Do Politicians Know Enough About Entrepreneurship?

The quantity and quality of entrepreneurship in any country is contingent on the rules in place that support or hinder it. Technological progress seems inevitable, but history is testament to the fact that good or bad politics plays a huge role in making or breaking a country.
At the extreme, as was the case in the Soviet Union, entrepreneurial types are forced into criminality. In fact, you don’t even need to look to the past. Compare the remarkable success of Chile’s start-up scene – where the government has gone above and beyond to support domestic entrepreneurs and encourage foreign entrepreneurs to move there – with the disastrous policies of Venezuela. In short: policies matter.
In the UK, successive governments of all the major parties have served up decent policies for entrepreneurs. As such, it would be wrong to talk British entrepreneurship down: in many ways we’ve never had it so good.
But progress isn’t inevitable and it’s relative. Although human capital isn’t as fluid as other assets, it can easily take flight. Entrepreneurs aren’t a loyal bunch – if the next generation can build a bigger, better business elsewhere, they probably will. Just consider the Indian tech migrants who played a large part in making Silicon Valley what it is today.
Our new report, Parliamentary Snapshot 2015, was released today. It follows last year’s paper in trying to get to the bottom of what Members of Parliament (MPs) think and know about entrepreneurship. As with last year, the most positive policy direction across the House of Commons was ‘spending more on improving the skills of the domestic workforce’, which was seen as positive for 90% of MPs.
Surprisingly, the second most popular policy direction was ‘making it easier for entrepreneurs to move to the UK’. We didn’t ask this question last year, but with the failure of Britain’s entrepreneur visas to attract and retain the right sort of talent, it was perhaps the result we were most interested in seeing. That 76% of MPs think ‘making it easier for entrepreneurs to move to the UK’ would be good for business suggests that there might be an element of hypocrisy among our politicians. MPs know that highly skilled immigration is good for the UK, but aren’t willing to make the case to the electorate. Theresa May’s announcement this week that she wants non-EU students – many of whom want to be entrepreneurs – to be sent home after finishing studying is bad policy in action. The impact on Britain’s universities and the country at large will be devastating if they come to pass.
The question of Britain’s future in the EU will increasingly dominate this Parliament. My experience is that most owners of fast-growing companies are doubtful that leaving the EU would be good for them. There have been suggestions from some commentators that an increasing number of Labour MPs are coming around to the idea of Brexit; however, when asked about the benefits of leaving the EU for entrepreneurship in the UK Labour MPs are almost entirely negative about the prospect, while Conservative MPs are largely positive or unconcerned.
When it comes to the impact, or otherwise, of cutting taxes, regulations and spending, Labour and Conservative MPs split along familiar ideological lines. Broadly speaking, Conservative MPs are more hopeful about the positive impacts of cutting taxes and regulations, while Labour MPs generally favour spending more.
The report also found that most MPs are remarkably unaware of of policies already in place to support entrepreneurs. We find that MPs are largely ignorant about initiatives already in force. Of particular concern is the revelation that 63% of MPs either have not heard of or don’t know whether the Seed Enterprise Investment Scheme (SEIS) is effective. Whenever I speak with entrepreneurs who have raised finance, I can barely stop them talking about how great SEIS and the Enterprise Investment Scheme (EIS) are, so clearly something is being lost in translation. Similarly, 69% have not heard of or don’t know whether Innovate UK is effective.
SEIS and Innovate UK are two major initiatives – one a tax break, the other involves spending millions on funding. Simon Rogerson, Chief Executive of Octopus Investments, stated:
“This year’s Parliamentary Snapshot identifies a particular blind spot on SEIS and EIS, two of the UK’s most successful policies for helping small, risk taking companies to grow. Entrepreneurs need policies in place that really work, so clearly there is a need to help MPs understand how well these established initiatives perform for both investors and the businesses funded by them. High growth small businesses are extremely valuable to the UK in terms of job creation, wealth generation and economic growth. We must help MPs bridge the knowledge gap highlighted by this report, so that they support policies that will help secure the UK’s strong reputation for fostering entrepreneurship.”‬
It matters that many MPs don’t know about the schemes that are already giving them what they want. Hollie Gallagher, Head of Entrepreneurs at Bircham Dyson Bell (BDB), which supported the Shapshot thinks: “It is concerning that MPs are not as well informed as they could be about important government schemes to support UK entrepreneurs. Fast-growing small firms are vital to our economy: they generated 36% of UK economic growth between 2012 and 2013 and created 68% of all new jobs. Great initiatives already exist for startups, but steps need to be taken to promote them and ensure that these businesses continue to thrive.”
Of course, MPs have a lot of competing policy interests and can’t be expected to be on top of everything. But the whole idea of a representative democracy is that it affords politicians the time to make more informed decisions than the general public. With regards to entrepreneurship, this isn’t happening.
In order to improve policymaking around entrepreneurship, we need more receptive and informed MPs, but we also need a more vocal entrepreneurial community to tell them what initiatives are working on the ground.

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