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The writing has been on the wall for a while. The parties and lies may have sunk Boris, but as I wrote a few weeks ago, our “15-year (economic) rut” left Conservative MPs with few reasons to stick with him.

Of course, Boris has only been in the hot seat since 2019 and some of the economic challenges haven’t been of his making – the pandemic, Putin, Brexit (actually, that one's on him). But it’s undeniable that this government hasn’t delivered. Boris said as much in his resignation speech, but unlike him, I’m not sure he was ever going to. His government always felt bereft of new ideas.

We, on the other hand, like most think tanks, are full of ideas for what the next Government could do. So what’s next for us? We know lots of politicians, special advisers and people who will be involved in campaigning for the various leadership contenders. And while we might have our personally preferred contenders, it’s our job to make the case for why all of them should adopt our ideas.

We’re under no illusions about the nature of politics versus policy though. The leadership platforms will inevitably only give a rhetorical nod to entrepreneurship, and as Boris proves, that’s not enough to be a successful Prime Minister. To be successful our country needs policies that will grow the economy in a way where the majority feel better off.

As John Myers notes, there are three big things the next Prime Minister should be aware of. First, the UK is capable of delivering much higher incomes per person – with the right policies people could be earning 50% more than they do today. Second, our low incomes are largely a result of decades of bad governance. And third, few realise how easily many of these issues can be fixed. “Understanding these points will let you reach beyond your core supporters – whether they be (say) One Nation, free marketeers, traditionalists or fiscal conservatives – and give a vision that can appeal across a party, and then across a country.”

For his part, Myers suggests solutions on housing, energy and transport. We’re particularly supportive of his housing agenda, incorporating some of his ideas in our Strong Foundations paper, which focused on how expensive housing harms entrepreneurship.

We have a whole heap of policies to add to his agenda – everything from reforming the High Potential Individual (HPI) visa and establishing a new order of chivalry specifically designed to encourage invention, to cutting bureaucracy and boosting innovation in government procurement (watch out next week for another report on this), to making the UK the best place in the world for AI innovation. And that’s just the tip of the iceberg of what we’ve already done, with plenty more in the works.

None of these policies will win an election on their own. But together they form a pro-growth platform that will appeal to those who share our impatience to actually realise an optimistic vision for the country. Many of these people are entrepreneurs, of course, but they’re also overrepresented among political influencers (for desperate want of a better description). Getting their support is critical.

What’s true of the Conservative Party is true of the opposition parties too. We’re inputting into Labour’s review to ensure “Britain is the best place in the world to start and grow a business” and the Liberal Democrats have always been very open to our ideas.

We’re busy planning dinners with senior politicians across all the parties. Let Katrina know if there is anyone you think we should host. And if you think what we’re doing matters as much as we do, now is as good a time as any to become a Supporter or Adviser: Join Us!

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True Potential

As we all know, half of the UK’s fastest growing startups were co-founded by someone born overseas.

When we calculated that figure, free movement with the EU was still a thing. A lot has changed since then. We've moved to a system that's pretty open for skilled workers with jobs, but there's a huge gap in the market for people who want to move without a job offer (i.e. entrepreneurs). The UK’s new High Potential Individual (HPI) visa helps fill that gap and opens the UK up to the best talent from the rest of the world. It’s a move we called for, and welcome.

To be awarded an HPI visa, you must have attended a university that has appeared in the top 50 of at least two of the three following global university rankings: the Times Higher Education World University Rankings, QS World University Rankings, or the Academic Ranking of World Universities.

The problem is, these lists aren’t great at measuring what we want. They are great for measuring research output, the number of Nobel Laureates, and the quality of facilities, but they’re weak predictors of graduate labour market performance. That’s because they don’t even try. The closest we get is QS asking employers what they think of each uni.

We have a better idea. Or more accurately, economists Jason Sockin, Paolo Martellini and Todd Schoellman do. They’ve used real-world labour market data from Glassdoor for migrant and non-migrant graduates from around 3,300 universities across 66 countries.

Building on this work, Sockin and our Research Director Sam Dumitriu have found in True Potential that the HPI visa excludes graduates from many of the world’s top-performing universities. In fact, graduates from most of the top 25 global universities as measured by average earnings are not even eligible to join, including the Indian Institute of Technology Ropar, which tops the list.

If the UK adopted our proposed method and allowed any overseas graduates who attended a university with higher potential earnings than the median-performing, currently eligible university, it would give graduates from approximately 100 universities spanning 13 different countries access to the visa.

The additional universities include many STEM-focused institutions, small liberal arts colleges in the US, and business schools. Of the omitted universities, 33% are from the United States, 22% are from Europe, and 17% are from India.

No system is perfect, of course. But we think supplementing the current list with ours would be a serious upgrade. And we’re not the only ones:

– “No-one was suggesting a better list [until now]” – Tom Forth
– “Completely agree with this” – Sam Freedman
– “Brilliant bit of analysis. Should be adopted by govt immediately” – Jonathan Simons
– “Fantastic idea for a paper. Anecdotally, I’ve already met quite a few US grads planning to stick around in the UK because of the HPI visa. Would be great to open it up further” – Julia Pamilih
– “Excellent thread on how to make the High Potential Visa better” – Matt Cifford MBE
– “A good thread arguing Britain’s new open door visa to the graduates of the world’s leading universities needs to have a more sophisticated metric” – Ben Judah

Finn(est) Hour
This week we also released the All-Party Parliamentary Group for Entrepreneurship’s report on Entrepreneurship Education. Written by Finn Conway and kindly support by finnCap, it calls for the Government to:

– make clear which minister has the responsibility for enterprise education;
– draft a Youth Enterprise Strategy for England;
– integrate enterprise into the National Curriculum;
– provide resources and funding for pupils to engage with entrepreneurial activity in schools;
– provide incentives for businesses and local enterprise partnerships to support and engage with entrepreneurship education.

First and foremost, if you haven’t done so already, read this letter and sign it here to show your support.

Second, we want to make sure this report sparks policy change. This is just the beginning (well, it’s not actually the beginning as we’ve been researching and campaigning on this for years). Over the coming weeks and months we’ll be making the case with Ministers, MPs, Peers and civil servants making the case for change. So will Sam Smith, founder of finnCap, who also wants to see change – listen to her from 33 minutes in on Sky.

We’ve now built a sizable network within a network of entrepreneurs, educators and experts who are passionate about this topic, but the more the merrier. If you care as much as we do, get in touch.

Finally, we have a couple of reports coming out around this topic. First, we’re looking at the role of applied learning in building an innovative mindset for Young Enterprise, and looking at how to improve the connections between FE colleges and entrepreneurs in their communities for Gatsby. If you know – or are involved in – a case study to illustrate best practice in either, get in touch with Dr Anton Howes.

Copy Right
We have a solid track-record of changing policy. Unlike some other think tanks that are aligned to a political party, we don’t run our ideas past the Government or opposition parties to make sure they agree, and we don’t write reports to test the water or lay the groundwork on behalf of political parties. We try to change minds.

Latest on the growing list is Anton’s copyright reform proposals, which are starting to become part of government policy. Since Fixing Copyright was published last year, Anton has taken part in various conversations with the Intellectual Property Office and BEIS about how the UK could encourage its AI sector by extending the copyright exception for text-and-data mining to everyone, not just non-profits. These were proposals also put forward in Seb Krier’s paper for us on Making the UK the best place in the world for AI Innovation. Now the Government has announced that it intends to adopt our policy, citing many of our precise arguments – particularly around the opportunities we pointed out for making the UK more competitive in AI following Brexit.

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Skin Deep

As entrepreneurs understand better than most, having skin in the game is the best way to align incentives. The fact that all the blood, sweat, and tears aren’t only for someone else’s gain helps to drive innovation. It’s never just about the money (and innovators can actually only capture a tiny fraction of the value of their innovations), but it would be naive to suggest that those few percent aren’t a driving force.

It matters for many employees too. That’s why in the past we’ve argued for the expansion of Enterprise Management Incentives (EMIs), and why we’ll try to influence the Government’s preferred solution of reforming the tax-advantaged Company Share Option Plans (CSOPs).

For the same reasons, the Government is right to be considering removing restrictions on non-executive director remuneration, allowing them to benefit from share incentives. As fellow think tanker Robert Colville says: “If you have got a high-growth company and you want to attract the best advisers, directors and board members – especially Americans – you have got to give them a slice of the upside.”

I wouldn’t have to write this but for the fact that some have vehemently come out against the plans, connecting this reform with bankers’ bonuses (including in the articles linked to above). Even the CBI’s response has totally missed the point. They said, in response, that “high pay can only ever be justified by exceptional performance. In the midst of the cost-of-living crisis, and as many are faced with lower earnings, firms will be particularly mindful of the importance of fair executive rewards.”

This is woolly thinking, playing to the crowd but in a way that will make things worse. Of course the cost of living crisis needs addressing, but just because the timing means it might be “not a good look” right now, doesn’t mean the Government shouldn’t do the right thing for the long term. People are always complaining about how short-termist politicians are, but when they’re actually looking at the long term they’re also getting attacked. Ultimately, the policy will make the UK richer, giving us more to spend on helping the poorest during future tough times like these.

(A final thought: should politicians have skin in the game too? One proposal is for politicians’ pay to be linked to what happens to real GDP per capita over the parliamentary term, and to grow or be reduced accordingly. Our current MPs would have had over a decade of falling real wages had it been in place. Answers on a postcard please.)

Sign, Sealed, Delivered
I’ve trailed it for the last two weeks, so won’t go on too much, but on Tuesday we’re launching the All-Party Parliamentary Group for Entrepreneurship’s report on Entrepreneurship Education. To coincide with the launch, we’re asking for entrepreneurs and experts to sign a public letter calling on the Government to make entrepreneurship education a priority.

The proposals are significant, but we’re mindful of overloading teachers with more work. The curriculum is already packed with a lot and most of it’s there for a good reason. Instead, we suggest integrating entrepreneurship into subjects such as Maths, English, and Design. As well as giving children the right skills to adapt to whatever the future economy might hold, it has the added (and underappreciated) benefit of making school more enjoyable.

You can read the letter here, sign it here, and let me know if you would like to read a strictly embargoed copy of the report.

On the topic of education, we’re also currently doing some work with Young Enterprise on the value of applied learning in schools – specifically, we’re looking for case studies of what it looks like to put it into action, emphasising the usefulness of what pupils learn, and fully preparing them for the world beyond school, either through extracurricular programmes or within the classroom itself. If you happen to know of teachers or schools that really stand out in this way, then please do put us in touch by contacting my colleague Anton Howes.

On the Money
In other APPG news, we will have a new theme on SME Productivity, which we’re undertaking with the support of Virgin Money. The government is already doing a lot – or trying to – in this area, making it an opportune time to review progress and identify what is (and isn’t) working. On this, Nesta, who worked with BEIS and Innovate UK to deliver the Business Basics Programme, recently shared some key highlights of the successes and failures from the experiments of that programme.

As with all of our themes, it will kick off with a virtual roundtable on the topic. This will help shape the Call for Evidence, which will form the backbone of the final briefing paper. If this is a topic that you’re passionate and knowledgeable about, drop our events team an email to request a place.

Party Faithful

To coincide with London Tech Week, the Government has made a number of announcements, including a Digital Strategy and £30 million of small grants for cutting-edge start-ups. But today I’m going to focus on the UK’s main opposition party.

Labour has been pretty quiet in terms of business policy and engagement. But as we get closer to the election we can expect more. First out of the blocks has been Shadow Chancellor ​​Rachel Reeves, who this week launched a review to ensure “Britain is the best place in the world to start and grow a business” (we won’t sue them for pinching our tagline – not least because the Conservative Party also did it a few years ago, and because I’m not entirely sure we were the first to come up with it).

Reeves’s review will look at access to capital (in particular patient capital), incentives to scale, universities and spinouts, public procurement, the geographical distribution of high-growth businesses, the listings regime, and diversity.

The panel includes former Treasury minister and founder of Northern Gritstone, Lord Jim O’Neill; CEO of Resi Alex Depledge (who is a Member of our Female Founders Forum); Julie Devonshire, the Director of Entrepreneurship Institute at King's College London; and Tom Adeyoola, Co-Founder of Extend Ventures.

Unlike quite a few think tanks, we’re not tied to a political party, just to good ideas. So we’ll be hosting events with members of the panel over the coming months.

Although we aren’t affiliated with any political party, we appreciate that you might be. So we’ve added an optional question about it when you sign up (for free) as a Member on our website. If you have a particular interest in engaging with party-specific events, do fill it out. This won’t preclude you from being invited to other events, and nor will having no party affiliation at all, but it will help us better match event invitations to your interests.

25% Reduction
We do a lot of work helping female founders, so are always happy to see others come up with new ways to look at things. Alongside our friends at Beauhurst, JP Morgan has put out a report that finds that although female-powered businesses are attracting an increasingly large amount of equity investment, female founders give up a larger percentage of their ownership than male founders. In fact, it is almost twice that of men: a 25% reduction compared to 13%.

This is an important finding. You can read the report here, or Henry Whorwood (our Adviser and Beauhurst’s Head of Research) is happy for you to drop him an email to find out more about the report.

Times A-Changin'
The Times has released its much anticipated Education Commission report. It’s littered with quotes from entrepreneurs and framed around the need to ensure the next generation has the skills for the 21st century. In the recommendations it calls for a cadre of Career Academies with close links to industry, but I think there’s more work to be done in terms of concrete policy.

We’ll help fill in some of those gaps soon with the launch of a report through the APPG for Entrepreneurship. With support from finnCap it focuses on improving entrepreneurship education in schools. While I can’t break our own embargo, I can tell you we’ll be asking entrepreneurs to sign a letter to back the findings (assuming you agree with them of course).

If you want to be invited to sign the letter, you’ll need to sign up (for free) as a Member. Just tick that you’re interested in education and we’ll make sure the letter gets to you.

It's The Economist, Stupid

This week, The Economist took a sledgehammer to the Prime Minister, his party (in both senses of the word) and Britain’s economic prospects.

According to the magazine, we’re in a “15-year rut”. Our GDP per head is 25% lower than America’s and we’ve been falling further behind both America and Germany since the mid-2000s. Average annual GDP growth over the decade preceding the global financial crisis was 2.7%, now it’s just 1.7%.

“In the decade to 2007, British productivity growth was second only to America’s in the G7. In the decade to 2019, growth in output per hour worked stalled to just 0.7% a year, making Britain the second-slowest in the G7; only Italy was slower. Had Britain’s productivity growth rate not fallen after the financial crisis, GDP per person in 2019 would have been £6,700 ($8,380) higher than it is.”

I could go on. The Economist article does, citing export data, OECD predictions and much else to hammer home the truth.

For all these problems, there is “no shortage of ideas about how to turn the country round. But the mettle and strategic thinking that reform requires are absent.” This is fighting talk. Comparisons are made with 1979, before Thatcher came to power with the final line of the article echoing her slogan: “there is no alternative.”

We’re optimists here, and believe entrepreneurs will dig us out of this hole. But politicians set the rules of the game and can hold back innovation in thousands of ways. As the article says, it’s not for a shortage of ideas. And I don’t just mean ours that are yet to be implemented – I mean elsewhere too. I’ve been working in think tanks for decades, and when it comes to good ideas, we’ve never had it so good.

Take the Oxford-Cambridge Arc, which would link up the two cities and everywhere in between like Milton Keynes and Bedford. The original plan was to build a new ​​rail link, new homes and an expressway, but bit by bit the project has fallen apart, with only the rail link left.

Stian Westlake, CEO of the Royal Statistical Society, author, and former government adviser (and one of our Research Advisers) appeared on GB News explaining why the lack of guts on this is such a big deal.

As well as backing the Arc, Westlake suggests building a new city outside Cambridge, on a square mile of unremarkable farmland. This doesn’t need to be ugly, and he suggests looking to Edinburgh’s New Town for inspiration: “Cambridge could be a city of a million people and power economic growth into the next decade.”

Those Who Can
In a couple of weeks, we’re launching a report with the APPG for Entrepreneurship on Entrepreneurship Education. It’s a topic that we’re passionate about – and I know many of you are too. That’s why it’s a big area of focus for us.

This report is kindly sponsored by finnCap, which does some incredible work supporting young entrepreneurs through A Fairer Foundation and The Side Hustle Initiative.

It will be launched in the House of Lords. If you’re an Adviser or Supporter, drop our events team an email confirming your place. Otherwise, you can request a place here. Looking forward to seeing many of you there!

Million Pound Question
Our longest running project is the Female Founders Forum. Built and run by four incredible women – Annabel Denham, Sophie Jarvis, Katrina Sale and Aria Babu – with support from across Barclays, each year has been bigger and better than the last.

To remain at the cutting edge of research done in this area, this year we are interviewing the most ambitious female founders, to find out what their thoughts are on entrepreneurship, learn about their businesses, and profile them as examples to champion.

We’re focusing on the most successful female founders because we want to know how to get more of them. If you’ve raised over £1m (or can demonstrate your success in another way), drop Aria an email to get involved, which could include being featured as a case study in her final report.

As well as supporting our Female Founders Forum, Barclays is looking for applications for its Entrepreneur Awards, which consist of eight award categories, ranging from start-up through to sustainable success and this year. Find out more here.

Love Me Tenders

When Taavi Kotka, former chief innovation officer of Estonia, was asked about how he and his colleagues managed to build one of the world’s most advanced digital governments for £100m he quipped: “If you don’t use Accenture or McKinsey, you’d be amazed at what you can get done.”

Apologies to any management consultants reading this (for my part I think you’re unfairly maligned, as businesses often benefit from outside perspectives), but the point that a lot of taxpayer money is wasted by the Government is incontrovertible, as any reader of The Register will know.

Waste isn’t just about overspending though. By shutting out entrepreneurs from procurement we’re also wasting an opportunity to innovate.

This is a topic that I’ve wanted to tackle for a while. Time and again, entrepreneurs have described how the public procurement processes are often difficult and bureaucratic. Fortunately, it’s also a policy area that innovation expert Dr Chris Haley is passionate about fixing. He teamed up with us to write a response to the Government’s Green Paper, and now has published a report with us on it.

Procurement and Innovation reveals ​the key barriers that early-stage innovative businesses face when they go through existing public procurement processes. It argues that the recently proposed reforms in the Transforming Public Procurement Green Paper don’t go far enough and, in some cases, risked creating new barriers. And it argues how adopting best practices in procurement could deliver better-quality public services at a reduced cost to taxpayers.

Culture also matters. Many public bodies are much more risk-averse than private sector organisations, yet risk is inherent to innovation. And procurement managers need better training. In our experience, many are open to innovative solutions, but may not be aware of the state of the art.

Then there’s the issue of social value compliance requirements, which have become excessive. For example, job creation, while a noble aim for government as a whole, should not be the concern of procurement policy – it’s a direct disincentive to innovation.

We also want more pre-commercial procurement (PCP). In case you haven’t heard of it, PCP is the process of challenging industry to develop innovative solutions to a problem. The Small Business Research Initiative (SBRI) scheme is an example, and typically involves an initial competition with grants of £50,000 to £100,000. After that first phase, some ideas may be taken into the second phase, where companies are awarded grants of £250,000 to £1 million to develop a prototype.

There’s a lot more we want to see: more pre-procurement consortium-building, which helps startups collaborate in developing a more complete solution; more feedback to startups and SMEs and the publication of previously successful bids, better advertising and use of brokering platforms; the opening up of more UK public procurement data; actively identifying innovations with cross-public body applications; broadening ‘meet-the-buyer’ events; a move towards cheaper off-the-shelf solutions from start-ups, as opposed to requiring expensive bespoke solutions large companies provide; as well as the use of more innovative funding models like challenge prizes, advanced market commitments and subscription payment models.

The report already has traction with Jacob Rees-Mogg, the minister for Government Efficiency and Brexit Opportunities, who says: "The Entrepreneurs Network has produced a typically astute briefing on the opportunities of procurement reform. I want to ensure our reforms are as ambitious as possible, achieve value for money for taxpayers by reducing bureaucracy for businesses, and make it easier to procure new technologies; the public sector must not be frightened of start-ups and innovation.”

Given the Rees-Mogg endorsement, it may not surprise you that it was covered in The Express under the headline: Brexit freedoms to see £300bn of public cash spread across Britain in spending revolution. While it is true that some reforms are only possible outside the European Union, many are not. Those of a less Brexity disposition may prefer our Research Director’s Twitter thread.

This is only the beginning though. We’re busy working on a report with Enterprise Nation that will look at procurement from a small business perspective and the wider challenges for business owners interacting with government. This will be a tough nut to crack, but it’s a very tasty proposition.

Routes Two
While Brexit may have eased immigration concerns, it hasn’t actually reduced it. In fact, based on recent Home Office data, it is being reported that the number of visas handed to workers, students, family relatives and other foreign nationals rose by 35% to 994,951 in the year to March, up from a pre-pandemic high of 739,936.

As Jonathan Portes argues and the ONS admits, there’s huge uncertainty about these statistics, which are based on experimental analysis of administrative data. But the fact remains, despite the truly madcap Rwanda scheme, that this Government isn’t wholly anti-immigrant.

This is particularly true for entrepreneurial individuals, which is why they have introduced the Scaleup and High Potential visas. I have my doubts about some aspects of both them, but all visa routes are being updated – sometimes too often, leaving entrepreneurs unsure which to use.

That’s why we have a roundtable on Tuesday on these visas and wider visa policies. Join us to better understand the scheme, but also to help inform us on our future lobbying efforts to make the schemes better for you.

We will be joined by Irene Graham OBE, CEO of the Scaleup Institute, and experts from Kingsley Napley. Just drop our events team an email to request a place.

Project Runway

Inflation hit 9% this week – its highest level in 40 years. At the same time, consumer confidence has plunged to the lowest level since records began in 1974. In the public markets, tech stocks have taken a beating. So, what does this mean for entrepreneurs?

It is likely to be a very tough time to raise finance. Economic evidence, which I blogged about a couple of years ago, suggests that risky (but innovative) startups find it particularly hard to raise finance when the market cools.

If you’re concerned about what it means for your business, I recommend looking at a recent email sent out by startup accelerator Y-Combinator. It’s full of useful advice and insights from people with a track-record of building great companies. They advise cutting costs and extending runway to get to default alive: a term which means “based on current expenses, growth rate, and cash on hand – the business is on the right trajectory to reach profitability before running out of money.” They even suggest raising money from investors at existing terms if it’s necessary to get to ‘default alive’.

Y-Combinator warns that the poor performance of tech stocks will mean that VC will find it harder to raise money and that limited partners will demand more discipline. Even top-tier VCs will invest less and reduced competition will make it much harder to raise funds. Additionally, VCs will look to prioritise their best performing companies, as a result, exacerbating the problem for unfunded businesses.

But there’s an opportunity too. Many startups will not plan well and extend their runway. Their mistakes can be your gain.

Invest, Train, and Innovate
As Westminster once again debated the merits of a windfall tax on North Sea Oil and Gas, Chancellor Rishi Sunak spoke at the CBI’s annual dinner covering rising energy costs, interest rates, and his plan to get businesses to train, innovate, and invest more.

The Chancellor’s options to address the crisis are limited. As he noted in his speech:

“We need to be careful… at a time of severe supply restrictions, an unconstrained fiscal stimulus does risk making the problem worse. By pushing up prices still further. Embedding high inflation expectations. And creating a vicious cycle of even higher interest rates and more pain for tens of millions of mortgage holders and small businesses.”

This means policies such as a cut to the headline rate of VAT, as suggested by some this week, are likely off the table. He will instead continue to focus on protecting the least well-off through targeted support and easing the supply constraints.

On this front, he signalled the Autumn Budget will include tax reforms designed to increase the incentive to train more employees, invest more in capital goods, and do more R&D.

We’ve recommended a range of policies on all three fronts. We pushed for a more general training levy in our report Management Matters, called for R&D tax credit modernisation in our Startup Manifesto with Coadec, and have consistently pushed for more generous capital allowances.

And we’ll keep pushing for more pro-enterprise tax reforms because as the Chancellor rightly stated in the intro to his speech: “Change doesn’t happen behind a desk in Whitehall. Not even the Chancellor’s desk. It comes from all of you. When your businesses invest, things get built. When you train someone, they excel. When you invent new products and services that people want to buy, you change the world.”

The Queen's Speech

There was a lot for entrepreneurs to be enthusiastic about in this week’s Queen’s speech. To address the rising cost of living, the Government is focused on growing the economy – so there has been keen interest in decreasing business’ regulatory burden.

We’re particularly happy to see the Procurement Bill, which promises to simplify public sector procurement to make it easier for small businesses to participate. The current process requires too much red tape and gives businesses only a short window to put together applications. We have some ideas about what the Government can do to make this process even easier for everyone, procurers and businesses alike, but I won’t give too much away as this is the subject of our next report.

To spur on the agritech sector, the Government is also putting forward a Genetic Technology (Precision Breeding) Bill, so hopefully we will see an increase in vertical farming, GMO crops, and maybe even cultured meat.

And there will be changes to our data rules. The Government has been looking for opportunities from Brexit, and reforming the way we treat data could well be one. They will be bringing an end to bothersome cookie notices, for a start, but we’ll hopefully be seeing something more transformative. The Goldacre Review looked into how we might make the most of the goldmine of data that the NHS has, for example. I wrote earlier this week about how it could enable us to create new life-saving therapies and provide better, more personalised, healthcare to NHS patients. Data reform is a key part of getting this right.

The Levelling Up and Regeneration Bill promises to reform the planning system to give residents more involvement in local development. Regular readers of this newsletter may recognise that as being one of our favourite policies, Street Votes. In our report Strong Foundations, I wrote about how restrictive planning rules have increased the cost of housing, which, in addition to squeezing people’s budgets, also creates a drag on innovation, productivity and entrepreneurship. Among other policy ideas, like Community Land Auctions, I recommended that the Government allow for residents on a street to vote on design codes that could make their streets denser and more beautiful. It is no silver-bullet policy, and it won’t address every aspect of the housing shortage, but it will go a long way to bringing us denser, more beautiful, and more walkable city neighbourhoods.

Since the Queen’s Speech, too, we have seen more policy announcements that we’re excited about. Will Quince, the Parliamentary Under-Secretary for Education has tweeted today announcing that the Government will be consulting on childcare ratios, investigating whether it is worth moving to the Scottish model, with a ratio of one adult per five two-year olds, rather than one adult for four, as we have in England. This is very encouraging, as the UK has the most expensive childcare in the OECD, and our strict ratios are in large-part to blame.

I don’t want to overstate how good the Queen’s speech was. There were still signs of increasing burdensome regulation. The Online Safety Bill has not been scrapped and, while we think we have done a lot of work to improve the conversation around the CMA’s Digital Markets Unit, the Digital Markets, Competition and Consumer Bill may have a chilling effect on innovation in the tech space. That remains to be seen.

The APPG
The APPG for entrepreneurship has welcomed two new officers: Labour MP for Sefton Central, Bill Esterson, and Conservative MP for Stoke-on-Trent Central, Jo Gideon.

Both bring a wealth of entrepreneurial experience to the role. Before becoming an MP, Bill Esterson a customer service training company with his wife, and since joining the Commons has served as the Shadow Minister for Small Business. Jo Gideon is an entrepreneur. She started a handmade paper import and wholesale business and she was a leadership mentor for university enterprise centres.

If you want to learn more about our new officers or hear more updates from the APPG, you can sign up to the monthly digest here.

The Entrepreneurs Network's response to the Queen's Speech

On the Queen’s Speech focus on deregulation, The Entrepreneurs Network’s Research Director, Sam Dumitriu said:

“The only real solution to the cost-of-living crisis is a dynamic, growing economy. It is right then that the Government is pursuing a deregulatory agenda designed to cut the burden on entrepreneurs and allow startups to bring new technologies such as gene-edited food or e-scooters to market.“In recent years, the Conservatives’ pro-enterprise credentials have rightly come under scrutiny. Scrapping badly thought-out plans to restrict the ability of tech entrepreneurs to sell their companies will go some way to restoring their reputation as a party on the side of enterprise. “But, there’s more work to be done. The Online Safety Bill, carried over from the last Parliamentary session, would create massive burdens on innovative digital startups and ultimately entrench the market share of tech giants like Google and Facebook. It should be dropped.”

On Data Reform, The Entrepreneurs Network’s Founder Philip Salter said:

“The UK’s data protection rules are far-from-perfect. Too often, they burden SMEs with excessive costs, hold up research and development, and inconvenience the public with pointless cookie pop-ups. None of which are necessary to protect consumer data from misuse.

“If a new regime can make it easier for biotech startups to use data to develop medicines and allow government departments to better share data so businesses do not need to give the same information twice then it will be a major post-Brexit win.

“The key challenge for the Government is moving to a new system while preserving data adequacy with the EU. The best designed system in the world would be worthless if it meant businesses could not easily transfer data back and forth between the UK and Europe.”

On Procurement, The Entrepreneurs Network’s Senior Researcher, Aria Babu said:

“Small businesses regularly complain about how selling to the government is a time consuming, opaque, and bureaucratic process. As a result, many see selling to the government as not worth their time.

“Despite significant efforts made by successive governments to spend a higher proportion of procurement budgets on small businesses, a steady upwards-tick in red tape and qualification criteria have made it harder for SMEs to bid for public sector contracts.“Moving to a less-bureaucratic, tech-enabled procurement system isn’t just good news for SMEs, it is good news for taxpayers too who will get better value for money. ”

What should we do with our health data?

The NHS is sitting on a gold mine. We’re a nation of 70 million people where almost everyone is covered by the same health system and much of their data is already logged in the same computer system. Unlike American insurance companies, the data about patients' drug usage is stored on the same system that contains clinical notes. And the UK is relatively ethnically diverse, which means that findings based on UK health data are more likely to be applicable at a global scale.

For example, for everyone who was vaccinated against COVID-19 in the UK the NHS has logged what vaccine they received, their number of doses, and when they received said vaccine. Everyone who was hospitalised due to Covid also has that information logged onto the same system. Together, this information can give us high-quality information on which vaccines are the most effective, give us a sense of who benefits the most from boosters, and how different vaccines respond to new variants.

There are many other plausible applications of NHS data.

• We could use it to better monitor the effectiveness of new drugs. Post- market drug surveillance, as it is called, is useful because it shows you how drugs interact in a real-world context. Clinical trials are often run on patients with few ailments, but outside of trials this is rarely the case in the real world. (In fact, people who have at least one disease are much more likely to suffer from multiple diseases.) Better post- market drug surveillance, aided by more data, would give us a better understanding of when to prescribe medicines and to whom.

• Data about when and where people need to be treated can be deployed to use hospital resources more effectively and efficiently, as has been effective in Australia.

• AI can be trained on banks of patient data and can be used to find links between different diseases or predict who needs pre-emptive medical care.

• Smart watches and rings can be used to monitor things like a patient's blood sugar and hormone levels throughout the day, and this data can then be integrated with a patient’s medical records, to give doctors a more complete view of a patient’s health.

A few weeks ago, Ben Goldacre wrote a report for the government about better use of health data. It is comprehensive, covering everything from dealing with privacy and ethics concerns to the practicalities of gathering and finding people to use the data. But, it perhaps deliberately dodges a key debate. Should private companies have access to our data, and how should they be allowed to use it?

Answering this question matters a lot. Get it right, and we will improve healthcare and lead happier and longer lives.

The life-saving drugs and treatments that the NHS gives us are not made by the government. Instead they are designed, tested, and manufactured by private companies. So capitalising on the full potential of NHS data will mean sharing it with businesses.

Goldacre’s report does acknowledge that there is a political battle to be fought. 

In media and public discourse around access to NHS data two principle concerns dominate: appropriate safeguarding of patients' privacy; and the notion that NHS data is being “sold” for commercial use.

And it describes the following case, where allowing private businesses to use NHS data already clearly benefits the wider public:

When side effects are spontaneously reported for a given treatment, regulators will typically approach the relevant pharmaceutical company and require them to conduct pharmacoepidemiological research, using complex statistical models in electronic health records data – often from the NHS, using subsets of the GP data – to evaluate the extent to which a given adverse outcome is more or less common in recipients of different comparable drugs, or with comparable medical histories.

But it fails to acknowledge any of the other benefits of allowing private companies to use the data.

The NHS’s teams of analysts are not good enough to reap the benefits of the data either.

• Training is low-quality and is often framed as a voluntary activity without there being a clear path to validate or certify skills gained. Private sector analysts are often given access to training, accredited courses, and conferences to keep them up to date with the latest statistical methods.

• The path to promotion usually requires analysts to move into management roles, which means the best analysts either stay junior or spend less of their time working on data.

• NHS analysts are typically paid under £45,000, while their peers in the private sector can expect to earn over £80,000.

Together this means that NHS analysts are poorly trained, likely to leave, or making major sacrifices to do public service.

To remedy this, the report proposes better training, recruitment, pay, and methods of empowering NHS analysts. This is not good enough. Many of the issues NHS analysts face are problems that are prevalent throughout the public sector. While it may be possible to make the NHS data analysts a rare, shining example of a great public sector work environment, I think this will be a hard fight to win. Political pressures will always favour more spending on medical staff and healthcare over analysts. It is overly ambitious to think that the NHS will ever be able to compete with the likes of McKinsey or DeepMind for data science talent.

It is more realistic, instead, to focus on external collaborations. Of course, the easier it is for people outside of the NHS to access the data, the more concerned we have to be about data privacy. So we need robust security standards.

There are problems with the current system, which is over-reliant on pseudoanonymisation, which doesn’t really work. Pseudoanonymous data  just removes a couple of key pieces of identifiable information, like a patient’s name. But if I know a person’s birthday and saw their Facebook post about getting vaccinated with Pfizer in April, then it would not be difficult to put that information together to snoop on a friend’s private medical records.

Sometimes synthetic data is used, where a new dataset is created that is similar to what a real data set would look like. This is problematic because the process of creating synthetic data uses computer programmes. Machine Learning algorithms trained on synthetic data could, plausibly, be useless.

The approach favoured by Goldacre, which I think is a good idea, is to create Trusted Research Environments where people can apply for access to NHS data.

A Trusted Research Environment (TRE) is a secure environment that researchers enter in order to work on the data remotely, rather than downloading it onto their own local machine. Users can extract and download the answers from their analyses – such as results tables, or graphs – but individual patients’ data always stays within the secure environment.

All of this implies that Goldacre and his fellow report writers believe that private researchers should have access to NHS health data. Despite this, the report does not mention startups or businesses and has only a cursory mention of pharmaceutical companies.

The danger is that we create a world-class library of healthcare data and fail to use it well. If the data is gated in such a way that it can only be used by researchers at large established pharmaceutical companies or universities, then we will miss out on some of the most innovative and novel therapies. It is not uncommon for pioneering drugs to be created by startups which are then purchased by larger pharmaceutical companies. While it is, of course, possible for a new startup to partner with a university or an established company to access the data, this creates an extra barrier for the creation of new drugs and biases the economy towards existing players.

The UK has a thriving, plausibly world-leading, Life Sciences research environment. But if we want to maintain an edge we have to be smart about what we do. The NHS’s bank should give us an easy advantage, leading to the creation of all kinds of healthcare innovations. It is in everyone’s best interest to get this right.

I want to see the NHS proactively gather more patient data. GP surgeries often keep their records in paper filing cabinets. This is a waste. Instead we should be encouraging surgeries, hospitals and clinics to be uploading their data to a central system. We should make this easy to do and make sure it fits in with other work that doctors are already doing, like recording patient’s blood work or giving out prescriptions. Patients should have the choice to opt out but data should be gathered by default.

The central data system should be held securely, and have dedicated teams making sure that the library is easy to use, well maintained, and that the data is accurate. Then, as Goldacre proposes, we should allow trusted researchers access to this data. After appropriate security measures are put in place, we should be generous about who we give the data access to. Provided they agree to certain ethical standards, research teams and startups should be given the information they need, and the process for gaining access should be quick and unbureaucratic.

If we manage to create this, this system will be unlike anything else in the world. If we can combine it with data from 23 and Me, period/fertility trackers, and smart watches it would be more powerful still. This is an ambitious goal, but it is worth pursuing as it will increase the quality of healthcare we can get, provide a new stream of income for the NHS, and create more viable therapies. Few government interventions are as win-win-win as this and we are well placed to achieve this.

Is Musk a modern Medici?

Elon Musk is a divisive figure. Simply mention his name on Twitter, and you’ll summon both his haters and his fans. But the controversy he excites signifies the start of a very positive trend – a trend that in the seventeenth century helped sustain the Industrial Revolution, and which in the late nineteenth century gave us much of the infrastructure for science and knowledge-creation that we still use today.

To put Musk into perspective, we should bear in mind that the vast majority of the wealthiest people throughout history have largely been content to just make their money, hoarding it for their own families or spending it on themselves. Most new fortunes were traditionally sunk into country estates, expensive private schools, and perhaps on gaining a few aristocratic titles. Many of the richest people today continue to do something similar, largely retreating from public life once their millions or billions have been made.

As Nadia Asparouhova notes, “the default state of a suddenly wealthy person is to quietly buy the boat or the vineyard in Napa, raise a family, and avoid confronting the power they've been given.” Even the now-famous industrialists of the Gilded Age, like Carnegie or Rockefeller, had to deliberately campaign to persuade their fellow fortune-makers to become philanthropists like them, endowing libraries, universities, and museums. Paying a few million to charity or into a named foundation may now be par for the course for the wealthy with no idea how to spend it, but it was not always thus. Philanthropy had to be normalised first, by those with the imagination and inclination to do so.

Indeed, it was from very similar initiatives amongst a handful of the wealthy that we got much of the technological progress of the sixteenth and seventeenth centuries. The Medici were far from the first oligarchs to seize both riches and power, but they certainly stood out both then and today as being among the most devoted to spending their wealth on the arts, encouraging others with similar power and wealth to do the same. 

One of the things that once differentiated Britain from the rest of Europe was the much greater early willingness of the nobility, gentry and wealthier merchants to spend their wealth on encouraging inventors. Eventually, when many inventors soon found themselves with fortunes of their own, they tended to refrain from simply becoming mere landed gentry, instead encouraging the next generation of inventors as well. Britain may not have been the only country to have inventors, but it is where innovation most dramatically accelerated in the seventeenth and eighteenth centuries – partly thanks to the philanthropic habits of their major success stories. James Watt made his fortune from steam engines, but he also later supported an innovative pneumatic medical institute to combat tuberculosis – not just financially, but by designing some of its equipment. Watt thereby nurtured the careers of the next generation of innovators, including Thomas Beddoes and Humphry Davy.

Given Elon Musk’s major investments in developing new technologies – Tom Chivers convincingly argues that for all his flaws, he’s been a major force for good in combating climate change – he has almost certainly already nurtured the career of a future Humphry Davy or two. 

Philanthropy doesn’t have to be purely charitable, after all. Indeed, investing in risky ventures – even if the returns might be large – is something that a lot of technology-made rich people seem peculiarly willing to do. We would be much worse off if they cared only about preserving their wealth, as it would be much wiser for them to invest in something much more boring (but less world-changing) things like land, bonds, or listed shares.

Of course, many dislike Musk not because of anything he actually does, but because he has become a billionaire in the first place. They are concerned that our economic system can produce any such person at all, able to wield extraordinary influence on a whim (though personally I find it encouraging that so many of the wealthiest people in the world today are entrepreneurs and inventors, rather than just landed aristocrats and magnates’ heirs). 

So long as billionaires exist, however – and I don’t think that will change anytime soon – it’s a good thing that Musk and his ilk wish to take some responsibility for their power, and devote their funds to the public good, and even that they wish to be in public life at all. The default alternative, as Asparouhova warns, would be much worse: “The failure mode of today's ascendant wealth class would be a backslide into aristocracy, perpetuating the bloat and disquiet of generational wealth”. 

Closing the Funding Gap

Over the last decade, I've tried to shift inclusion in entrepreneurship and investing: through education, storytelling, and access to capital. Policy cuts through all three of these things, which is why I decided to get involved in this project with The Entrepreneurs Network.

We kicked off our programme with a roundtable on the funding gap for founders of colour. Let's be real. Most of us have discussed the funding gap more than enough. We are bored of it; I am bored of it. It's time for some action. Maybe we've been directly impacted by it as founders; maybe we've struggled to gain funding; maybe we've been seen by our peers to be investing in what they think is socially good and nice projects, as opposed to what it really is, which is an absolute need for more funding options for underrepresented founders. This isn't charity. This is a need for innovation that serves everyone.

The Entrepreneurs Network will use the insights of this project to campaign around this issue. They were among the first to call-out the gender equity funding gap and since then, others have taken up the torch, with industry and Government working together on initiatives like the Investing in Women code. While there is a long way to go, we have seen the funding gap narrow over the past few years.

The same attention hasn’t been paid to entrepreneurs of colour. The Government’s recent response to the Commission on Race and Ethnic Disparities does not go anywhere near far enough.

Less than 2 percent of VC funds in the UK invested in teams of founders who were all from an ethnic minority demographic. This is mad. Yet founders of colour have built over a million businesses, created over 3 million jobs, and delivered more than £74 billion to the UK economy and growing.

This project is in partnership with Morgan Stanley, which recently expanded its Multicultural Innovation Lab to Europe, Middle East and Africa, having successfully run it in the US for almost five years now. “It's about connecting capital to ideas,” explained Sanghamitra Karra, Managing Director, EMEA Head of Multicultural Innovation Lab at Morgan Stanley. “We want to make sure that we help businesses grow. We want to make sure that new products get formed, and we want these new businesses to help communities grow.”

Sanghamitra pointed to research they’ve done on why VCs aren’t investing in diverse entrepreneurs and the trillion-dollar case for investing in female and multicultural entrepreneurs.

Insights from the roundtable

“The challenge always is when you're presenting to a VC, you're usually sitting in the room of white, middle-class men. The challenge is getting them to really appreciate the problem.” – Angela Malik-Agarwal, Founder & CEO of Planet Nourish

“We're a FinTech that empowers migrant communities to build generational wealth. So here, we have a triple glass ceiling where I'm a female founder, a woman of colour, and we are also serving communities of colour. So I had problems when I was trying to raise venture capital. I had to contort myself and my business so that venture capitalists and investors would understand what we’re doing. Oftentimes, I was talking to people who didn’t know anything about immigrant communities and that was tough.” – Nina Mohanty, Founder of Bloom Money

One of the major topics of conversation during the roundtable was whether investors should have quotas for the amount of funding they give. There wasn’t agreement on this, with some worried it would be seen as tokenism.

"Sometimes when we got a yes from VCs, I would wonder if I am their token founder that they’ve chosen to invest in – that I’m the brown woman that they get to put on their website. Especially with social impact funds, they'd keep telling me that they are diverse and they invest in diverse founders but then I'd later find out that they have no women or no people of colour on their portfolio team page, which I find very alarming.” - Nina Mohanty, Founder of Bloom Money

There is a worry that official quotas would only increase the feelings of imposter syndrome that some minority founders face.

“It’s not about quotas on the founders and amounts invested. I think we need quotas on the investors and that these will filter down to the founders. This way you won’t end up with people feeling as if they only received money because the company had to invest in them. Instead you have ethnic minority investors who have a larger community to draw upon.” – Josephine Philips, Founder & CEO of Sojo

But Nina and Josephine’s views weren’t shared by all. Ezechi Britton MBE believed that anything that gave him, and people like him, control of the levers of power is a good thing.

“If I get to sit at the top table, and if I get my hands on the levers of power, and I am only there because of a quota, that doesn't bother me. Sign me up. I don’t care, so long as I am in the room where it happens. We have to recognise that people don’t just change without encouragement or incentive. Do I like quotas? No. Are they necessary? Yes.” – Ezechi Britton MBE, Founding Member, Principal & CTO in Residence at Impact X Capital Partners LLP & Co-Founder and CEO of Code Untapped

It was agreed that quotas don’t need to be applied to the whole industry.

“It’s probably unrealistic to force private Angel-owned funds to change their behaviour. The way they invest is going to be at their discretion and they are going to do what they want. But I do think the BBB is the answer. It should be made to invest in diverse fund managers. That’s the simplest and most straightforward solution.” – Andy Davis, Co-Founder of 10x10

"If we’re not going to enforce quotes on everybody, then at least we should enforce them on certain VCs, subject to where their cash has come from. If the money has come from publicly funded sources, like the BBB or from pension funds, then I want to have some say about where that money goes and I expect it to be representative of the population as a whole.” – Ezechi Britton MBE, Founding Member, Principal & CTO in Residence of Impact X Capital Partners LLP & Co-Founder and CEO of Code Untapped

Some suggested that a data driven approach would be better. A quota would be a crude tool and would not uncover the reasons for why ethnic minority entrepreneurs are underinvested in – moves like this could just result in the most privileged people, who are ethnic minorities, receiving funding. This would only make the situation more equitable on the surface but would fail to address the core of the issue.

“I think it's really about having a data-driven approach. We need to understand why VCs tend to overlook these opportunities, whether it's in the way that they ask questions, which I know is the case for unconscious bias in gender, or whether it is about what they're seeking to build and who their target consumers are. Something like standardising investment committee questions, or even just screening questions, could go a really long way. So I don’t know that having quotas is necessarily the right approach.” – Saloni Bhojwani, Co-Founder and Partner of Pink Salt Ventures

We know that a large part of the reason that white founders are more likely to receive funding is that they have relationships with people in Venture Capital before they even found their first businesses. “Warm approaches” to funders, by people who already know them, are much more successful than cold approaches. And this is bad for business.

“Diverse and emerging fund managers outperform the market. But the amount of capital going towards that part of the market is low.” - Saloni Bhojwani, Co-Founder and Partner of Pink Salt Ventures

Sanghamitra Karra, the Managing Director, EMEA Head of Multicultural Innovation Lab at Morgan Stanley worries that new technology is making this problem worse. VCs are now building technology that grabs information from LinkedIn Connections as a way of finding new people to fund. This technology focuses on people who went to elite universities or else helped to build unicorns, meaning that people who have been gate-kept from established tech companies and academic institutions are still more likely to lose out.

Taking it back to quotas, Angela did not think that this was a good enough response.

“When you’re pitching an ESG company, then you’re competing against companies that are doing things like making beer from recycled bread. It’s a very broad space with a lot of categories. So who is going to be more successful? It’s probably the guy who is talking about saving the world through recycling bread. So there’s a fundamental disconnect between the different goals. If you have a quota, then you have to be included in the conversation. And that is basically a way of giving a leg up to individuals who come from different backgrounds and different life experiences. Did I go to the right school? Do I have the right network? Can I pick up the phone and get a warm introduction? No. So I think there has to be a way to give people the chance to go forward.” – Angela Malik-Agarwal, Founder & CEO of Planet Nourish.

If you want to hear more about our Inclusive Innovation Forum you can subscribe to our newsletter here.

To the Moon

There are things you shouldn’t ever bring up in polite conversation: politics and religion, obviously, but also crypto, blockchain and Web3.

If you do, there’s a good chance you’ll hear predictions about the demise of fiat currencies and how there isn’t a problem whose solution isn’t sitting on the blockchain. Or you’ll meet the person who thinks it’s all just a waste of energy (literally and figuratively); that it’s a big bubble and the whole shebang is worthless – not just dogecoin, but smart contracts too.

I don’t have any unique insights on how revolutionary the technologies will or won't be. I’ve read the same articles available to any interested reader. That said, I think we should take the potential seriously. I would be nervous about betting (even if only my reputation was at stake) against the likes of Marc Andreessen, Elizabeth Stark or Vitalik Buterin without knowing a lot more.

But currently the UK government is doing just that – and it’s not just reputations on the line. At a recent roundtable we hosted, dozens of crypto and blockchain entrepreneurs spoke eloquently about how their businesses are solving very real problems. But, for many, their biggest problem is trying to build it in the UK.

We’ve hosted meetings with more or less every type of business out there, but no sector has been shunned like these entrepreneurs. Incredibly, some had actually been told by their regulator they should move their business abroad.

This negligence has shown itself in the way the Financial Conduct Authority (FCA) has been forced to extend a temporary licensing programme for cryptocurrency firms. Mel Stride MP, chair of the Treasury select committee, is asking questions: “It is disappointing to hear that the FCA hasn’t fully met its own already-extended deadline, which the committee strongly encouraged it to meet. I look forward to receiving a full explanation for the delay.”

If you speak to someone within the FCA (and I have) you would be hear about a regulator that’s overworked and under-resourced. Wherever the fault lies, the UK is haemorrhaging crypto entrepreneurs.

An entrepreneur speaks out in the FT: “I have been the biggest fan of the FCA over the years. They were the gold standard of regulation. But no longer.” Lisa Cameron MP, who is an Officer of the APPG for Entrepreneurship, recognises the problem: “The lack of clarity from the FCA has presented huge challenges to firms in terms of business certainty.”

Crypto, blockchain and Web3 (if you think that’s even a useful term) covers a lot of ground. These aren’t industries immune from fraud and regulatory complexities. And let’s be clear, some of this is indeed the Wild West – just yesterday the Vietnamese-owned Ronin Network was hacked to the tune of $600m. But we mustn’t tar all crypto with the same brush.

It also probably doesn’t make sense to conflate crypto with blockchain. If you look at Beauhurt’s list of 249 high-growth blockchain companies you’ll find some crypto companies, but also plenty doing very uncontroversial, reassuringly boring things being done in regulated industries. The government needs to be careful about the way we define our terms.

With a financial centre to rival any on earth, the UK is perfectly placed to benefit from whatever the future holds. We could also help tame the wilder elements with proportionate regulation. As The Times reported: “​​While UK-based businesses that do not register with the watchdog are required to stop trading, they can bypass the FCA by setting up abroad, where they can continue to offer their services to people in Britain."

We’re not just failing to attract entrepreneurs from abroad, but actively turfing out those already here.

APPG AGM
Later this month, the APPG for Entrepreneurship will hold its AGM. This is where it elects new Officers. As the Secretariat we’re coordinating all this.

You can see the current list of Officers here. These are MPs and Peers who are supportive of the APPG’s aims: to encourage, support and promote entrepreneurship, and ensure Parliament is kept up-to-date on what is needed to create and sustain the most favourable conditions for entrepreneurship.

You can help! Most obviously if you’re an MP or Peer get in touch with Katrina Sale to find out more. If not, ask any MPs or Peers you know to get involved, or even contact your local MP (find out who that is here) to suggest they should.

In addition, we’re looking to expand our APPG Advisers too. These are normally people involved in business groups like the FSB, Enterprise Nation, or CBI. Anyone who fits the bill can get in touch with me to find out more.

Finally, if you have any ideas of work we should be doing, drop me a message. While we're never short of our own, we’re always open to fresh ideas from outside.

You can sign up to Philip’s Newsletter here.

What a Drag

“Don’t be fooled, Rishi Sunak is a fiscal conservative first, and a low-tax conservative second.” So begins Sam Dumitriu’s response in City AM to the Spring Statement.

By freezing tax thresholds, the Chancellor is stealthily raising taxes by dragging many into the higher rate of tax. In 1992, 1.6m paid the 40p rate of Income Tax; in 2022, three times as many (4.8m) pay it; in 2026, the OBR forecast 6.8m will pay it. He’s also timed his tax cuts for maximum electoral advantage: “more pain now, but a nice feel good year in 2024”. This will hit the poorest hardest.

Beyond the headlines, Aria Babu has picked out some of the announcements you might have missed. It wasn’t all bad – for example, R&D Tax Credits will be expanded to cover cloud & data – but Coadec and others were disappointed to see that the government has decided not to change the EMI share options scheme. In his newsletter, Dom Hallas links to a mini-tweet thread from Matt Clifford and the #NotOptional campaign, which called on European legislators to fix the patchy, inconsistent, and often punitive rules that govern employee ownership. I expect we’ll see a similar campaign here, which we’ll keep you updated about.

A disappointing Spring Statement isn’t the end of the world. It isn’t supposed to be a big fiscal event. The budget, in six months time, is much more important. Sam has spotted signs that it could be a big one for tax reform: “Top of the list is tackling under-investment. The Chancellor has rightly identified that by international standards our tax system’s treatment of investment in physical capital is stingy. He will need to act soon to fix that as next year the super-deduction will expire and corporation tax will rise to 25 per cent.”

The solution here is full expensing, which Sam argues for in Energising Enterprise, a new report he’s penned for Bright Blue (I don’t know where he finds the time!).

You can see the UK’s current lacklustre economic trajectory in this Resolution Foundation chart: real wages in the UK will rise by about as much in 19 years as they did in a normal 19-month period before the financial crisis. This isn’t good enough.

As Duncan Weldon writes: “UK macro-policymakers just keep accepting economic damage as irreversible. They shouldn't." We need is growth. The policy ideas are ready and waiting. There really is no alternative.

Double Standards
Aria has written on our blog about the unfair way female founders are treated by the media: “​​Female entrepreneurs are accused of getting into cat-fights, of not being feminist enough, being hyper-critical, cruel, mercurial, inexperienced, and of “going too far” when pivoting their business.”

On the theme for female founders, get involved in our Female Founders Forum. On Thursday we have a lunchtime roundtable in Southampton with Rt Hon Caroline Nokes MP, who chairs the Women and Equalities Committee, if you can make it.

Something Ventured
Also on Thursday, we’re hosting a Something Ventured virtual roundtable with Ian McLennan, Partner at Triple Point. This series of events are arguably the most information rich we do. In 40 minutes you (and I) will learn and discuss emerging digital and data insights, back office innovations, and valuations. We keep these events purposely small, so please let me know if you would like a place.

Sign up to Philip’s Friday Newsletter here.

In defence of Girlbosses

Last week Marc Andreessen tweeted about how the press aggressively targets female founders.

Get you a hobby you love as much as the press loves running hit pieces on aggressive, determined female founders. pic.twitter.com/FzmYQ3cdR9

— Marc Andreessen (@pmarca) March 17, 2022

Female entrepreneurs are accused of getting into cat-fights, of not being feminist enough, being hyper-critical, cruel, mercurial, inexperienced, and of “going too far” when pivoting their business.

This article from Mother Jones seems to really relish tearing down female founders as a whole group, asking

How are female founders still fucking up this badly? The primary villains, invariably white and privileged, are always the same. Her slick businesses are often underpinned by young employees who say they’ve been subjected to various forms of abuse, including racism and wage theft. But the bosses don’t see any of it—and how could they? They’re preoccupied, staring at each other. 

That fixed gaze—and failure to learn from the various exposés uncovering exploitation and embarrassingly spoiled behavior—has become a propulsive distraction.

People disagree with their bosses all the time. Startups can be rewarding and exciting places, but the high-pressured environment doesn’t suit everyone. This is no secret. Founders are a disproportionately privileged group of people. There is no question about that either.

But for some reason it is so much worse for a female founder to be white or to have wealthy parents. As if, by paving the way for one form of diversity, she is expected to represent every intersection of society. Male founders can micromanage their businesses, accidentally tank their company’s stock price, and hire entire departments full of male software engineers. Female founders, on the other hand, have to be perfect.

Take Emily Weiss, the founder of Glossier, who was accused of being too intense because she wanted sign-off on every employee. This was a problem, allegedly, because she did this in areas that were outside of her expertise. I find it difficult to believe that a fifty-something male CEO would have his authority questioned if he took similarly firm control of his company. He’d probably have his work-ethic and attention to detail praised.

These criticisms of female founders are tired. We’ve all seen it before, in every industry under the sun. Women aren’t allowed to be anything other than agreeable, pliant, and conciliatory. If they step out of line, then it is inevitable that journalists will come after them.

But might it go deeper? A lot of articles talk about how employees are upset and quitting these female-founded companies, which indicates to me that this time the blame does not sit entirely with the media. It’s starting to sound like people don’t like working for women who are younger than them.

This fits with what I have heard outside of entrepreneurship too. One of my friends said that when she was a junior doctor, she would struggle with nurses and midwives who didn’t want to follow instructions from a woman in her twenties. Even Taylor Swift, after ten years of being one of the world’s most popular musicians, gets snarky comments from the industry questioning whether she really writes her own songs.

People are social and they seek approval from their peers. So if women are endlessly criticised for being assertive or exceptional, then many more will choose to keep quiet and achieve less. If women receive a tirade of public abuse whenever they build something big, is it any wonder that they are still less likely to found businesses?

I don’t have a good solution to this. There have been plenty of campaigns trying to encourage women to be leaders. Lean In and Ban Bossy don’t seem to have shifted the dial, mostly they just attract jibes on the internet. The same goes for even superficial changes to old narratives, like Emma Watson portraying a feminist-inventor Belle in the Beauty and the Beast remake. It feels like we’re swimming upstream.

My solution right now is to highlight incidences of sexism as and when I see them. But what I really want is deep cultural change - which is not something I can do alone. I want everyone to change how they talk about successful women, and I want these changes to take place throughout our culture; from each individual parent up to the most influential media moghuls.

This sounds like it could be an impossible task, but we’ve been moving incrementally in the right direction, so it’s not hopeless.

What the Spring Statement means for entrepreneurs

Tomorrow’s headlines on the Spring Statement will cover the changes to fuel duty, national insurance, and income tax (in two years time). These reforms have the most direct impact on most people’s budgets, but beyond the headline announcements, there were a number of proposals that will affect entrepreneurs that went under the radar.

When the super-deduction is over, the UK is set to have one of the most punishing tax regimes for investment in the OECD. The Chancellor says that he is keen to address this. He floated five reforms he is considering

“1. Increase the permanent level of the Annual Investment Allowance, for example to £500,000. At its peak, this could cost around £1 billion in a single year. Previously an Annual Investment Allowance threshold of £1 million has covered around 25% of Annual Investment Allowance eligible plant and machinery expenditure.

2. Increasing Writing Down Allowances for main and special rate assets from their current levels of 18% and 6% to 20% and 8%. At its peak, this could cost £2 billion in a single year. This would particularly support those investing above the permanent Annual Investment Allowance level.

3. Introduce a First Year Allowance for main and special rate assets where firms can deduct, for example, 40% and 13% in the first year, with the remaining expenditure written down at standard Writing Down Allowances. At its peak, First Year Allowances of 40% and 13% could cost £3 billion in a single year. This would particularly support those investing above the permanent Annual Investment Allowance level. However, it may add a layer of complexity to the UK’s capital allowances regime.

4. Introduce an Additional First Year Allowance, to bring the overall amount that can be claimed to greater than 100% of the initial cost. An additional capital allowance of 20% in the first year, on top of standard Writing Down Allowances on 100% of the initial cost across the first and subsequent years. This would spread relief over time, while giving relief on over 100% of the initial capital cost. At its peak, an additional allowance of 20% could cost over £4 billion in a single year. It may add a layer of complexity to the UK’s capital allowances regime.

5. Introduce full expensing, to allow businesses to write off the costs of qualifying investment in one go. No other country in the G7 has implemented this on a permanent basis. Full expensing of plant and machinery could cost significantly more than the above options. At its peak, this could cost over £11 billion in a single year.”

We are big fans of full expensing, which we recommended in our 2018 report on Tax Reform for the All-Party Parliamentary Group for Entrepreneurship

The Chancellor was right to talk about how the UK spends less than half the OECD average on R&D and he is looking at ways to boost R&D spending. The interesting changes are:

“To support the growing volume of R&D underpinned by mathematical advances, the definition of R&D for tax reliefs will be expanded by clarifying that pure mathematics is a qualifying cost.

This spring, the government will launch a review into the Future of Compute, building on a range of compute work across government and in particular the Government Office for Science report on Large Scale Computing. In the past decade, compute has grown as a critical general-purpose technology for productivity, prosperity, and innovation, making it essential to review our compute needs over the next decade. Led by an external expert, the review will provide recommendations to form the basis of a long-term plan for the government’s approach to compute.”

If the Government is looking for ideas on cloud compute, they can read our report with Seb Krier where he calls for a pool of cloud compute credits for the UK’s R&D system and upgrades to public data infrastructure.

On AI:

“The government will partner with industry and academia to create 1000 new AI PhDs. The government will invest £117 million to create the PhDs through Centres for Doctoral Training (CDTs), with the investment further leveraging industry and university funding. This will build on the 16 existing CDTs across the UK, to train a new generation of AI researchers to develop and use AI in areas such as healthcare, climate change and creating new commercial opportunities.”

The government is extending the Annual Investment Allowance.

“To support businesses to invest and grow, the temporary £1 million level of the Annual Investment Allowance has been extended to 31 March 2023. This is the highest level of support for capital expenditure ever provided through the Annual Investment Allowance and provides generous relief for investment across over a million SMEs.”

And they are increasing the Employment Allowance again:

“In April 2020, the government increased the Employment Allowance from £3,000 to £4,000. Spring Statement announces a further increase from April 2022, meaning eligible employers will be able to reduce their employer NICs bills by up to £5,000 per year – this is a tax cut worth up to £1,000 per employer.”

For SMEs:

“The government has already reduced the burden of business rates in England. The business rates multiplier will be frozen in 2022-23, which is a tax cut for all ratepayers worth £4.6 billion over the next five years. Eligible retail, hospitality, and leisure businesses will also benefit from a new temporary 50% Business Rates Relief worth £1.7 billion.”

Sam has talked about Business Rates before. This policy will mean a bit more cash in the pockets of SMEs, but ultimately, we would like to see Business Rates replaced with a levy on unimproved land values, instead of what’s built on top.

Something else to look out for is the new Innovation Challenge.

“The launch of an Innovation Challenge to crowdsource ideas for how the government can operate more efficiently.”

We will keep our eyes-peeled for more details on this, which could be very promising.

In our Startup Manifesto with Coadec we called for the limits of EMI to be increased from a £30m asset capitalisation to £100m, and from 250 to 500 employees. As Coadec’s Dom Hallas tweeted, we are disappointed to see that there will be no changes to the Enterprise Management Incentive (EMI) scheme.

“At Budget 2020, the government launched a review of the Enterprise Management Incentive (EMI) scheme, to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and to examine whether more companies should be able to access the scheme. The government has concluded that the current EMI scheme remains effective and appropriately targeted.”

The Entrepreneurs Network responds to the Spring Statement

In response to the Chancellor’s Spring Statement, Sam Dumitriu, Research Director at The Entrepreneurs Network said:

“There is no good economic argument for hiking taxes on employment today only to cut Income Tax two years later. In effect, the Chancellor has raised taxes on work and cut them on unearned income.

“If the Chancellor wanted to properly back businesses and workers, he should have ditched the Health and Social Care levy altogether.

“Sunak signalled big changes to the tax system in the Autumn. There is a pressing need to fix the way investment is taxed. When the super-deduction expires Britain will have one of the most punishing tax treatments for investment in the OECD. Allowing businesses to fully deduct investment costs upfront would be a good start.

“The Chancellor’s pre-Statement rhetoric around R&D Tax Credit has caused concern among startups and innovators. Entrepreneurs then will be relieved that the Chancellor floated making R&D more, not less, generous in Autumn.”

Hope Springs

On Wednesday the Chancellor will deliver his spring statement. The Economist’s Bagehot column reasonably concludes that Sunak’s popularity is about to take a hit. It’s easy to make voters happy when you give out £400bn, as he did during the pandemic. But that’s now over. Inflation may hit 10%; energy bills may cost the equivalent to raising the rate of income tax by six percentage points; the price of diesel may reach £3 per litre by the end of this year; and, unless he changes his mind, we have a 2.5p rise in national insurance from next month.

Make no mistake about it. These will be tough conditions for doing business – not least for small businesses. That’s why we’ve joined forces with Enterprise Nation to set out what the Chancellor should prioritise to support them.

In our Access to Finance briefing paper we recommend:

– allowing micro businesses to use the new Help to Grow schemes and create a new tax relief to help the self-employed acquire new skills;
– helping entrepreneurs to scale and innovate by scrapping the sunset clause for EIS, SEIS, & VCTs and simplifying the process for Advanced Assurance;
– ruling out an Online Sales Tax;
– reinstating and expanding the New Enterprise Allowance to £100 per week for up to a year, allowing recipients to access more of it upfront, and expanding the eligibility of the scheme to all 23-year-olds earning less than the National Allow micro businesses to use the new Help to Living Wage;
– using data to make it easier for small businesses to learn about the wide array of support schemes available.

This isn’t exhaustive of course, but it would be a start. You can read more about it here.

The Chancellor should also cancel the rise in National Insurance, or at the very least raise the income threshold for paying employee’s NI, as recommended by Robert Colvile and Tom Clougherty.

Although the Chancellor can’t change the macro-economic conditions, he can and must be ambitious about growth – it’s really our only option. In a week where the Government released an unforgivably damaging Online Safety Bill – both for tech and freedom of speech – the Government has a lot of making up to do.

As Sam Dumitriu writes: “In theory, leaving the European Union was meant to free us to diverge from some of the bloc’s anti-tech instincts. Yet, the most significant divergence to date will be replacing the relatively pro-innovation e-Commerce Directive and its sensible liability protections with a bill that’s as, if not more, badly drafted than the Cookies Directive. At least with the Cookies Directive you can avoid the annoying mandated pop-ups with a nifty browser plugin.”

Rishi claims he wants “a future economy built on a new culture of enterprise.” Now’s the time to prove it.

S(tuck) In
Our Access All Areas project is just the first of four reports we’re undertaking with Enterprise Nation. We’ll also be looking at Access to People, Access to Markets, and Access to Government. If you run a small business and want to get involved, drop our events team a message and I’ll make sure you’re invited to the next roundtable. We may end up using you and your business as a case study.

For those running scale-up companies, we have a dinner on Tuesday in London with FTI (see below), which we may be able to squeeze you into. This is focused on the founders of high-growth businesses, as we want to explore the unique challenges they face. Just drop me an email with some information about you and your business.

Entrepreneurship Education x3
Everyone has a view on education. We’ve all experienced it in one way or another and we all know it could be better. While education can never be distilled down into a single goal, a goal that’s becoming increasingly important is for schools to prepare young people for the modern workplace. After all, it’s undeniable that the modern world of work requires entrepreneurial skills in a way that wasn’t the case in the past.

Through the All-Party Parliamentary Group (APPG) for Entrepreneurship, of which we’re the Secretariat, we’ll be investigating this issue over the coming months. We have put out a Call for Evidence, and would be incredibly grateful if you could respond to it.

There are a lot of questions, but we honestly don’t expect you to answer them all (unless you really want to). If you were able to focus on just one or two that you feel best-placed to answer that would be great. We may get in touch to use you as a case study in the report.

See the questions and respond here.

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