A huge amount of finance and support packages have understandably been directed towards keeping businesses afloat and by design, keeping people in work. But what support and incentives are out there to encourage the next wave of start-ups and entrepreneurs to succeed and help the UK get back on its feet.
In this article, Debbie Assinder (West Midlands Enterprise Champion at Enterprise Nation) considers what could and should be done (both regionally and nationally) to create the conditions and support for enterprise to flourish.
In the words of Albert Einstein, “In the middle of difficulty lies opportunity”. It is difficult to read a business post, these days, without seeing references to a ‘new normal’ – a business future which captures the positive benefits of the COVID era. Where businesses will be more agile and carry less expensive fixed assets and where there is a genuine commitment to employee wellbeing.
But to what extent will the start-up sector kick start our economy and what are the practical steps that Government should now be taking to support the re-emergence of the UK start-ups?
As Enterprise Nation Founder Emma Jones observes:
‘We are already seeing signs of what could potentially be a significant start-up boom. If we get this right, we could be looking at an even larger population of founders working to bring us out of recession..”
In June this year, there were 77,574 new company formations compared to 52,779 in June 2019, a 47% growth. In terms of location, all regions and devolved nations saw rising business formations, with London and West Midlands on top with 60% increases. (1) Start-ups have emerged as key drivers of economic growth and job creation and are often a catalyst for radical innovation. Young firms may only account for about 20% of employment but create almost half of new jobs on average across OECD countries [Source: OECD 2016].
And of course, even the great unicorn corporations of the 21st century were start-ups in the beginning. Indeed Unicorns, such as Airbnb and Uber grew up out of the last recession as did over 50% of Fortune 500 companies (2)Indeed businesses which launch in a recession tend to survive longer because they budget for low costs and think they have spotted a gap in the market. So, what needs to happen for the country, and West Midlands region, to promote and nurture these trends in entrepreneurship?
Here are some of my thoughts on how business start-ups could be better supported to prosper, even in these challenging times.
The right conditions for growth
Politicians, at both a national and regional level, have a critical role to play in creating the right conditions for people to start a business by reducing barriers and providing the right incentives. We need a reduction in administrative burdens for start-ups by implementing simplified procedures, and accelerating transition to e-government.
Governments can keep interest rates stable and provide risk finance but perhaps of equal importance in a pandemic, reduce the less obvious barriers associated with the entrepreneur status, (especially those that may be seen particularly critical during and after pandemics e.g. paid sick leave.)
Financial support
Now is the time to consider more lending and grants for start-ups. How do we fund this? I would suggest that government bonds are the answer. These provide a better alternative for economic growth than tax rises and can be redeemed in more prosperous times. Many households were able to save during lockdown (3) but are now faced with earning negative real returns on their savings. Government ‘COVID recovery bonds’ analogous to War bonds in previous times, would provide a safe home for savings which could offer a modest return after inflation.
A simplified route to support for start-ups
To best exploit this financial support, we need a single point of contact for start-ups along the lines of the former Business Link, with its associated marketing budget which helped increase awareness of the service. The phrase I have heard repeatedly during COVID is ‘overwhelmed’ as many businesses have struggled to know how to access support. (4) Chopping and changing support schemes has been a feature of successive governments, which tends to lead to confusion and low pick up rates. If this is not practical, then individual LEPS should endeavour to share best practice.
An example of this, is the Digital Voucher programme currently offered by Leeds LEP to start-ups (5) COVID has emphasised the importance of integrating digital technology to deliver products and services, reducing costs, improving efficiency, and speeding up processes. This is something many start-ups struggle with.
Revival of the Growth Voucher Programme
Now is the time to resurrect the Growth Voucher Programme. The Growth Vouchers enabled start-up businesses to access specialist support and advice that they otherwise could not afford. A voucher worth £2,000 would make most difference to start-ups, and these are often the most difficult for Whitehall departments to reach. A step in the right direction is the Enterprise Nation Recovery Advice for Business Scheme. (6)
Supporting the diversification of our entrepreneurs
If we want to “build better” post Covid then a financial bonus could be provided to those start-ups that hire employees or that provide other social benefits such as green businesses, social enterprises and businesses started from groups currently underrepresented in entrepreneurship.
The Rose Review of Entrepreneurship noted that £250 billion of new value could be added to the UK economy if women started and scaled new businesses at the same rate as UK men. It is a shocking statistic that currently only 9% of investment currently goes to female start-ups. (7)
A recent study also called on Ministers to improve ethnic minority access to financial help as “some BAME business owners are disproportionately unable to access grants, loans or investment whilst contributing £25 bn to the UK economy every year ” (8) Government needs to publicly record and monitor the scale and quality of provision to women and BAME business founders as part of an Equality Impact Assessment and meeting a Gender Equality Duty. (This would be much easier to assess if there was one single point of contact for business support.) The government also needs to invest in expanding the childcare sector to create jobs, close gender employment gaps and support the 600 000 mothers who are self-employed. (8)
The Importance of Innovation and Enterprise Education
Now is also the time to redress the financial imbalance between London and the rest of the country. Currently over 50% [of UK R&D expenditure] goes to London and the South East. The 10 Point Manifesto sent to Business Secretary Alok Sharma includes a call for a new national innovation policy, a target for every UK region to have a centre of world-class research excellence by 2040 and greater collaboration between UK cities, in order to boost science and technology innovation. (9)
In the world of education, we need curriculum policy to focus on maintaining the pipeline of future entrepreneurs. Currently, enterprise education remains optional and there is no national strategy This needs urgent government review along with a revitalisation of local government supported training programmes to re-skill workers to enable them to start their own businesses with business planning and finance raising advice.
Finally, this raises the issue of the extent to which government start-up policy wishes to support “necessity entrepreneurship” (those who start a business as they do not have another means of generating income) in response to Covid19 (10) It does, however, seem to me to be a more joined up solution than more austerity or a metaphorical helicopter money distribution approach. When Birmingham entrepreneur Ben Francis started Gymshark it was just one of seven websites he had set up that month and Gymshark now has a £1bn unicorn valuation employing 499 staff!
Covid has brought great challenges and the need for bail-outs to keep existing companies afloat and people in work. But – we need to be doing so much more to support the next generation of wealth creators
Notes and References
1. Some of the biggest increases came among companies in the so-called ‘COVID economy’. There was a 400% rise in disinfecting services, 317% increase in retail of medical goods and an 85% hike for businesses offering specialised cleaning services. There was also an 110% increase in new internet retail businesses as locked down households turned to the web for shopping. A total of 13,904 new online firms started in June. There was also growth in sports retail (+89%), games and toys retail (+89%), bakeries (+58%) and clothing retail (+53%). [Source: https://centreforentrepreneurs.org/research/]
3 Typical UK households could be spending 29% less in lockdown compared to ‘normal’ times – equal to an average saving of around £171 per week
4. www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/bulletins/familyspendingintheuk/april2018tomarch2019Daniel Evans co-founder of Business Enterprise Community “There is a lot of support about but it can be really hard to know what support is available specifically to you and how you then go about getting it”
5. https://www.digitalenterprise.co.uk/vouchers/
7 https://smallbusiness.co.uk/has-the-growth-voucher-scheme-helped-small-businesses-2483126/#:~:text=Growth%20Vouchers%20were%20available%20up,you%20up%20to%20%C2%A32%2C000
8. https://fleximize.com/articles/016832/supporting-female-led-start-ups-with-investment
10. https://netimesmagazine.co.uk/news/experts-call-on-government-to-support-womens-enterprise/
12. SUMMARY OF PROCEEDINGS Re-booting start-up policy in response to the COVID-19 crisis OECD Webinar – 12 May 2020 With participation of delegates from the Working Party for SMEs and Entrepreneurship (WPSMEE) and Local Economic and Employment Development (LEED) Committee
About Debbie Assinder:
Debbie is the West Midlands Enterprise Champion for Enterprise Nation, enabling her to support and promote businesses across the region. Debbie also works with tech start up businesses at Innovation Birmingham and is also the Event Director for the inaugural Midlands Women in Tech Awards.
In May 2019, Debbie was awarded Young Enterprise Gold Award, ‘For making an outstanding contribution to the work of young enterprise’. Debbie was also nominated for Woman of the Year 2020, in The City of Birmingham Business Awards, which “celebrates those business heroes who have made a difference to the Birmingham city region.”
Debbie provides freelance business advice and support to start-up businesses and pre-start up companies in the micro -business and SME sector.
Debbie is a SFEDI/ILM Gold accredited business adviser with 20 years plus experience; her qualification also includes the SFEDI Practitioner Certificate in Social Enterprise Support.
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