APPG for Entrepreneurship Digest: October 2022

You can put away the warm white wine and questionable canapes – party conference season has drawn to a close for another year. But whether you’re a veteran conference goer, or someone who avoids them like the plague, there’s no escaping the policy pronouncements declared by ministers, shadow ministers and backbenchers alike.

Whether they were made on the conference floor, at fringe events, or simply overheard in corridors, during the last few weeks we’ve got a flavour of the shape of things to come on a whole range of policy areas – including those that will affect Britain’s entrepreneurs.

If I can start at the end with Liz Truss’ closing speech to Conservative Party Conference, she was at pains to make clear her three priorities for the economy: “growth, growth, and growth”. It’s plain to us that entrepreneurs will need to play a vital role if the Prime Minister is to make good on this ambition – after all, it’s only through new and innovative ways of doing things that the size of the economy can reliably expand in the long run.

Truss also went on to state that she: “love[s] people who take responsibility, start their own businesses and invest”. We wholeheartedly agree – and will continue to champion policies which give British entrepreneurs a better shot at doing just that.

Her Downing Street neighbour, Kwasi Kwarteng, used his speech to reiterate many of the themes made during last month’s mini-Budget. The Chancellor took aim at “barriers for entrepreneurs looking to scale up” and “burdens on our finance sector stopping it from investing in key projects”, before concluding that “when Britain’s innovators, job creators, entrepreneurs and risk takers are held back – so is Britain”. Again, it’s encouraging to hear the recognition that entrepreneurs are central to the future economic success of the country, and we look forward to promoting ways in which Kwarteng can help deliver for them.

Elsewhere in Birmingham, Business Secretary Jacob Rees-Mogg announced a change in the Government definition of small- and medium-sized enterprises (from businesses employing up to 250 employees to ones employing up to 500), and Culture Secretary Michelle Donelan revealed plans to replace GDPR with a new, “British data protection system”, which would be “simpler and clearer for businesses to navigate”.

Looking northwards, the Labour Party pitched up in a windy Liverpool. Inside the relative calm of the conference hall, however, Sir Keir Starmer also took time in his remarks to sing the praises of economic growth. He pledged that a Starmer-led Government would unleash Britain’s “entrepreneurial spirit”, and capitalise on “the jobs, the industries, the opportunities of the future”.

Meanwhile, the morning before Starmer took to the Stage, his Shadow Chancellor Rachel Reeves was ploughing a similar furrow, speaking about “supporting innovation” and being “proudly pro-business”. She highlighted the importance of “people feeling the confidence to take risks, to change career, to learn new skills, or to start a business”.

Alongside the warm words, however, the Labour Party also served up cold, hard policy. Of particular interest to us was the publication of their new Industrial Strategy. Writing in its foreword, Shadow Business Secretary Jonathan Reynolds set out Labour’s vision of harnessing “the technological frontier to transform challenge into opportunities”. The section on ensuring that “future successes” – from firms in clean tech, robotics, quantum computing and more – are able to both start and scale in the UK caught our eye, as did the announcement of Labour’s ambition to see 3% of GDP spent on R&D.

Out of respect for HM Queen Elizabeth II, the Liberal Democrats took the decision to cancel their party conference – which would have otherwise clashed with the Royal funeral.

Call for Evidence

Equity investment is essential to financing Britain’s high-growth startups. We are writing a report looking at targeted tax reliefs for equity investment, namely the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs).

This Call for Evidence will feed into the report. We are interested in knowing what works and what needs reform. You can find the questions here.

We are interested in hearing from entrepreneurs, investors, researchers, or anyone who is part of the ecosystem. There is no expectation that you answer all the questions – short responses focused on specific issues are often the most useful.

The closing date is 7th November.

Friends of the Network

Last week, our friends at Beauhurst published not one but two reports. The first takes a look at high-growth companies in Nottinghamshire, while the other focuses on the Warwick Innovation District. Do give them a read.

The UK Business Angels Association are hosting their Early-Stage Investment Summit – in Manchester on Thursday 1 December, and in London on Thursday 8 December. To view the agenda and book an early bird ticket, click here.

To mark National Mentoring Day on Thursday 27 October, Enterprise Nation is hosting an event on the Help to Grow: Management scheme. You can sign up to attend for free here.

In Parliament

The House of Lords debated The Economy and the Government’s Growth Plan. Last month’s mini-budget was criticised and defended.

The Lord Bishop of Birmingham in his valedictory speech said that: “Devolution of power and influence is very close to my heart. The new Investment Zones are welcome, as are the infrastructure projects listed, which in our own region are led by Andy Street, the West Midlands mayor. We will do well, but I ask the Government to go further and to make local influence part of an equal partnership, putting responsibility and resources where they belong in the local regions”.

Lord Londesborough, a crossbench peer said: “Let us reflect for a moment on the impacts of the proposed tax cuts, especially amid a cost of living crisis. Do we give a £20,000 tax break to one person – let us say a mid-ranking City lawyer earning £500,000 a year – or a £1,000 tax break to 20 people earning the median average salary of £26,000? The cost to the Treasury is the same but I argue, as an entrepreneur and business investor, that the impact on growth will be much more significant if you reward at the margins. I do not have time to preach the theory of marginal utility but I urge the Ministers to brief both No 10 and No 11 on its relevance in relation to taxation and growth”.

And Lord Bilimoria, also a crossbench peer said: “In February 2021, I said to the Chancellor at the time, Rishi Sunak, when I was president of the CBI, ‘Do not increase taxes. Increasing taxes will hamper the recovery and hamper growth’. What did he do? He kept putting taxes up, up and up, to the extent that they are the highest in 70 years.

“Before the financial crisis in 2008-09, we in this country had a growth rate of 2.5%. Since then, we have had a decade of no growth, low productivity and low inflation. What a state to be in. We had austerity. That achieved nothing. So the Government are absolutely right to target a growth rate of 2.5%. They are absolutely right to reverse the 2.5% – 1.25% and 1.25% – National Insurance: it is a tax on jobs. Even the Labour Party said it would not have done that. The Government are absolutely right not to increase corporation tax from 19% to 25%. They are absolutely right with Investment Zones. They are absolutely right with the reform to IR35.

“But – and there are ‘buts’ – what about speeding up the move to alternative energy, such as small modular reactors? That is not being spoken about. What about investment: replacing the super-deduction of 130% that will go in April with a 100% write-off to encourage businesses to invest? What about labour shortages? We kept saying to the Government, ‘Activate the shortage occupation list’. Now the Government say they are going to do it. I ask the Government to confirm in their response that this will actually happen”.

In the Commons debate on the The Growth Plan, Rachel Reeves said: “Labour believes in wealth creation. We will always support enterprise, creativity and hard work. We want British businesses to grow, to be successful and to contribute to our country’s prosperity. What we do not believe, as the Chancellor and Prime Minister do, is that British workers are idlers. We understand that it is the workers, who turn up every day to make a great product at a factory or deliver a great service in the store, who generate growth. It is the teachers giving the young people the skills they need, and the doctors and nurses keeping people well. It is the entrepreneur taking a personal risk to start a new business. These are the people who generate growth, and they all deserve to share in it too.

“This statement is more than a clash of policies; it is a clash of ideas – two different ideas about how our country prospers. If you are a pensioner worried about the cost of living, a working family seeing your mortgage rate going up or a small business whose costs are spiralling, the Government’s announcements today do little to reassure you: bigger bonuses for bankers, huge profits for energy giants shamelessly shielded by Downing Street, and all the while Ministers pile the crushing weight of all those costs on to the backs of taxpayers”.

To which Kwasi Kwarteng replied: “You cannot grow the economy if you keep taxing families. You cannot grow the economy if you see business as the enemy. We have to reiterate very clearly to our friends on the Opposition Benches that you cannot tax your way to prosperity. You cannot help workers by increasing their taxes. Far from denigrating British workers, our measures are relieving burdens on our workers and our people by intervening on energy prices and relieving the burden of taxation. We have to unshackle the creative energies of this country and that is what we are 100% focused on”.

And the Conservative Chair of the Treasury Select Committee, Mel Stride said: “There is a great deal that will help millions of families and businesses up and down the country. There is, however, a vast void at the centre of the announcements that have been made this morning: the lack of an independent OBR forecast. At a time when the markets are getting twitchy about Government bonds and the currency is under pressure, now is the time for transparency and making it very clear that whatever tax cuts or otherwise there may be, they are done in a fiscally responsible manner”.