leaver to think that there are indeed pathways open to the UK now that it has left the EU to burnish its innovative credentials – especially in some of the most exciting and cutting-edge industries. At the same time, and without wanting to relitigate the debates of 2016, this is a slogan we’ve heard said a lot, without much meaningful action to date. Putting into practice some of the changes we’ve been promised should be a key goal for 2023.
Third, the Prime Minister observed how adequate access to finance is critical for fast-growing companies. It certainly is. Finance is the fuel which businesses need to grow. For many of the country’s most innovative startups – which might be breaking new ground, or be heavily skewed towards intangible capital – relying on external finance might be their only way of survival until they gain a foothold and begin to turn a profit as per any other ‘conventional’ business might.
Partial progress on this agenda was already made when, also at last year’s Autumn Statement, reforms were made to the generosity and availability of the Seed Enterprise Investment Scheme. The Government also somewhat vaguely said that it “remains supportive of the Enterprise Investment Scheme and Venture Capital Trusts and sees the value of extending them in the future.” Encouraging, yes – but “seeing the value” of something and actually legislating for it are two very different things. Our secretariat organisation, The Entrepreneurs Network, has previously called for the sunset clauses on EIS and VCTs to be scrapped, and will shortly be publishing more research on the topic.
Fourth, Sunak spoke of his desire of “spreading a culture of creative thinking and doing things differently across every part of the UK.” This might prove his hardest aim of all. While governments aren’t entirely powerless to shape the economy’s spirit – for want of a better word – they can influence at the margin. Tax frameworks can be amended to motivate entrepreneurship, while regulatory landscapes can be updated to permit more experimentation, especially in emerging industries. Immigration rules can be fine-tuned to import new ideas and talent, and education systems can be improved upon to instil the skills necessary for the next generation of entrepreneurs.
Apparently, only 9% of people succeed in keeping their new year resolutions. With entrepreneurs still facing unprecedented uncertainty, they will hope the Prime Minister manages to stick to those of his which focus on shoring up the economy.
Adviser Update
The Entrepreneurs Network is hosting two events towards the end of this month. On 24 January, they’re convening a virtual roundtable as part of their Inclusive Innovation Forum to discuss the findings of the Start-Up, Scale-Up report, commissioned by the Labour Party and published last year. You can request a place here.
The following day, they will be holding another roundtable – this time in person – to launch and discuss their first report of 2023. Supported by Young Enterprise, What Applied Learning Really Looks Like examines the concept of applied learning, and this event will discuss the challenges of implementing applied learning more widely, and how policymakers can better support it. You can request a place here.
The Global Entrepreneurship Congress 2023 – which will bring together entrepreneurs, investors, policymakers and community leaders from over 200 countries – takes place in Melbourne, Australia from 1-4 May. Our friends at the Global Entrepreneurship Network will be there, and would like you to join the UK’s delegation.
If you are interested in a speaking opportunity, please complete this form. To register as a member of the GEN UK delegation, please notify Elaine Gold for a delegate’s code. More information is available here.
The Enterprise Research Centre is holding a Research Showcase event on 26 January. It’s a chance to discuss a range of new and ongoing research on themes including mental health, innovation, rural enterprise and internationalisation. It’s being held in person with lunch provided, and you can register here before 16 January to request a spot.
And that’s not all from the ERC. On 2 March, they’ll hold their New Frontiers in Family Business Research Conference – bringing together researchers, decision makers, and family business practitioners to discuss current themes and challenges in the family business research field and practice, and to explore new priorities and avenues for research in 2023 and beyond. Again, places are free, but you’ll need to register here to reserve a place.
Last but not least, Enterprise Nation began their year releasing some encouraging new research, which found 30% of UK adults are considering starting a business in 2023 – rising to 48% among those aged 18-24. Take a look at their findings in full here, and read a write up here.
In Parliament
Parliament has been in recess for much of the time between this and the previous digest – but there were still a handful of contributions to note.
The Business Secretary, Grant Shapps, gave a written statement on the decision taken to end Help to Grow: Digital. This scheme gives discounts to small businesses buying certain digital technologies, but due to low uptake, the Government has decided to “refocus efforts towards other support mechanisms for small businesses, ensuring businesses get the backing they need in the most efficient and productive way possible.” Help to Grow: Digital will close to new business applications for discounts on February 2, 2023 – if you’re a small business owner, and think you could benefit from it, click here for more details.
Just before the Commons broke for Christmas, there was a debate on family businesses, and their contribution to local communities. Our Chair, Seema Malhotra MP, spoke during it, emphasising “the part that women play in family businesses,” and adding it “is important to make sure that we use language that reflects the work of women such as Anita Roddick, who set up the Body Shop, and so many other women entrepreneurs who run a family business.” She finished her intervention, however, by saying “family businesses are absolutely up against it. They have raised concerns about business rates, supply chain costs, access to schools, and the need for a stable tax environment.” But the Small Business Minister, Kevin Hollinrake, was keen to defend the Government’s record, noting the recent cut to Fuel Duty, support for energy bills, the reversal of the National Insurance rise, and new incentives for investment – such as the £1m annual investment allowance, which come into play this April. You can read the debate in full by clicking here.
Later that day, a debate was held on entrepreneurs from ethnic minority backgrounds. Sir Stephen Timms MP began proceedings, noting that while eight of the UK’s 23 unicorns had minority founders, Britain’s ethnic minority community is significantly underrepresented in the business population at large. Also speaking in the debate was the Investment Minister, Nus Ghani, who agreed “on the importance of ethnic minority entrepreneurs and their valuable contribution to our vibrant business landscape,” and praised the “dynamism and resilience of ethnic minority entrepreneurs that they continue to adapt, and that they overcome so much, especially during covid.” She also acknowledged the challenges minority entrepreneurs often disproportionately face, such as access to finance, on which point she informed colleagues that “the Department for Business, Energy and Industrial Strategy is working with the Investing in Women code signatories and with trade associations to pilot data collection on the ethnicity of entrepreneurs applying for finance.” You can read the debate in full by clicking here.
Last of all, in a debate on the fairness of the tax system, Alan Mak MP welcomed the recent ‘Edinburgh Reforms’, and urged the Government to “adopt the same approach to R&D tax reliefs and capital allowances, so that our world-class entrepreneurs, start-ups and small and medium-sized enterprises can benefit from the same advantages.” Responding was the Financial Secretary to the Treasury, Victoria Atkins, who was “delighted to say that we very much support innovation and the critical work of our entrepreneurs, start-ups and SMEs, which is why we are setting the annual investment allowance permanently at £1 million from 1 April, and reviewing the research and development tax reliefs to ensure that, while we are rebalancing the rates of relief out of fairness to the taxpayer, we are also targeting that relief at the knowledge-intensive and innovation-intensive businesses that we all care so much about.” You can read the debate in full by clicking here.