Britain ‘risks losing its start-up edge’ without more support for young entrepreneurs

By
Dan Martin
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young people entrepreneurs coworking space

The challenges faced by younger people who want to set up a business are being overlooked by policymakers, and many are being enticed to relocate to faster-moving rivals abroad, a new report has warned. 

Based on interviews with almost 200 young entrepreneurs, the report by The Entrepreneurs Network said aspiring young founders face barriers to entry including a lack of financial reserves, professional networks and knowledge of navigating regulation, as well as limited experience of managing the daily challenges of being a business owner.

Despite this, it is younger founders who often have the freshest ideas and the greatest appetite for risk, but the UK’s support environment is letting them down, the report warned.

The report makes several policy recommendations to tackle the bottlenecks facing young founders in the UK, including improving how publicly-funded accelerator programmes operate, increasing the generosity of tax relief schemes for start-up investment, liberalising immigration rules that make it difficult for promising talent to come to or remain in Britain, and experimenting with new funding mechanisms to support innovative start-ups.

Sean Kohli, chair of the The Entrepreneurs Network’s Young Entrepreneurs Forum, said:

“Britain has no shortage of talent or ambition, but too much of that potential is still being held back. We need a system that supports us, not one that hinders us. Culturally, we’ve made entrepreneurship seem like an impossible dream for too many driven innovators.

“That mindset kills more start-ups than failure ever will. In California, I see what a truly supportive ecosystem looks like – risk is celebrated, capital moves fast, and regulation keeps pace with innovation. If we want fast-growing start-ups, we need real reform. The next generation of founders are ready to lead; now Britain needs to be ready to back them.”

Eamonn Ives, research director at The Entrepreneurs Network, said:

“The strength of Britain’s economic future hinges on its ability to allow young founders to flourish. Promising entrepreneurs at the start of their journeys have the world at their feet, and the Government should be doing all it can to make sure they’re building here in the UK – not elsewhere.

“Britain already gets a lot of the hard stuff right when it comes to nurturing entrepreneurship, but with other nations quickly catching up, we cannot afford to get complacent.”

The report’s full list of recommendations to support young entrepreneurs:

Policy theme

Headline findings

Policy recommendations

Investment

Britain performs well at attracting early-stage investment into promising start-ups, thanks in part to long-standing tax reliefs on investment. But years of inflation have now eroded the value of these schemes, and perennial issues remain for firms accessing growth capital from institutional investors.

  • Commit to increasing the generosity of the Enterprise Investment Scheme and its Seed stage equivalent to keep pace with inflation and market trends.

  • Ensure the Mansion House reforms deliver in terms of getting more investment from institutional capital into start-ups.

  • Abolish Stamp Duty on shares to increase the attractiveness of London as a place to list.

Regulation

Starting a business in Britain is a straightforward process, and the general background level of business regulation is manageable. However, on emerging tech and disruptive business models, the regulatory state is still too cautious and too slow to adapt.

  • Use bodies like the RIO to ensure British start-ups can bring innovation to established industries, and break through in emerging sectors.

Immigration

Top talent from around the world regard Britain as an incredibly attractive place to build in. But recent reforms that restrict visas risk this status.

  • Remain open to high-skilled and promising labour – creating pathways for top talent that are navigable and competitively priced.

  • Explore ways to recognise the value of equity in lieu of salary with regard to salary thresholds for Skilled Worker visas.

  • Avoid common failure modes for the Global Talent Taskforce so that it can be as effective as possible in proactively enticing the world’s brightest and best to Britain.

Taxation

Entrepreneurs are now starting to feel the burden of taxation weighing more heavily than has previously been the case in recent years. Other jurisdictions are increasingly being singled out as being attractive for mobile founders.

  • Keep taxes on wealth creators globally competitive – especially Capital Gains Tax.

Education

Britain’s universities stand out as being genuinely world-class – undertaking cutting-edge research and producing a pipeline of skilled graduates. Yet, issues remain with commercialising academic research, and there is a sense universities could do a better job at instilling an entrepreneurial mindset among students – something that is also true at earlier stages of education.

  • Move towards a system of Professor’s Privilege that vests intellectual property with academics who are then empowered to spin out their research on more attractive and investible terms.

  • Embed entrepreneurship throughout the education system, raising awareness of entrepreneurship as a career and encouraging individuals to pursue it.

Government initiatives

There is a recognition that the government has a large footprint in terms of initiatives for entrepreneurs and innovators, but it is not always clear whether these are as effective as they could be.

  • Overhaul state funding for startup support programmes so that they genuinely deliver what is demanded from founders.

  • Experiment with novel R&D funding mechanisms for start-ups which cut bureaucracy and allow entrepreneurs to focus on actually innovating.

Culture

Whether Britain has an entrepreneurial culture is up for debate – with respondents conflicted one way or the other. Many believe that other countries, chiefly the United States of America, do a better job at celebrating entrepreneurship, which if we matched here in Britain would pay dividends.

  • No single policy recommendation can fix the culture of an entire nation. Infusing a spirit of entrepreneurship into society will take years, decades or even centuries to achieve – and will be downstream of a host of more material factors going right. One critical ingredient will be successful role models that aspirational entrepreneurs grow up wanting to emulate and learn from. To a large extent, doing what we can to help today’s entrepreneurs be as successful as possible may be the best way to ensure those of tomorrow are similarly inspired to build incredible businesses.