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This is the second lesson in the series, the first one explained how two big factors (elephants I called them) are reasons as to why the UK economy doesn’t seem able anymore to adequately fund basic state functions like defence, justice, the NHS and councils. The two elephants are the shopping habits of the super-rich and the high level of externalities caused by some weakly regulated industries which require us via the state to pay to fix. Examples included obesity and air pollution.
In this class we explore two approaches to growing new industries to balance those declining ones. Two different approaches to business start-ups, one resulting in good growth and benefits all round and not just for the entrepreneurs and investors. We then compare that an approach which maintains and even worsens the current situation. Both currently attract tax relief on investments, so should this be available on both or indeed on either?
Firstly, the positive example; last year a UK institution came top of the world rankings; a generally unknown, yet really important local organisation that will bring benefits to us all. I refer to SETsquared, a collaboration of five Universities including Bristol and Bath. In 2015 they were judged top of all university sponsored business incubators worldwide, ahead of those in Taiwan, Canada, USA, Italy, Austria and many more..
The nurturing of inventions and turning them into businesses is something the UK has generally been quite bad at over the decades. We invent well and then let others make the gains. But technology based inventions aimed at solving today’s and tomorrow’s problems will increase the value added in our economy, thus pay more tax, employ more people and the products will bring social benefits too.
Business incubators are a social enterprise fulfilling a task too risky for many businesses to take on. Apart from university money, they gain support from local companies like Dyson and university alumni who donate and invest, some getting tax relief on the way and they also give their time to help the would be entrepreneurs turn their projects into a success. Note, SETsquared was the only UK university incubator to be ranked at all. The UK needs more.
So how do I know all this? I was invited to teach entrepreneurship at a SETsquared event in Bath in September 2016. Thirteen graduates, selected from the many who had applied, attended a two day workshop. I look forward to mentoring some of them over the coming months. Innovations include strap on electric propulsion for bikes, electricity management systems for 100% renewables, websites and apps to help small businesses to collaborate and a surgeon’s drill guidance system.
Most of these businesses will fail, that’s normal, the alumni will lose their money, but gain self-esteem and the participants will have learned so much over the year that for society it won’t be a failure at all. The inventions might be picked up by social enterprise and the participants are sure to get great jobs thanks not only to their degree but also to their new found business experience. The few start-ups that succeed, well they are the up and coming employers and corporation tax payers upon which our future economy, our welfare and well-being will depend.
And now for the other example; entrepreneur-shit I call it, describing the unacceptable face of start-ups. Nothing to do with SETsquared; and fortunately I was in the position to object to this particular example at a recent council planning meeting...
...The case at hand is a business set up to respond to the National Grid’s need to buy in electricity at peak times. OK so far, but this company decided it would be good to do this by purchasing forty eight diesel generators, install them into the centre of a city, an area already full of polluted air and so rather than solving societal problems they would worsen them
Investors in this type of scheme get the same tax reliefs as they do in an incubator business, yet these entrepreneur- shit schemes often don’t create value added jobs, rarely add to technology and can worsen social problems. Fortunately this one was turned down at planning, not by the officers, but by councillors who could see through the smokescreen. So by eight to two the application failed, and the two? I’ll let you guess which party they were.
We need a Government that understands the difference between good and bad growth; one with an economic plan that brings benefits to all and doesn’t just see profit as evidence of success. Theresa May is talking about an industrial strategy so we might see something there, but I fear big business and their lobbying will distort the final package and so our tax will continue to support value destroying schemes whether they be diesel generators in cities, fracking that accelerates climate change or banking products that bankrupt a nation.
Profit is not necessarily evidence of wealth creation as you shall now see.
I think many people recognise the difference between the two and want Government to support students, university research, development and innovation. Entrepreneur-shit however should be flushed away and not get tax breaks. by Clive Stevens 16 October 2016
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