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Businesses: Start-ups

Volume 787: debated on Monday 20 November 2017


Asked by

To ask Her Majesty’s Government what conclusions they draw from calculations by the Centre for Entrepreneurs that 660,000 start-up companies were founded in 2016.

I beg leave to ask the Question standing in my name on the Order Paper, and in doing so I declare my interests as listed in the register.

My Lords, the Government are working hard to ensure that the United Kingdom is the best place in the world to start and grow a business. While there is no single source of data on the start-ups, the Government agree that the numbers engaged in enterprise is at a historic high, which shows that entrepreneurship is thriving in the United Kingdom.

I thank my noble friend for that reply. Is he aware that there was a record number of start-ups in 2015 and 2016 and that, according to the Centre for Entrepreneurs, there is likely to be another record in 2017; that we are third in the world for start-ups, second only to Silicon Valley as a centre for the tech industry; and that we have three times as many unicorns—that is, $1 billion start-ups in tech—as Germany? However, while this entrepreneurial revolution is a welcome result of government policy since 2010, does my noble friend agree that what is needed now are policies to help small acorns grow into big oak trees without selling out too early? In that respect, will he perhaps look at Rishi Sunak MP’s proposal for a retail bond market for SMEs?

I am grateful to my noble friend for quoting all the figures that I would have wanted to put before the House, and I thoroughly endorse his doing so. I am also grateful to him for bringing the attention of the House to Rishi Sunak’s report, A New Era for Retail Bonds, which I am aware of. He would not expect me to comment on it in detail at this stage, but it is certainly interesting and the Government will certainly want to have a look at it.

My Lords, is not reference to 660,000 start-up companies and this entrepreneurial revolution peddling a myth when a large chunk of that number is made up of personal service companies, the objective of which is to save tax and save on national insurance contributions? Why peddle these myths?

The noble Lord is overcynical. It is quite obvious from all the figures we have, whether we take them from Companies House or wherever, that a large number of new companies are coming into existence. My noble friend quoted the other figures, which show just how well they are doing, and how well compared to other countries throughout Europe. The noble Lord should welcome that and be grateful that entrepreneurship flourishes in this country because the Government create the right environment for it.

My Lords, publicly available data shows that 93% of funding goes to male-led start-up businesses and that one in 10 people making decisions in financial institutions is a woman. Do the Government track this data, and what are they planning to do about it when so many people are being left out of the entrepreneurial revolution?

My Lords, I was not aware of those figures but if the noble Baroness is correct, they obviously give us some concern. It is not for the Government to create new businesses—as I said earlier, it is for the Government to create the right environment in which businesses can start up. However, if 93% of them seem to be male led, we should look at that to see what is happening and whether, in creating the right environment, there is anything that the Government can do to make sure that women feel they have an opportunity to create their own businesses.

I endorse the comments of the noble Lord, Lord Campbell-Savours. Many of these start-ups represent self-employed people using contractor payroll and virtual office solutions. The FSB says that small business confidence has plummeted since the Brexit vote, with rising inflation and a weakening domestic economy. Therefore, if the Government want to help businesses, large and small, will they provide some certainty on where Britain is headed—remaining in the single market or going over a hard Brexit cliff?

Again—dare I say it?—I think that the noble Baroness is being overcynical. All the figures, from wherever they are taken, show the same trend—that business start-ups are at an historic high. Perhaps not all of those businesses will go on to flourish, but the trend is in the right direction and I think that the noble Baroness ought to welcome that.

My Lords, do the Government accept the enormous help provided to entrepreneurship by the Government’s EIS scheme, which I think has raised some £16 billion of risk capital? It is the envy of Europe. I declare my interest as chairman of the Enterprise Investment Scheme Association.

I welcome what my noble friend has to say and I hope that noble Lords on the other side of the House take note of it.

My Lords, as welcome as the rise in numbers is, is it not the case that under close examination the data shows some very worrying trends? Professor Mark Hart of the Enterprise Research Centre, one of Britain’s leading academics on this matter, points out:

“Too many of these businesses do not create jobs or do anything for UK productivity”,

and that our entrenched problem is,

“turning start-ups into high growth companies”.

Can the Minister confirm what proportion or number of start-ups in these figures was for structuring purposes—holding companies, special purpose vehicles, personal service companies and partnerships—and can he set out the Government’s plans to reverse the decline in the three-year company survival rate, the falling number of high-growth companies and the proportion of start-ups that scale?

The noble Lord asked quite a number of questions and I will restrict my answers to two. He is right to express concern about productivity. This is something that we will want to address, and I hope that he will be ready for the Statement on the industrial strategy that I hope will come out later this month. He also expressed concern about companies progressing from small to medium and medium to large. That is why we made an announcement in last year’s Autumn Statement about patient capital and why we announced a review into it. We are waiting to respond to that in due course.

Given the last question, will the Minister look at a lighter touch, particularly in employment law? A lot of this is very onerous for small businesses and, if certain things happen, they can easily get bankrupted. Small businesses need a lot more flexibility in the laws as they apply to them. Until you employ a lot of people, you cannot handle some of the provisions around employment law, and I think that the Government should look at that closely.

The noble Earl is right to express concerns about the regulation that faces business, particularly small businesses. We obviously want to reduce the regulatory burdens on businesses wherever possible and wherever it is right to do so, and we will certainly continue the work that we have done in this field.