What does reorganising the new Department for Business and Trade mean to entrepreneurs in the UK?

As Kemi Badenoch settles into her new job as Secretary of State for the Department for Business and Trade it is worth reflecting that she is no less than the 6^th Secretary of State at the Department since the Brexit Referendum six years ago in June 2016.

The cost of the reconstruction of her Department (and others) is said to run into many millions of pounds.

But what is the point of this reorganisation and is it the right way to spend the resources that have been allocated to it?

Entrepreneurs already based in the UK, and other thinking of relocating and/or setting up business here, are already giving thought to whether the UK remains as attractive as it once was for them. We need to ensure they continue to think we most definitely are.

On 17 February 2023, The Times reported on the latest Annual Global Entrepreneurship Monitor research led by Aston Business School. It is a long report, but essentially what they concluded was that we are now ranked 25 out of 51 countries. Last year we were 18th. By comparison France was 18^th, Germany 17^th, and the USA 15^th. The top 5 rankings were occupied by the United Arab Emirates, Saudi Arabia, Taiwan, India and the Netherlands.

That is not good enough. In previous blogs we have commented on the debacle that was the Kwasi Kwarteng budget of  23^rd September 2020, and its virtual reversal by way of the Autumn Statement from new Chancellor of the Exchequer Jeremy Hunt on 17^th November 2022. We explained how virtually all of the tax breaks previously announced by Kwasi Kwarteng designed to encourage growth, had been withdrawn. Few would now suggest the way in which these were brought in was anything other than disastrous, with the much trumpeted unfunded nature of the tax concessions, and without there having been prior engagement with and support from the City.

Although since those dark days we have been told by the Prime Minister and others around him that growth remains very much part of the Government’s agenda, we have to ask whether the reorganisation at the Department for Business and Trade as it is now called, is really the answer.

And whilst we are “reorganising” the Department principally charged with sponsoring our growth and entrepreneurial activity, we see our international competitors looking like they will continue to steal a march. Take the Netherlands for example. They are ranked 5^th according to the latest Annual Global Entrepreneurship Monitor’s report. Eindhoven, one of its principal business centres, features in a recent article in the Financial Times (FT). It will be remembered that this was the City that suffered so grievously in World War Two. It is now where ASML is leading the way in the production of advanced silicon chipmaking machines. These are used to produce the semiconductors that are so much in demand these days by the world’s manufacturers. According to the FT article the region around Eindhoven is  now looking to create 70,000 jobs in the next 10 years.

By contrast look at what happened to Britishvolt. This was going to rival the USA’s runaway success, Tesla. The Government apparently invested £100 million to help fund the project. It was going to foster growth in Northumberland and the North East, surely a region that could have done with a boost in the aftermath of Brexit and the Pandemic. Yet 9 months after it set up in the UK, it has been allowed ignominiously to slip into Administration. The opportunities that have been lost are legion.

Is it therefore  any wonder that there are calls north of the Border to use the opportunity created by Nicola Sturgeon’s surprise resignation to “reset its troubled relationship with business” (according to an article in the FT on 20 February 2023).

It is also only a short time ago that the then British PM (Boris Johnson) so infamously put down the business and entrepreneurial sector in this country using language that is unrepeatable here.

So on behalf of the entrepreneurial community here in the UK can we put in a plea to the Government to focus less on managerial reorganisation at the Department charged with fostering growth in this country, and more on the policies, the inducements, the tax breaks, the grants and the support that would be so welcome in the near term.

As for our suggestions? We could start with these:-

1. Tony Blair and William Hague have just published a joint report focussing on what the UK government can do to assist with innovation and technology. They have reached many sensible conclusions. There are too many to list out in full here (the report is available online), but the essential point is that the Government should do all it sensibly can to support the technology industry. The suggestion of incentivising the consolidation of pension funds by offering CGT relief for larger funds investing more in the UK would create a significant pool of capital for UK businesses as well as the potential for greater returns for the funds (compared with the current heavy investment in the bond market).

2. The UK benefits hugely from the success of small businesses. This leads to the creation of jobs and the collection of corporation tax, PAYE, and VAT amongst other fiscal benefits. The recently announced improvements to the (S)EIS regime for investors were very welcome and the reliefs are hugely positive, but we can go further. It is too easy for companies to make innocent, entirely commercially driven mistakes, that cause investors to lose their benefits. The legislation should be relaxed. The mischief it seeks to prevent catches too many innocent actions.

3. EMI schemes offer small businesses a fantastic tool to incentivise employees away from big employers. It lets them share in the potential of the company, helping start-ups recruit the best talent. Government should reduce the restrictions – allow EMI options in companies controlled by another company, remove at least some of the restrictions as to qualifying trades for example.

There are many more. It really is time for the Government to put behind us Brexit and the Pandemic, and all the noise around those issues, and instead steadfastly focus on creating the best environment we can in the UK for our entrepreneurial community to thrive before we fall further behind our international competitors. Whatever its new shape, Secretary of State Kemi Badenoch has a lot to do (and prove) in the coming months. Our entrepreneurial community will be watching to see how she performs…