Business

Start Up Britain gets mixed reception

  • 29 March 2011
  • From the section Business
Padlock on a computer keyboard
Image caption The government's new initiative to help fledgling businesses will include support for IT training

In his Budget speech, Chancellor George Osborne was determined to drive home the message that his economic plan would foster growth.

And in the light of the government's new Start Up Britain initiative, the country's ability to give entrepreneurs a helping hand is under increasing scrutiny.

A group of venture capitalists and investment angels has praised the chancellor's Budget plans to increase tax relief to 30% and extend the scope of the Enterprise Investment Scheme for risk capital investments.

In a letter to the Daily Telegraph on Monday, the 39 signatories said the measures would be "a massive boost for start-ups and will help entrepreneurs to secure finance to get their ideas off the ground".

"Britain is being positioned as a world-class place to launch new businesses," they added.

But the uncomfortable fact of business life is that four out of five start-ups end in failure.

Coupled with the economic climate, the precarious world of business is an even tougher environment in which to do battle.

So what do those who advise fledgling businesses make of the government's plans?

'Less regulation'

Mike Burley, of BV Consultants, agrees with the venture capitalists that the UK is better placed than many other countries when it comes to encouraging new start-ups.

"I've helped budding entrepreneurs from abroad and they're often surprised at how easy it is to register and start up as a sole trader in the UK in comparison to their home countries of Poland, Denmark, Germany and France," he told the BBC.

"The key factor is that the UK has less regulation."

Image caption Consultants want the government to cut red tape for small firms

However, he is also keen to point out that while increasing the tax relief initiative and reducing regulation would help, only larger "potential businesses" will see any benefit.

"If the potential business is too small, investment angels are simply not interested, so smaller businesses will see little, if no change."

Howard Graham, from the business support consultancy Made Simple Group, goes further.

"The increase in tax relief is irrelevant to a start-up company, there's not a start-up in the world which would pay any attention to this," he says.

In his view, the government needs to understand start-ups better. It should do more to cut red tape for small businesses, which account for the vast majority of start-ups, and improve the availability of finance.

"The government needs to give more tax breaks to small businesses and provide more grants," he feels.

'Hype and nonsense'

On the Start Up Britain initiative, Mr Graham is equally unconvinced.

The scheme, led by the private sector, is offering support in the form of vouchers worth about £1,500 in areas such as IT training and internet advertising.

It is supported by some of the biggest firms around, including AXA, Barclays, Intel, Blackberry, Experian, Google, Virgin Media Microsoft, McKinsey & Co and O2.

But while the Prime Minister, David Cameron, insisted "Now is the time to strike out on your own", Mr Graham derides the plan as "all hype and nonsense".

"Support worth up to £1,500 has been around a while. They're deals, not loans, and the firms that provide these services often their own vested interest in providing them."

As part of the government's review on how it delivers business support services, it announced the closure of the regional Business Link advisory service by November 2011.

As someone who makes a living out of giving new businesses advice on how to be successful, unsurprisingly Mike Burley believes it is essential that would-be entrepreneurs can access free advice before they start themselves up in business.

"If you start anything wrong, you're going to make it harder to succeed," he says.

"The government needs to ensure a higher percentage of people get advice and continue to do so as their business grows, this will ensure a better success rate in the long term."

There is also a degree of scepticism around Start Up Britain from the Forum of Private Business.

"Whether it can genuinely provide the support entrepreneurs need to start and grow a business is highly questionable," says Phil Orford, the forum's chief executive.

"The government must now throw its weight behind real measures to improve tax, regulation and business funding for both existing firms and new start-ups if private sector growth is to drive economic recovery."