APPG for Entrepreneurship Digest: February 2023

“The way that government works must never stand still, but rather evolve to meet the challenges of the day.” So wrote Rishi Sunak, upon announcing last week’s somewhat unexpected Whitehall reorganisation. The Prime Minister carved the ‘E’ out of BEIS – establishing a standalone Department for Energy Security and Net Zero (DESNZ) – while fusing DIT onto what remained (in turn rendering it DBT). DCMS hung on to its acronym but lost ‘digital’ from its portfolio to the newly created Department for Science, Innovation and Technology (DSIT). 

Predictably, opinions on the reshuffle have been mixed. Critics have been quick to make ‘deckchairs on the Titanic’ references, or simply see the changes as cynical pre-election ploys. Supporters say that the change in focus is welcome and responsible, for exactly the reasons Sunak set out in his quote above. I’ll leave you to make your own mind up – but what isn’t up for debate is that the new Whitehall configuration clearly indicates what the Prime Minister sees as his key priorities. 

Many of the changes herald new opportunities/risks (delete as you see appropriate) for Britain’s entrepreneurs. DSIT perhaps represents the most intriguing development. We’re told it “will focus on positioning the UK at the forefront of global scientific and technological advancement.” By taking responsibility for our approach to R&D spending, decisions it makes will have knock on effects for innovators up and down the country. On this point, it already very much has a job on its hands – momentum is building behind campaigns which view planned modifications to R&D policy as a retrograde step. An optimist might think that having a Secretary of State dedicated to standing up for innovation will ensure the voice of Britain’s cutting-edge startups will be louder than ever around the cabinet table – we certainly hope so. 

The newfangled business department holds obvious importance as well – especially for those entrepreneurs who aren’t necessarily pushing the frontier of science, but nonetheless play a vital role in keeping the economy ticking over. To bring trade policy into the fold is not necessarily an original idea – Liam Fox, who was DIT’s first Secretary of State, has called for merging business and trade in the past – but it could pay dividends, given that we know exporting is a proven way to boost productivity among all sorts of businesses. By bringing trade officials and business officials into closer proximity, one would imagine those links can be strengthened, and headway can be made towards delivering on the Government’s target for £1 trillion of exports by the end of the decade.

Energy is of course a critical input to virtually all businesses, and as we’ve become painfully aware of over the past couple of years, it’s an increasingly expensive input too. The creation of DESNZ therefore, with a key focus on bringing down energy bills, should be welcome (indeed it seems to be the one change in particular which has garnered broad support across the political spectrum). Entrepreneurs will be hoping it succeeds in banging the drum for the rollout of more cheap, clean energy supplies – as well as new cleantech innovations, for those working on developing them. Here, however, it should be kept in mind that the big blocker to new energy infrastructure is more often than not our sclerotic planning system, as opposed to any other obstructive forces at play. Acknowledging this fact will be paramount.

The removal of digital policy from DCMS, and handing it over to DSIT, will also have profound implications for some of the country’s most trailblazing entrepreneurs. Over the last decade, tech startups have been a bright spot in the often lacklustre British economy – especially compared to their peers in Europe. But digital policy has not always seemed sympathetic to the ecosystem’s needs – see the debates about the Online Safety Bill for a vivid example. Whether it’s a fair accusation or not, a common critique of DCMS was that, because it had little in the way of spending powers, it developed an appetite to simply (over)regulate. Many in the industry are now cautiously enthusiastic that by moving digital into DSIT, policy might play a more enabling role – which will be crucial for the future success of the industry, not least as we get to grips with developments such as increasingly sophisticated forms of artificial intelligence.

Machinery of government changes are never a guarantee of genuine change. Even where departments are welded together, the age-old adage about their constituent parts continuing to operate in silos can persist (this argument was constantly levelled at the now defunct BEIS). A new name and a new Ministerial team can happen at the stroke of the Prime Minister’s pen, but the actual behind-the-scenes restructuring can take months. Nevertheless, this reshuffle gives the entrepreneurial ecosystem much to consider – and attempt to influence for the better – just as our APPG will do. 

A Small Favour

Over the last few weeks, we’ve been carrying out research in partnership with the Venture Capital Trust Association on tax reliefs for equity investment, and highlighting their importance to founders in the UK. We’re coordinating an open letter which calls on the Government to pass the necessary legislation to continue and update the SEIS, EIS, and VCT schemes. You can add your name to the hundreds of signatories who have already done so by clicking here.

Adviser Update

We will be hosting our first public event of the year on Wednesday 19 April, to launch a forthcoming report we have written in partnership with the Venture Capital Trust Association on the subject of tax relief for equity investment. It will be held in the House of Lords, and you can request a place here. 

The Entrepreneurs Network, our secretariat organisation, also has events on the horizon. On Monday 13 March, in partnership with Kingsley Napley, they are hosting a roundtable discussion in the House of Lords with Lord Billimoria of Chelsea, CBE, DL to discuss reforms to the immigration system to support the UK’s entrepreneurs. You can request a place here.

A few days later on Thursday 16 March, they’re partnering with the Small Business Roundtable, Enterprise Nation, Intuit and Federation of Small Businesses on the Entrepreneurship Exchange 23 – which will bring together small businesses, entrepreneurs, government leaders, and subject matter experts from across the globe. You can find out more and register here.

Then, on Wednesday 22 March, they are hosting another roundtable to launch a forthcoming report written in partnership with Enterprise Nation, looking at SMEs and international trade, with Mark Garnier MP – Member of the International Trade Committee – as the guest speaker. You can request a place here.

Campaign for Science and Engineering are hosting their Annual Lecture on Tuesday 28 February. Kim Shillinglaw, Chair of CaSE’s new Discovery Decade project, will share her reflections on the public’s relationship with science in the UK, and the urgency of forging a deeper and broader public connection to put research and innovation at the heart of the UK’s future. It’s free to attend, and you can register here.

On Thursday 2 March, the Enterprise Research Centre will 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 spot.

The Centre for Entrepreneurs have opened applications for NEF+ – a 6-month programme for ambitious entrepreneurs to get the education, 1:1 mentorship/coaching and network to take their goals further. If you’re interested, be sure to register before the end of March, by clicking here.

In Parliament

In Topical Questions to the Business Secretary, Stephen Hammond MP raised the issue many entrepreneurs face about difficulty accessing finance, and asked what the Government is doing to make sure that access to finance is open to as many people as possible. Responding was the Small Business Minister, Kevin Hollinrake, who acknowledged the challenge of access to finance, but noted that “the Start-Up Loans Company has provided £1 billion of loans to around 100,000 businesses,” and that “40% of those loans go to people from a black, Asian and minority ethnic background.”

A debate on Non-domicile Tax Status saw views exchanged for and against abolishing the measure. Speaking in support of the status quo was Rob Butler MP, who said it is “vital that our tax regime is competitive and that talented entrepreneurs overseas see the UK as a country where their risk taking will be rewarded and where their commitment to developing their business will bring jobs to British people, strengthening our economy and generating in turn more tax that will pay for more public services.” Alex Sobel MP questioned whether abolishing it would render the UK less internationally competitive, noting: “Would this loophole happen in the United States of America? Would it happen in Canada, Germany or other jurisdictions? No, it would not. They require people to pay tax after a qualifying period. In the United States of America, that qualifying period is just one day.” 

Reacting to the creation of the Department for Science, Innovation and Technology, Anthony Browne MP mentioned that there are “reservations about the reform to the research and development tax credit, introduced to try to tackle fraud in the sector” and asked for reassurance that “the Government [is] still committed to supporting research and development companies while tackling fraud.” Responding, the Chancellor said the Treasury is “continuing to look at how we can support the R&D small companies sector without allowing that fraud to happen” indicating changes could be on the way.