APPG for Entrepreneurship Digest: May 2024

May began with local elections taking place across England and Wales. The futures of a few thousand councillors, 37 police and crime commissioners, 25 London Assembly Members and ten directly-elected mayors hinged on where voters were putting their little crosses. In this month’s digest, I want to focus on that last group of politicians – mayors – and their importance to economic growth and the country’s entrepreneurs. 

Before beginning, a quick primer. England now has eleven metro mayors, plus the Mayor of London – which for boring legal reasons is not technically a metro mayor, but in practice basically is. Different mayoralties have different powers, but all have responsibility for at least some aspects of transport policy and adult education; most take a role in housing and planning; and some have varying degrees of fiscal powers such as business rates retention.   

As well as serving around half the population of England, they also represent half the number of jobs in the economy, and even more than half (54%) of the country’s entire economic output. While it’d be wrong to ascribe all of that value creation to the individual mayors in question, it’s clear that the decisions they take will have profound consequences for how easy – or difficult – it is for businesses to thrive in their localities.  

We can see this most tangibly in areas like transport and planning policy. On issues like these, mayors have the means to make a noticeable impact – whether it’s franchising buses or extending tram networks, or reviewing local plans to enable the development of more new homes. As was noted in The Entrepreneurs Network’s latest report Building Blocks, Britain’s cities tend to punch below their weight compared to their European neighbours, and weak agglomerative forces caused by inadequate transport infrastructure and lack of housing supply doubtlessly explain much of this. By placing more responsibility for these policy areas in the hands of those closer to the reality of them, it stands to reason that better outcomes will ensue – or so a devolutionist would argue. (Certainly, it’s what our APPG chair Seema Malhotra thinks, as she told a recent interview with FE Week.)

As well as being able to pull on policy levers, perhaps one of the most important aspects of a metro mayor’s job is acting as a cheerleader for their region – both nationally and internationally. Since being elected, Sadiq Khan has repeated the phrase ‘London is open’ almost ad nauseum, in a bid to catalyse investment and attract tourists through uncertain times; during the Covid-19 pandemic, Andy Burnham was nicknamed ‘King of the North’ for campaigning for Greater Manchester to receive more support and attention from Whitehall; and while he was Mayor for the West Midlands, Andy Street was a vocal proponent for HS2, even as others in his party called for it to be scrapped. 

Given the near infinite number of variables and possible counterfactuals to consider, it’s nigh on impossible to calculate the economic impact of metro mayors. But there are strong grounds to believe it’s positive – research from the OECD suggests that cities with fragmented governance structures have productivity levels that are up to 6% lower than those that do not, while polling data from the think tank Centre for Cities shows that people living under a metro mayor support further powers being devolved down from central government (surely an indication that they think the arrangement is working well). 

Looking ahead, what might be the next step for metro mayors? An obvious place to start would be to level up the range of powers that each authority is currently afforded. As noted earlier, some mayors have responsibilities for some policy areas, while others do not. The Institute for Government recently said that: “The powers devolved are in many cases inadequate. The funding system is fragmented and short-termist. Insufficient attention has been paid to the capacity and structure of combined authorities. And the constitutional status of English devolution is uncertain.” Granting each mayoralty equal standing would be a quick and easy way to distribute more powers away from Whitehall.

Beyond that, further thought could be given to expanding what powers are available to even the most devolved mayors. Taxing and spending stands out as particularly good examples. The UK is an outlier when it comes to fiscal centralisation – with only 5% of taxes in the UK being collected by local government, well below the OECD average of 11% for non-federal countries. Tying the economic fortunes of businesses closer to mayors would, in theory, give the latter more of a stake in their success, and an incentive therefore to give them what they need. NIMBYist tendencies could be quelled if local politicians can capture more of the upside of pro-business development, rather than just the downsides as the case is currently. 

Of course, political devolution is not universally liked. And just as mayors are capable of making good decisions, so too are they capable of making bad ones. As Will Brett-Harding of the What Works Centre points out: “increased discretion over spending for local government raises questions about who will evaluate policy, and how.” Mechanisms are built into devolution deals to ensure mayors can be effectively scrutinised, but consideration of how to further boost transparency and accountability can hardly be a bad thing. 

As for now, however, the evidence suggests that metro mayors are a broadly popular turn in British politics. With a little fine tuning, there’s every reason to think that they can deliver even more for entrepreneurs up and down our country.

Adviser Update

Our Secretariat, The Entrepreneurs Network is hosting a meetup with Growth Hub Global and LSE IDEAS on 21 May. This event will focus specifically on international policy issues with an informal gathering over drinks – including non-alcoholic options – and nibbles. Learn more by clicking here.

On 22 May they are also hosting an event in Parliament with MDRx, discussing how a Labour government would build trust in AI through regulation without curbing innovation, and how this novel technology can be used to enhance public services. Learn more by clicking here.

And finally, they are convening two dinners with Britain Remade, aimed at learning more from entrepreneurs who have faced challenges to do with the planning system. One will take place on 30 May, and the other on 19 June.

Enterprise Nation is partnering with Google to convene a series of digital skills events. Their Digital Garage workshops are designed to help you grow your business online and find new customers. Learn more by clicking here.

On 19 June the Enterprise Research Centre (ERC) will be at the Shard in London to host their 9th annual Small Business Britain conference. The day will include a mix of insights from ERC research as well as discussion with a range of academic, business and policy speakers and examples of good practice in business support. Learn more by clicking here.

In Parliament

Business and Trade Secretary Kemi Badenoch gave a statement to the House on the UK’s latest trade statistics. She declared: “The value of UK exports was £862 billion in the 12 months to February 2024. That builds on progress we have made in growing our exports outside the confines of the EU. Exports are now 2% above 2018 when adjusted for inflation. Services exports are at an all-time high.” Replying was Shadow Minister for International Trade Gareth Thomas, who said: “British exports in the past decade have grown slower than those of any other member of the G7 besides Japan. According to the Office for Budget Responsibility, since the Secretary of State was appointed, British exports have dropped and are expected to decline again this year, with at best anaemic growth in each of the next three years. Ministers have cut funding to help small businesses get to the international trade shows that they need to attend in order to find new export markets, and have cut funding to allow business groups to lead their own trade missions to win vital new orders for British business.”

Sammy Wilson asked the Chancellor whether he realises: “that the tax burden he is imposing on small and medium-sized businesses is crushing this economy?” In response, Jeremy Hunt said: “We are doing everything we can to support small businesses. Businesses like the one that the right hon. Gentleman mentions have received, for two years in a row, a 75% discount on their business rates. That is a massive leg up for businesses recovering from the pandemic. We have also made sure that any increases in corporation tax apply only to larger businesses.”

Pauline Latham questioned what the Government is doing “to help businesses in [her] constituency that have difficulties because [they] do not have the skills to increase the business.” Small Business Minister Kevin Hollinrake responded, saying: “We are putting £3.8 billion into skills training for people who work for businesses, which is important. We are also improving skills for entrepreneurs and business owners through our help to grow management programme – it can be found on the help to grow webpage – a 12-week mini-MBA, which is 90% funded by the Government. We also have “Help to Grow: Management Essentials”, which offers two hours of totally free online training for aspirant new business owners.”

Also on the topic of skills, Lisa Cameron told the House that: “The UK already has a strong track record as a leader, and we want to maintain that leadership and be at the helm of this transformation. We want to be seen as a destination for innovation and businesses that want to start up and scale up across the United Kingdom. We also have to level up. I hear a lot in my role about businesses starting up in London, and that is absolutely fantastic, but that has to be levelled up to give people opportunities right across the UK. The UK boasts some of the most respected universities, and the largest financial services sector and tech ecosystem in Europe. In 2023, the UK tech sector reached a combined market valuation of more than £1 trillion. Focusing on education and boosting digital skills will therefore be central to the success of the Government’s vision and will ensure that people have the skills they need to pursue careers in digital economy transformation. To turn that vision into reality and make the UK a digital and technology superpower, we must not only attract the right talent but build the talent base here through teaching and training in every sector and maximising our talent pipelines.”

Chair of the Treasury Select Committee Harriett Baldwin announced the publication of their latest inquiry, on SME finance. She said: “As every Member will know, small and medium-sized enterprises form the backbone of the UK economy. All of us in our constituencies will be aware of amazing small and medium-sized businesses. In fact, 99% of the businesses in this country are small and medium-sized, which gives us an idea of how important they are. Well over half of our constituents who are employed work for SMEs. Access to finance for small and medium-sized businesses, which the Committee has been looking at, is therefore a really important issue. I want to highlight some of the points raised in our report.”

Over in the House of Lords, meanwhile, Lord Birt told colleagues that: “The economy is highly dynamic, constantly reinventing itself and demanding new skills and abilities. Society too is dynamic, constantly evolving, and embracing social and cultural shifts. It is not clear, however, that our education, skills, health and welfare systems are acting in step and that they are sufficiently dynamic and innovative to keep abreast of and respond to these ever-changing needs of both individuals and the economy. These issues are deep, stubborn and challenging and, as a nation, we need to step back and consider in the round how best to address them.”

In a debate on startups and tax incentives, the Earl of Effingham said: “one of the main sources of capital for [startups] in the past – the UK’s Small Cap stock index – is shrinking as firms list overseas or go with private equity. So I ask my noble friend the Minister: what are the Government doing to reinvigorate the Small Cap index, help our start-ups and keep them here?” In response, Baroness Vere said: “London remains one of the leading financial centres in the world. The Government are incredibly focused on our domestic equity markets to ensure that they meet our ambitions of ensuring we have capital available to small companies. My noble friend will know that the noble Lord, Lord Hill, did a review into UK listings and we are taking forward his recommendations. My noble friend will also know that the Government are proceeding through looking at all our regulation to ensure that it is fit for purpose for the UK and UK listings under the smarter regulatory framework. He will also have seen the reforms announced by the Chancellor in Edinburgh and at Mansion House. We are seized of the opportunity we have with domestic equity markets, whether they be for large cap or small cap companies. However, we recognise that there are things we can do to make them better.”