APPG for Entrepreneurship Digest: March 2024

A week has elapsed since the Chancellor stood up to give the Spring Budget, and the dust has, just about, settled. In this month’s newsletter, we’ll delve into some of the key announcements it made for Britain’s founders, and consider how they’ve gone down in the wider entrepreneurial community. 

Looking at the Budget in the round, one thing that many seem to agree on is that it was a somewhat sedate affair. But as The Entrepreneurs Network (usual disclosure: the APPG’s Secretariat, and the think tank I work for) said in its reaction: “We can’t have it both ways. We’ve all complained about governments too readily chopping and changing policies, and then a rather boring Budget comes along and suddenly we’re all asking: is that it?” 

And indeed, last Wednesday still gave plenty for us to sink our teeth into. One of the easier, and more well-briefed, announcements that the Chancellor made was with respect to the definition of High-Net-Worth Individuals. After hiking the qualifying income threshold from £100,000 to £170,000 at the end of January, a backlash ensued from entrepreneurs and investors alike – not least those from underrepresented groups. Jeremy Hunt confirmed that legislation would be brought forward to reinstate the previous eligibility criteria, and declared that “further work to review the scope of the exemptions” would be carried out. 

Talking of thresholds, another which was subject to change was the VAT Registration threshold. This had previously been set at £85,000, and the Spring Budget saw it increase to £90,000. On the face of things, this was a good piece of news for small businesses, who’ll have some extra breathing room (the FSB were certainly happy). 

But it wasn’t met with universal approval. In recent years, increasing attention has been paid to the idea that the threshold actually holds back business growth, by incentivising small firms and sole traders to limit their turnovers to ensure they remain just below the threshold. (Tax expert Dan Neidle explains the situation far better than I could ever hope to.)

Another prominent plank of the Budget – accompanied by a hefty document of its own – centred on what more can be done to deliver better bang for the taxpayer’s buck. The Chancellor said that the Government will be taking the “next steps” of its Public Sector Productivity Plan, and to that end mapped out new funding streams for tech upgrades and digitisation. As Enterprise Nation’s Emma Jones noted in her Budget response, “increasing Government spending with small businesses and procuring the goods and services of SMEs has the power to take the best of British innovation and accelerate it.”

In order to develop those innovations, we need to harness the best of the research being carried out in our universities. It would seem Hunt agrees – as he built on previous efforts to catalyse spinouts (startups which commercialise academics’ work). “The government has asked universities to report on their spin-out policies by the end of May,” the Budget notes, “and has also begun consulting on the design of the new £20 million proof-of-concept fund to support universities and future founders to de-risk technology, and on a pilot approach to supporting the establishment by universities of shared Technology Transfer Offices.”  

As well as all of the above, the Spring Budget also saw the Government announce a consultation on a UK ISA, an update on Investment Zones, the publication of the ‘Case for Cambridge’ and a ‘Vision for Leeds’, and changes to the taxation of non-doms. 

By their nature, founders clamour for change, and that includes changes in policy. And while things might not always change on the timescales they’d like, we’ll always continue to make sure their voices are heard right at the heart of Parliament.

Adviser Update

The Entrepreneurs Network published their latest research, looking at the intersection of neurodiversity and entrepreneurship. Read it in full by clicking here.

They are also celebrating their tenth anniversary next week with an afternoon tea reception in the House of Lords. Find out more by clicking here.

With the UK Day One Project, they will also be holding a policy salon on high-skilled immigration. Find out more by clicking here.

Enterprise Nation published a report on what small businesses think and feel about artificial intelligence. Read it in full by clicking here.

A final analysis of the Business Basics Programme, conducted by Nesta’s Innovation Growth Lab, was published by the Government. Read it in full by clicking here.

In Parliament

In Business Questions, the Shadow Minister for Investment and Small Business, Rushanara Ali, asked: “What specifically will the Small Business Council do, and what will Ministers do to halt the alarming trend of more businesses closing than opening?” In response, the Minister for Small Business, Kevin Hollinrake highlighted work on improving access to finance, including “£1 billion of Start Up loans having been made to 100,000 businesses.”

Noting that it is “known around the world as a start-up nation thanks to its extraordinary tech sector,” Nicola Richards asked the Business and Trade Secretary what steps she is taking to advance negotiations on a bespoke free trade agreement with Israel. In reply, Kemi Badenoch said: “My hon. Friend will be pleased to know that we held a virtual negotiating round with Israel in February, focused primarily on services. That is one of the things that we are doing to move the FTA forward, and we will update Parliament shortly in the usual way via a written ministerial statement.”

Barry Shearman asked the Science, Innovation and Technology Secretary: “Whether she has had discussions with Cabinet colleagues on encouraging co-operation between universities and businesses to promote innovation.” In response, Michelle Donelan said: “Of course, I speak to colleagues on this important topic all the time. Our science and technology framework is designed to ensure that we do not just challenge university rankings, but translate them into material benefits for the United Kingdom. My Department has a number of programmes breaking down the barriers between universities and businesses, which have contributed to the nearly 90,000 interactions reported between universities and businesses in 2021-22. That is a 5% increase on the previous year.”

In a Written Statement, Science Minister Andrew Griffith announced the Space Industrial Plan, which he claimed: “Sends a strong demand signal to, and provides clarity for, UK space companies and investors, giving them the confidence to invest long term in the sector.” He added that: “We have heard and understood the challenges facing UK space companies, and we want the world’s space entrepreneurs and innovators to come to the UK because it offers the best possible place to make their visions happen.”

In a House of Lords debate on Higher Education, Lord Storey remarked: “The impact of research carried out in our universities is not limited to the grandest history-shaping excellences. For every history-shaping innovation, there will be millions of attempts by dedicated students and individuals contributing each day to moving the frontier of knowledge one step ahead. These are the students and people we need to support as, without them, there would be no innovation.” 

In the same debate, Lord Johnson said: “As the World Economic Forum’s Future of Jobs report found in its survey of employers, 44% of workers’ skills are likely to be disrupted over the course of the next five years. It is only the quality of our education system that will determine whether the UK will benefit from these innovations and whether it will be able to join the ranks of countries developing the next technologies. The most highly innovative knowledge economies around the world – look at South Korea, Israel, Japan and Canada –have boosted tertiary participation rates to well above ours, to the order of 60%, 70% or even more. Our ambition should be to join this vanguard of knowledge economies, not to give in to the dismal voices calling for student number controls that will hold back our productivity, widen inequality and throw sand into the engines of social mobility.”