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Business: Entrepreneurship

Volume 715: debated on Monday 30 November 2009

Question

Asked By

To ask Her Majesty’s Government what steps they are taking to encourage enterprise and entrepreneurship in British business and industry.

My Lords, our economy depends on healthy, successful small businesses. The Government have taken steps to develop a strong enterprise culture, giving everyone the opportunity to be entrepreneurial, irrespective of background or location, and seeking to ensure they have the skills they need. We have developed an environment in which enterprise can flourish, reducing red tape, ensuring small businesses can access the finance they need, and providing easy access to advice and support though the Business Link network and website.

I thank my noble friend for that reply. Did he see the first shot at an innovation index, produced by NESTA last Thursday? The index attempts to gather together all those entrepreneurial and enterprising activities that go into creating and running a business. Do the Government think that the index gives a fair and accurate picture of the benefits that innovation brings to our economy?

I thank my noble friend for his question. We welcome NESTA’s findings. It is an important topic for which we need better data. The report demonstrates the extent to which UK businesses already invest in innovation, but it also demonstrates that entrepreneurship is a critical element of successful innovation. Because the UK is strong on entrepreneurship, we are well placed to transform good ideas into successful innovation.

My Lords, I was interested that the Minister mentioned background and geography with regard to entrepreneurship being encouraged, but what about gender balance? It is so obvious still that although women are able to participate in entrepreneurial and business activity, there is still a very skewed distribution as regards participation, even at the early start businesses. How do the Government wish to correct that balance?

Well, hear, hear. It is a real challenge. Only an estimated 15 per cent of the UK’s 4.8 million SMEs are led by women. There are 1.1 million self-employed women in the UK, which is a 20 per cent increase since 2000, but this is a real challenge for the UK. If we had the same percentage of women in business as the US has, we would have another 700,000 to 800,000 SMEs. That is why the results just published from the women’s taskforce are hugely important. We will implement the recommendations and we need more women in business in Britain.

My Lords, without wishing to undermine the excellent work which I am sure my noble friend Lord Sugar will be doing, the evidence overwhelmingly is that entrepreneurs are born and not made. What is also interesting is how many of them come from overseas or are the children of immigrants. Is that not the important point that we should bear in mind? We need to seek out the entrepreneurs rather than convert people who have no entrepreneurial ability with the idea that we can make the entrepreneurs.

The World Bank still rates the UK as the first in Europe and the second in the G8 with regard to ease of doing business. We need to start educating and inspiring young people to be entrepreneurs and to start new businesses. That is why the Youth Enterprise is important; it is also why we must inspire international students in the UK who decide to stay. We must inspire young people to start new businesses, which is why the Government are giving so much support to Youth Enterprise and to ethnic minority groups.

My Lords, for entrepreneurship and enterprise to succeed, I am sure the Minister would agree that business needs support as well as access to finance. The latest estimates put the amount of support given by the Government to the financial sector and the banks at £1.2 trillion. Have the Government given anywhere near even a small fraction of that to support finance and access to finance to businesses and SMEs, which employ 13 million people in this country? Have the Government got their priorities right? Are the Government listening to the banks or are they listening to business?

We are doing both. We first of all had to recapitalise the banks; we then had to provide real help for small businesses. The variety of schemes that we have introduced, from the Enterprise Finance Guarantee scheme to many other initiatives, have given real help to small businesses. The challenge for next year is to ensure that the banks are there with access to finance as companies grow their turnover and as the economy recovers.

My Lords, despite the Minister’s optimistic initial response to his noble friend’s Question, the Global Entrepreneurship Monitor’s annual report shows that total United Kingdom entrepreneurial activity is down from 7.7 per cent in 2001 to 5.5 per cent today, and that we are falling badly behind our international counterparts. Does he not understand that people feel that the Government have spent too much time talking about helping business and not enough time acting?

Let me give the noble Lord a statistic straight back: the OECD says that the UK has the lowest barriers to entrepreneurship of all OECD countries. We have had 476,700 new start-ups in England and Wales in the year ending March 2009. Huge emphasis is being given to helping SMEs; they are the lifeblood of this economy, which is why the Government are giving them so much support.

My Lords, further to that point, is the Minister sure that tax and other incentives are competitive? I declare my interest as a past chairman of Plastic Logic, an exciting new company in organic electronics. When we came to build our first large facility, the UK was not even on the shortlist of places where we decided to locate that factory—it is now in Dresden. Even New York State and Singapore came in well ahead of the UK in providing incentives for us to place that factory.

I have had the benefit of visiting the premises of that company in Cambridge and have met it in Germany, so I am disappointed with the decision that was made. A 28 per cent corporation tax, with a 21 per cent rate for small business, means that the UK’s corporation tax rate is now at the lowest level ever. We continue to have the lowest corporation tax of the major G7 economies. I understand that the Tories are suggesting that they may one day cut it, but that would be at the expense of capital allowances and reliefs.