Posted: Thu 8th Dec 2022
Shadow chancellor Rachel Reeves has promised to transform Britain into "the high growth, start-up hub of the world" should Labour get into power.
The pledge comes as the party hosts a conference for 350 business leaders in London and announces the findings of a review that makes recommendations on how Labour should support and encourage small business growth.
Led by independent peer Lord O'Neill, the 'Start-Up, Scale-Up' report makes several suggestions for boosting start-ups.
Encouraging high growth start-ups
The review said a Labour government should increase institutional investment in small businesses by drawing on the experience of the French government's successful Tibi scheme. It brings together private sector investors and has so far raised €18bn (£15.5bn) for start-ups in France.
The British Business Bank (BBB) being given greater independence to provide business funding is another recommendation. Currently, the bank's business plan is reviewed annually by the government and changes have to be approved by ministers. The review said this makes it difficult for the BBB to pursue objectives on a long-term basis.
The BBB should also set investment targets for finance for women and ethnic minority founders, as well as upgrade targets for deploying funding outside London.
The review said start-ups should be given greater access to public sector contracts with the creation of a "procurement council of experts" to review best practice and identify areas of improvement.
Evidence suggests that the proportion of public sector procurement spending going to small businesses has decreased since 2016, from 25% to 21% in 2021, the report said.
It referenced a study by Enterprise Nation, the Entrepreneurs Network and Tussell which showed the variation across government departments. The Department for Culture, Media and Sport devotes 37% of its budget to small businesses, whilst the Department for Transport devotes just 2%.
The review called for the business rates system to be modernised to incentivise entrepreneurship and remove undue burdens from small businesses. Labour has previously pledged to scrap business rates.
A Labour government, the report suggested, should encourage more innovation created at universities to be turned into actual business.
An annual dashboard summarising each university's offer to spinouts and metrics of spinout success should be published, and universities should be encouraged to offer several options for spinout founders, including an option where the university keeps a relatively small stake of equity.
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS), which incentivise investors to back start-ups, have been successful at stimulating entrepreneurship, the review noted, so Labour should commit to maintaining the schemes and continuing them beyond their 2025 sunset.
It should also review whether the scope and scale of EIS and SEIS are sufficient and providing adequate incentives.
I’ll be speaking soon in Canary Wharf at Labour’s Business Conference setting out Labour’s plan to make Britain the high-growth start-up hub of the world.— Rachel Reeves (@RachelReevesMP) December 8, 2022
You can watch live here: https://t.co/0d962r06Vw
Rachel Reeves, Labour's shadow chancellor, said:
"These are challenging economic times. But I know the spirit of enterprise, of creativity, of endeavour are as present in Britain today as they ever have been.
"We are at a post-Brexit crossroads. We can go down the road of managed decline, falling behind our competitors, or we can draw on bold thinking to propel us forward.
"That is why Labour today welcome this radical plan to make Britain the high growth, start-up hub of the world.
“Start-Up, Scale-Up provides crucial insights towards achieving one of the guiding ambitions of the next Labour government: to make Britain the best place to start, and to grow, a business. And it sends a powerful message: that Labour is back in business."
Lord Jim O'Neill added:
"The more all political parties support the eco-system of start-ups for the UK, the more they become entwined in the DNA of policy thinking for the future.
“Leading this review has underlined the huge potential Britain’s start-ups have for changing our economic fortunes, especially in towns and cities outside of London."