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• United Kingdom
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United Kingdom at a glance
Compared with many other G20 countries, the environment for entrepreneurs in the UK is a
favorable one. New and growing ventures operate on a solid foundation of business-friendly
regulations, generous tax subsidies, good availability of skills from a solid education system
and the country’s dynamic financial markets. All of this gives the country an edge and has led
to high levels of new business activity, relative to many other G20 economies.
Given the UK’s difficulties in tackling its high rate of For example, 71% of local entrepreneurs say that the country’s
unemployment and low economic growth, supporting the growth culture is supportive of their efforts. Across the G20, only in
of fast-growing and innovative businesses is vital. Overall, Japan is entrepreneurship encouraged more as a career choice.
entrepreneurial businesses account for 99.9% of all businesses in
However, there is no room for complacency. British entrepreneurs
the UK, and 59.1% of all employment, according to the Federation
still face several tough challenges, especially in relation to funding.
of Small Businesses.1 Crucially, these smaller businesses account
The latest figures from the Bank of England suggest that bank
for two-thirds of all the new jobs created in the UK in an average
lending to smaller ventures contracted in 2012.3 In the survey,
year, according to the University of Nottingham, which highlights
about three in four UK entrepreneurs reported that access to
why it is important to foster and support their growth.2 Of course,
bank loans has deteriorated over the past three years. Just 22%
few of these companies are the innovation-led high-tech start-ups
feel that access to funding in the UK is easy, falling to just 11% for
that gather the most headlines, but rapidly expanding companies
those aged under 40. Despite the UK’s financial sophistication,
that deliver real and sustainable growth across a range of
there are clear challenges in securing funding.
sectors — often dubbed the “gazelles” — are what count most here.
Furthermore, there are signs that the ongoing economic downturn
The underlying preconditions for bolstering the UK’s
has led to a dip in the UK’s performance on various innovation
entrepreneurial ecosystem are already well established.
1
“Small Business Statistics,” Federation of Small Businesses website, fsb.org.uk, accessed 16 June 2013.
2
“Small firms driving UK job creation,” University of Nottingham website, nottingham.ac.uk, accessed 22 June 2013.
3
Bank of England, Trends in Lending: July 2013 (Bank of England, 2013).
Crowdfunding 41.8%
Tweet #G20ey
Informal networks 49%
8
Weaknesses
7
6
• While access to funding is strong in the aggregate, efforts
5 to increase funding to small businesses have struggled.
4
3 • Despite high levels of spending on education, there are
2 weaknesses in tertiary enrollment and in second-level
1
0
vocational education.
in
g ip tio
n rt d
an g
• Asked whether coordinated support has been improving
nd sh e po
fu eur ltur gula sup t
n
io inin or deteriorating, UK entrepreneurs are among the most
to en cu re d a a
ss pr nd te uc tr
cce tre xa di
na Ed pessimistic in the G20.
A En Ta or
Co
UK
Mature economies G20 average Opportunities
Source: EY G20 Entrepreneurship Barometer 2013
• The UK’s strength as an innovation center gives it a strong
position in high value-added industries.
• There is scope to boost direct support for exporters. In
An innovation leader, but with room for 2010, the UK’s export credit agency provided financial
improvement on finance and education support totaling £2.9b, almost none of which went
to entrepreneurial businesses. Its German equivalent
The UK provides its entrepreneurs with a well-developed provided €32.5b, with 73% going to entrepreneurial
ecosystem that continues to evolve in line with efforts to move businesses, according to UK think tank Civitas.4
urs? more new business activity up the value chain. The country has a
strong innovation base, and new tax incentives aim to boost the
commercialization of R&D in the country. From a tax perspective, Threats
the UK is one of the few countries in the G20 that is actively
• A growing number of indicators show signs of economic
lowering its corporate tax rate in order to stimulate business
recovery, but domestic demand may be fragile for some
activity. However, access to funding for local ventures is cited
time, particularly as real earnings have been falling for
as an ongoing concern by entrepreneurs, in particular for small
five years.5
businesses or those started up by younger owners.
• Uncertainty continues to hang over the Eurozone,
a pivotal export market for the UK, although, more
ules encouragingly, the local UK economy appears to be
ding
4
“Proactive export policies needed to target critical emerging markets”, Civitas website,
lity, civitas.org.uk, accessed 27 June 2013. improving.
5
B Maule and A Pugh, “Do Inflation Expectations currently pose a risk to the economy,”
Quarterly Bullettin 2013 Q2 Vol 52 No 2 (Bank of England, 2013).
Proportion of entrepreneurs citing improvement across access Recent trends in net lending to UK small- and medium-sized
to funding
UKinstruments
Funding environment by growth stage Recent trends
enterprises in net
(in GBP lending to UK SMEs
billion) UK Funding
0.0
IPO 3.6% IPO 3
-0.5
Bank loans 10.9% Bank loans 1
-1.0
Bank loans 10.9% Bank loans 1
-1.5
Private equity 23.6% Private equity
-2.0
Suppliers 7.3% Suppliers 7.3
Expansion -2.5
Customers 9.0% Growth 11 11 11 12 12 12 12 13 Customers 9
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q
Venture capital 21.8% Start-up Venture capital
Source: Bank of England, 2013
Seed
Angels 32.7% Angels
Family 23.6% Family
Public aid 25.4%
Public aid
£2.4b
Microfinance 29.0%
Microfinance
Angels 32.7%
What level of impact factors will have on entrepreneurship culture?
Net drop in bank lending
Angels
Crowdfunding 41.8% in Q4, 2012, following
Crowdfunding
Promotion of the role of entrepreneurs
Source: EY G20 Entrepreneurship Barometerin2013
introduction of new Funding
creating new jobs
for Lending scheme9
Improve communication around
6 entrepreneurs'
R Churm and A Radia, “The Funding success
for Lending stories
Scheme,” Quarterly Review 2012 Q4
Vol 52 No 2 (Bank of England, 2012).
7
Ibid. ft 6 Promote theTocareer opportunities
what extent have access to the following education & training programs improved?
8
Ibid. ft 7 offered by entrepreneurship
9
“Lending drops in Q4 despite Funding for Lending scheme” Financial Planner website,
Informal networks 49%
Government
financialplanneronline.co.uk, accessed 27programs
July 2013. providing
education, funding and profile raising
Mentoring 40%
10
“Tech City: the magic roundabout,” The Guardian website, theguardian.com, accessed 2 July
2013.
11
“London’s Silicon Roundabout,” Wired website, wired.co.uk, accessed 29 June 2013.
12
“London’s moment: The tech cluster in the east of Britain’s capital is on a roll,” Wired website,
wired.co.uk, accessed 29 June 2013.
0.0
Access to funding United Kingdom G20 average Period -0.5
IPO market activity -1.0
The UK performs well in the EY G20 Entrepreneurship Barometer bolster other sources of early stage funding, such as angel investors
Promotion of the role of entrepreneurs
2013 for access to funding. The country leads the G20 on the inand venture
creating capital firms. For example, improved tax incentives for
new jobs
extent of domestic credit in the private sector, with a rate as a risk-taking equity investments, for both entrepreneurs and their
proportion of GDP that is more than double the G20 average. backers, especially
Improve communication around angel investors, ought to be a priority.
entrepreneurs' success stories
However, there are clearly challenges on the ground, with 70% of There are also other means of support available at a government
entrepreneurs describing access to funding as difficult. Younger
Promote the career
level,opportunities
such as reforming procurement processes to make them more
offered
entrepreneurs find it even more difficult with just 11% considering it byworkable
entrepreneurship
for smaller businesses. Recommendations to this effect
easy to access funding. have been
Government programs made elsewhere, such as in Lord Young’s 2012 “Make
providing
education, funding and profile raising
At the heart of the challenge is the fact that bank lending to Business Your Business” report, but not enough change is yet being
entrepreneurial ventures is far more limited than it is to larger, G20 focusseen on the ground.14
on and support of
well-established companies. Local entrepreneurs identified bank entrepreneurship
For more mature businesses, conditions are typically better, but
loans as the most important funding instrument for boosting could still improve. For example, the volume of investment raised
Promotion of the high risk/high return
entrepreneurship over the long term. However, only 11% said dynamics
that ofthrough initial public offerings (IPOs) is above the G20 average, but
entrepreneurship
access to bank loans had improved over the past three years, while concerns remain. Only 4% of local entrepreneurs feel that access
a striking 75% said it had greatly deteriorated. “Access to funding
Improve tolerance to
of business failure has improved over the past three years, while 51%
IPO financing
in the UK is tough. We’ve got to create an ecosystem here with a say it has deteriorated. Nevertheless, there have been positive
broader range of financing options available for entrepreneurs,” 0% 20% 40% 60% 80% 100%
developments in other forms of funding. For example, in 2011, the
argues Young Brits Network’s Alex Mitchell. He advocates looking High-impact Low-impact
Business Growth Fund was set up with £2.5b to make long-term
at regional banks, using a model similar to the Sparkassen model in Medium-impact Don’t know or no opinion
equity investments.15 It seeks to match any capital with experience,
Germany, as one example of how conditions might be improved. advice and insight, and is focused on helping expand the rapidly
In the absence of other formal channels of funding, new types growing “gazelles” that are most valuable for job creation in the UK.
of funding are being made available. For example, 42% of
entrepreneurs cited improvements in crowdfunding, on the back of
a range of new platforms that have emerged in recentOverall,
years,how
such Entrepeneurs’
easy or difficult view on how
is it for entrepreneurs to easy or difficult
currently it is toinaccess
access funding funding country?
your headquarter
as Seedrs, Crowdcube and BankToTheFuture, among others.13 All
this highlights the strong potential for innovation in finance in the Young entrepreneurs Very easy
UK, but more progress is urgently needed. More could be done to (up to 40 years old) Somewhat easy
Somewhat difficult
Very difficult
13
“‘Crowdfunding’ Takes Hold in the U.K.” The Wall Street Journal website, online.wsj.com, All entrepreneurs Don’t know or no opinion
accessed 21 June 2013.
14
Lord Young, Make Business Your Business: Supporting the startup and development of
small business (Crown, 2012). 0% 20% 40% 60% 80% 100%
15
“About us,” Business Growth Fund website, businessgrowthfund.co.uk, accessed 14 June
2013. Source: EY G20 Entrepreneurship Barometer 2013
The UK ranks highly among its G20 peers as a supportive place Just 13% of local entrepreneurs said that business failure is
in which to be an entrepreneur. Seventy-one percent of local perceived as a learning opportunity in the UK, compared to
entrepreneurs agree that the UK has a culture that supports a G20 average of 23%. Accordingly, local entrepreneurs felt
entrepreneurship, compared to a G20 average of 57%. strongly that more could be done to bolster their reputation as job
creators: 62% felt this would have a positive impact on the UK’s
A wide range of factors underpin this cultural support for UK
entrepreneurship culture.
entrepreneurs. For example, there is broad cultural appreciation Recent trends in net lending to
of famous entrepreneurs such as Richard Branson, as well as from The UK has a strong reputation for innovation, which 0.0 the
prime-time TV shows such as the BBC’s Dragons’ Den. The private Government continues to encourage with new incentives,
-0.5
sector also has a role to play in promoting entrepreneurialism, such as a preferential 10% tax rate (the “Patent Box”),
-1.0 which
with high profile programs such as The EY Entrepreneur of the was introduced in 2013 and which applies to profits -1.5 that are
Year™, a high-profile celebration of entrepreneurial achievement attributable to patents. Overall UK spending on R&D -2.0 is above the
for those who are serious about business and making an G20 average, while the number of scientific and technical
-2.5 journal
11 11 Q11 Q12 Q12 Q12 Q
important contribution. articles published is the third highest after Australia and
2Q 3QCanada.
4 1 2 3 4
Britain will boost rates of new business creation, it is inevitable G20 focus on and support of
that not all of these will succeed. More needs to be done — entrepreneurship
perhaps through the media — to convey the fact that business Promotion of the high risk/high return
failure is often a crucial step on the way to subsequent success for dynamics of entrepreneurship
Overall, how easy or difficult is it for entrepreneurs to currently access funding in your headquarter countr
Crowdfu
Promotion of the role of entrepreneurs
in creating new jobs
Total tax rate (taxes and mandatory contributions borne by the 35.5 49.7 2012
business expressed as a share of initiatives
commercial ce
Top five and profit)
organizations that could most improve the long-term growth of entrepreneurs and entrepreneurship in the UK Ac
Indirect tax rate (taxes collected by the company and remitted to 20.0 14.2 2012
Business incubators 45%
the tax authorities)
Entrepreneurial workshops/support meetings 44%
Source: The World Bank
Government start-up/other programs 35%
two years, but which are already sending a strongly pro-business Reduction of personal Reduction of indirect tax
signal to entrepreneurs. In April 2013, the main corporation tax income tax burden, 35% rates, 11%
rate fell from 24% to 23%. It will be cut again to 21% in 2014 and
to 20% in 2015. This will leave the UK with one of the lowest
corporate tax rates across the G20. This should make a strong Simplification of tax rules
impact as local entrepreneurs prioritized cuts in the corporate tax and regulations regarding
calculation of tax liability,
rate ahead of simplification of existing tax rules (a direct reversal 20%
of sentiment in the US) as the initiative that would do most to
improve the overall tax environment in the UK.
Beyond this, the most popular tax or regulatory change the
Reduction of corporate
Government could introduce to boost entrepreneurship overall income tax burden, 29%
would be to improve tax incentives for innovation. Ninety-five Source: EY G20 Entrepreneurship Barometer 2013
To what extent have access to the following education & training programs improved?
Informal networks
Mentoring 40%
49%
8/10
UK entrepreneurs think
Education and training Specific programs at university/
business schools
35% students need access
PillarEntrepreneurship
ranking:conferences
6 and seminars 33% to specific training to
Coaching programs for entrepreneurs 31% prepare for setting up
Dedicated entrepreneurship chairs in 29% their own ventures
universities and business schools
Vocational education in school curriculum 29%
A strong educational
Corporate backdrop, but27%clear room
engagement with local schools
for improvement
Corporate engagement with start-ups 27%
Secondary school enrollment (total enrollment 100.6 95.0 2008-10 Tertiary enrollment in the UK
expressed as a percentage of the population
of official secondary education age)
average
at 57.8% does not compare as
equal weight scores
Recent trends in net lending to UK SMEs UK Funding environment by growth stage well with other mature G20
Tertiary enrollment (total enrollment 57.8 53.5 2008-10
0 expressed as a percentage of the total average economies, such as the US at
IPO 3.6%
5 population of the five-year age group 89.8% or Australia at 76.0%
following on from secondary school leaving) Bank loans 10.9%
0 (2008–10 average)
Source: The World Bank Bank loans 10.9%
5
Private equity 23.6%
0
The UK performs relatively well in terms of the education and 7.3%
Suppliers 34% cite gains in specific programs at universities and business
5 Expansion
11 1training
1 11 12aspects
12 12 of 1its
2 overall
13 entrepreneurial environment. CustomersOne of9.0% schools.“ There has got to be far more real advice, awareness
0 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Growth
ngthe factors ip
underpinning on this performance
rt is a high
n
level
dVenture of public
capital
and 21.8%
understanding of what Start-up
it is to create a viable business. In the
i h e i o
nd spendingurson lat At about pp
a
e ltu education. su 5.5% of GDP,
tio inthe
n ing UK spends well UK there are already some great
fu r
re
gu Seed examples of entrepreneurship
to ren cu d ed ca tra Angels 32.7%
es
s abovere the G20 xaverage
p an of 4.8%
in
at and enrollment
Ed
u levels are also ecosystems with structure support across the whole journey; the
Ent Ta ord Family 23.6%Wales One Stop Shop Service covers everything from
above average overall. Co Business
UK Public aid mentoring
25.4%and tendering to international trade and employment
However, there is mixed evidence about the degree to which
Mature economies G20 average
Microfinance and is a good
29.0%example of what a joined up approach can look like”
this
reneurship spending is feeding through to support the specific
culture? needs
adds Young Brits Network’s Alex Mitchell.
of entrepreneurs. One measure of output is provided by the
Angels 32.7%
Programme for International Student AssessmentCrowdfunding
(PISA), which But more could be done
41.8%to bolster education and training. In
measures the performance of 15-year-olds in mathematics, particular, corporate engagement with both schools and start-ups
reading and science. Between 2006 and 2009, the UK’s 15-year- could be much stronger, which could further bolster some of the
olds dropped from 17th to 25th in reading, 24th to 28th in gains being seen in areas such as vocational education.
mathematics and 14th to 16th in science.17
When it comes to tertiary education, the pool of skilled talent Proportion of entrepreneurs citing improvement in education and training
To what extent have access to the following education & training programs impro
available has risen sharply as the proportion of the UK labor force programs over the last three years
with a degree or other tertiary-level qualification has increased — Informal networks 49%
up from 26% in 2000 to 37% in 2011.18 But there is still room
for improvement: at 57.8%, the tertiary enrollment ratio is well Mentoring 40%
below the levels of other mature G20 economies, such as the US Specific programs at university/
35%
business schools
(89.8%) or Australia (76.0%).19 This matters, not least because the
education sector is an important source of innovation. Education Entrepreneurship conferences and seminars 33%
sector R&D accounts for 27.2% of total R&D in the UK, well above Coaching programs for entrepreneurs 31%
the average of 22.3% across the other G20 countries.
Dedicated entrepreneurship chairs in 29%
universities and business schools
In terms of sentiment on the ground, local entrepreneurs report
80% 100% Vocational education in school curriculum 29%
improvements in several aspects of education and training. About
pact
one in two (49%) note improvements in informal networks, while Corporate engagement with local schools 27%
now or no opinion
Corporate engagement with start-ups 27%
17
“UK Schools slip down world rankings,” The Guardian website, theguardian.com, accessed
2 July 2013. Government programs supporting 25%
entrepreneurship
18
“Labour force with tertiary education (% of a total),” The World Bank website, data.
worldbank.org, accessed 30 June 2013. Training period at schools 13%
From mentors and entrepreneur networks through to Promotion of the high risk/high return
dynamics of entrepreneurship
incubators, coordinated support is a vital aspect of the overall
entrepreneurial ecosystem. And it is one that the UK could Improve tolerance of business failure
pay more attention to. This is most clearly the case in relation
to business incubators. While one in two entrepreneurs 0% 20% 40% 60% 80% 100%
surveyed across the G20 report noted that access to business High-impact Low-impact
incubators has improved over the past three years, only half Medium-impact Don’t know or no opinion
as many feel the same in the UK. This is worrying, given that
UK entrepreneurs pointed to business incubators as the top
initiative to boost the long-term growth of entrepreneurship in
the country.
Overall, how easy or difficult is it for entrepreneurs to currently access funding in your headqu
According to Alex Mitchell, the co-founder of Young Brits
Network, which seeks to provide a global voice for young
UK entrepreneurs, one problem is the complicated range Young entrepreneurs Very
(up to 40 years old)
of support vehicles that are available. “There are a lot of Some
the past three years, which also rate highly as crucial aspects
Business incubators 45%
of support. Nevertheless, the category as a whole is one in
which more work could be done, to ensure that activities are Entrepreneurial workshops/support meetings 44%
aligned, easy to access and complementary. “We need to Government start-up/other programs 35%
encourage and support entrepreneurs. Government can play Entrepreneur clubs and associations 33%
a key role in facilitating that, helping create the conversations Teaming/mentoring 33%
and platforms for entrepreneurs to meet, speak and work
together,” says Mitchell. Source: EY G20 Entrepreneurship Barometer 2013
Reduction of personal
income tax burden, 35%
Ranking Access to Score Entrepreneurship Score Tax and Score Education and Score Coordinated Score
funding culture regulation training support
1 United States 7.12 United States 7.67 Saudi Arabia 6.40 France 6.58 Russia 6.23
2 United Kingdom 6.86 South Korea 7.53 Canada 6.34 Australia 6.53 Mexico 5.89
3 China 6.75 Canada 7.45 South Korea 6.34 United States 6.50 Brazil 5.87
4 Canada 6.62 Japan 7.28 United Kingdom 6.19 South Korea 6.40 Indonesia 5.84
5 Australia 6.48 Australia 7.18 South Africa 6.10 EU 6.25 India 5.76
6 South Africa 5.95 United Kingdom 7.00 Japan 6.07 United Kingdom 5.98 China 5.75
7 Japan 5.81 Germany 6.88 Germany 5.84 Germany 5.89 Turkey 5.66
8 South Korea 5.75 EU 6.07 Australia 5.75 Argentina 5.85 South Africa 5.65
9 Brazil 5.67 France 5.68 Russia 5.65 Canada 5.81 Argentina 5.64
11 India 5.48 India 4.95 Turkey 5.45 South Africa 5.67 France 5.41
12 EU 5.41 Brazil 4.88 Indonesia 5.38 Saudi Arabia 5.66 Saudi Arabia 5.39
13 Saudi Arabia 5.25 Italy 4.67 United States 5.33 Italy 5.47 EU 5.37
14 Germany 5.23 South Africa 4.33 Mexico 5.21 Russia 5.46 South Korea 5.36
15 Russia 5.04 Turkey 4.30 France 5.12 Mexico 5.32 Australia 5.31
16 France 4.74 Argentina 4.06 China 5.07 Japan 4.72 Canada 5.29
17 Turkey 4.57 Mexico 3.96 Brazil 4.83 Turkey 4.39 United Kingdom 5.19
18 Mexico 4.42 China 3.88 Italy 4.76 China 4.35 Japan 5.04
19 Italy 4.03 Indonesia 3.80 India 4.39 Indonesia 3.88 Italy 4.97
20 Argentina 3.27 Saudi Arabia 3.38 Argentina 4.31 India 3.49 United States 4.85
Note: As per the G20 membership, this list comprises 19 individual countries and also the European Union (EU), as an additional
20
member. Our rankings show the performance of each country, along with an aggregate performance for the 27 EU Member States.
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Contacts
Iain Wilkie
Strategic Growth Markets Leader,
UK&I, EY
+44 207 951 3410
iwilkie@uk.ey.com
Björn Conway
Government & Public Sector
Leader, UK&I, EY
+44 207 951 1749
bconway@uk.ey.com