APPG for Entrepreneurship Newsletter: June 2025

Politicians are extremely fond of singing the praises of small businesses, and they have every right – and incentive – to do so. With 5.5 million businesses classified as ‘small’ – employing fewer than 50 people – they account for 99.8% of all businesses in Britain. If you can think of a constituency that encompasses a greater share of its entire population than that, please do write in to let me know.

Thanks no doubt to their strength in numbers, small businesses receive adulation at every opportunity. A common theme seems to be the idea that more really is merrier. While I’ve no particular issue with more people having a go at starting out, when this becomes the only metric of success, we begin to lose sight of what really matters – whether any of these businesses become productivity engines.

Fortunately, an effort seems to be underway to correct the narrative. In the Enterprise Research Centre’s latest State of Small Business Britain report, they observe that the “number of start-ups in an economy is often used as a key indicator of business growth, but less attention tends to be given to the proportion of businesses that survive and go on to create healthy revenues.” They go on to add that: “ERC analysis has shown that the UK has a high proportion of start-ups that do not survive, and that only a small proportion of firms reach significant scaling milestones.” For all the plaudits Britain has received of late for incubating its startup ecosystem, the proportion of firms that startup and go on to turn over £1 million or more after three years has remained stubbornly persistent over the last decade – at around 2%.

Now that Britain has established itself as a place where just about anyone who wants to can start a business, we have to move beyond and examine what can be done to ensure promising businesses can grow to their full potential and deliver the sort of productivity gains that the country so sorely needs.

On this front, a recent article by the Financial Times’ Tej Parikh caught my attention. Contrary to a legion of speeches given and op eds written over the last decade or so, he concludes that Britain does not, in fact, suffer from the infamous ‘productivity puzzle’, but rather a policy puzzle. In his piece, Parikh cites testimonies from numerous experts who present the tangle of barriers to growth in Britain – dysfunctional planning policy, crippling energy costs, punishing marginal tax rates, slow diffusion of best practices and technology in businesses, and more. Thus, we now know all too well what holds us back, but we do not necessarily have politically workable solutions to these bottlenecks. (Pleasingly, one policy that Parikh notes which has managed to best the puzzle is ‘full expensing’ – for which we were one of the frontrunners in recommending, all the way back in 2018.)

Making progress on any of these growth impediments could pave the way for many more of the vast population of small businesses to break into the big (or at least medium) time. As understandable as it is that quintessentially small businesses capture the limelight, if we’re serious about growth, we need to focus as much on quality as quantity. Whether it’s through hard policy fixes or simply devoting more political bandwidth to it, legislators cannot ignore the fact that despite improvements in our entrepreneurial ecosystem, not every metric shows signs of success.

Adviser Update
Latest news, research and events from our Advisers

The Campaign for Science and Engineering (CaSE) is seeking two new trustees with expertise in either legal or financial matters. More details on the roles can be found on the CaSE website, and the deadline is 23:59 on Wednesday 4 June.

CaSE’s Policy Manager Camilla d’Angelo has also penned an analysis piece on the Immigration White Paper, which was released last month. Read it in full here.

The BVCA published Venture capital in the UK 2025, in which they document the scale of venture capital investment across the nations and regions of the UK.

The Entrepreneurs Network launched their Entrepreneurs Survey, with founders invited to make their voices heard on a variety of different issues. There is still time to complete it by clicking here.

They are also convening a handful of events in June – including a virtual roundtable on parenting and entrepreneurship, an evening meetup for foreign-born founders, a dinner with Allison Gardner MP for healthtech founders, and a networking event for climatetech founders.

In Parliament
Questions and comments relating to entrepreneurship this month

In a debate on the venture capital industry, Liberal Democrat Sarah Olney said:

“[W]hile our VC market is growing and strong, it is highly inequitable. For ethnic minorities, women and many other communities which there is either insufficient data or insufficient time to discuss today, our system of venture capital does not work. Businesses with founders from those communities receive a disproportionately lower percentage of VC deals and of total VC funding. With their priority of growth, the Government must do more to ensure that the venture capital market in the UK is inclusive and accessible.”

In a debate on business and the economy, Shadow Business Secretary Andrew Griffiths gave an impassioned defence of entrepreneurship:

“Running or investing in a business at its core is a profound act of human courage—the triumph of optimism over inertia, and a mindset of someone solving problems themselves rather than waiting for permission from others. It is about embracing risk knowing that there are no guarantees, no bail-outs and that no one is coming to the rescue. When enterprise succeeds, such people create the wealth that funds our public services. Every time a Minister dispenses money and largesse in Whitehall, as this Government are doing at record velocity, they can do so only because a founder, entrepreneur, or a businessman or businesswoman, took that leap.”

Over in the House of Lords, Baroness Stowell cautioned against the Employment Rights Bill:

“[T]he costs of hiring and firing are already much higher in the UK than anywhere else, which is putting UK businesses at a disadvantage. In the context of the Bill and the day-one rights around unfair dismissal, the Startup Coalition, which represents the start-ups, talked in its briefing note about the chilling effect that these day-one rights around hiring and firing would have on start-ups, seriously undermining their potential for growth. TechUK, which represents tech businesses of all sizes, has raised a lot of concerns about some of these day-one rights, but in the context of unfair dismissal, one of its concerns, which I do not think we have heard much about so far, is the risk of fraudulent claims.”

While debating the Strategic Defence Review, Defence Secretary John Healy reiterated the importance of innovation to national security:

“Ukraine also tells us that whoever gets new technology into the hands of their armed forces the fastest will have the advantage, so we will place Britain at the leading edge of innovation in NATO. We will double investment in autonomous systems in this Parliament, invest more than £1 billion to integrate our armed forces through a new digital targeting web, and finance a £400 million UK defence innovation organisation. To ensure that Britain gains the maximum benefit from what we invent and produce in this country, we will create a new defence exports office in the MOD, driving exports to our allies and driving growth at home.”

Looking Forward
Consultations and calls for evidence from government departments and Select Committees

House of Commons Public Accounts Committee – Governance and decision-making on major projects (Deadline: Thursday, 10 June)

HM Treasury – Alternative Investment Fund Managers Regulations consultation (Deadline: Monday, 9 June)

Office for Equality and Opportunity, the Race Equality Unit and the Disability Unit – Equality (Race and Disability) Bill: mandatory ethnicity and disability pay gap reporting (Deadline: Tuesday, 10 June)

Department for Work and Pensions – Pathways to Work: Reforming Benefits and Support to Get Britain Working Green Paper (Deadline: Monday, 30 June)

Low Pay Commission – Low Pay Commission consultation 2025 (Deadline: Monday, 30 June)

HM Revenue and Customs – Modernisation of the Stamp Taxes on Shares Framework – 1.5% charge (Deadline: Monday, 21 July)