UK is top European location for entrepreneurs
27 August 2013
EY G20 Entrepreneurship Barometer
The UK is one of the top five countries in the G20 for entrepreneurs, beating the likes of Germany and France, and second only to the US for access to funding, according to a new report released today by EY.
A competitive tax system, business friendly regulations, skilled workforce and dynamic financial markets have given the UK its edge and seen spending on Research & Development exceed the G20 average by over 0.2%. Domestic credit in the private sector, as a proportion of GDP, was almost double the G20 average – 209.5 compared to 99 in the G20.
However, the report – which has been launched ahead of the G20 Leaders Summit – warns that greater collaboration is needed between Government, business and entrepreneurs if the UK is to retain its leading position. Other countries considered top for entrepreneurship are Australia, Canada, South Korea and the US.
EY’s G20 Entrepreneurship Barometer is based on a survey of over 1,500 entrepreneurs – including 55 from the UK – plus quantitative data on entrepreneurial conditions and EY research into more than 200 government practices. Countries were then ranked on funding, culture, tax and regulation, education and training, and coordinated support.
No room for complacency
Stuart Watson, Partner and Head of EY’s UK Entrepreneur Of The Year Awards programme commented: “The foundations for a strong entrepreneurial ecosystem are already well established in the UK, with fast growth businesses accounting for nearly 60% of all new jobs. Targeted incentives for investment and research & development; one of the lowest corporate tax rates in the G20 by 2015; and positive interventions like Funding for Lending; all help send a clear message that Britain is open for business.
“But we shouldn’t be complacent and can’t rely purely on Government. Domestic demand is set to remain fragile for some time yet, uncertainty still hangs over the Eurozone, while the emerging growth markets are catching us up – Russia scored highest in the Barometer for ‘coordinated support’. Government and business will need to work closely together to maintain a competitive financial and regulatory environment and develop an entrepreneurial culture in every aspect of business life.”
75% of UK entrepreneurs report deterioration in access to bank loans
The UK scored highly on access to funding. However, long-standing concerns about the flow of credit remain. 70% of UK entrepreneurs described access to funding as difficult and 75% reported that access to bank loans had deteriorated over the past three years.
Iain Wilkie, EY’s Strategic Growth Markets Leader added: “The Regional Growth Fund and Funding for Lending are starting to have a positive impact, while new sources of financing such as crowd funding are becoming more readily available. But there are clearly still challenges for entrepreneurs on the ground. There’s a real need for more innovative financing to service every stage of the business life cycle, to take companies from fledging start-ups through to rapid growth and maturity.”
Support for UK entrepreneurs is in decline
The level of support entrepreneurs receive in the UK is also perceived to be slipping. The UK received its lowest score in the Barometer for ‘coordinated support’ from mentors, networks and business incubators, ranking just 17th amongst the G20.
While one in two entrepreneurs surveyed across the G20 said that access to business incubators had improved over the past three years, only half as many felt the same in the UK. 45% of those surveyed in the UK named business incubators as the top initiative to boost the long-term growth of entrepreneurship in the country.
UK PLC needs to ‘step up’
“The solution lies in the hands of business not Government,” says Watson. “Cambridge and the Silicon Roundabout are great examples of business communities that have formed clusters of expertise, where companies collaborate but are still able to compete. They are hotbeds of innovation, but we need to see these models replicated across the country rather than existing in isolated pockets. It’s time for UK PLC to step up.”
Scott Button, Co-Founder and CEO of Unruly Media, UK, said his company had benefitted considerably from being located alongside similar businesses in London’s so called Tech City. “It has stopped us making mistakes as we have grown. As you scale you face all sorts of organisational and management issues that you’ve never had to deal with before. You can bring in new senior managers to deal with that, but being here has let us tap into some of the same experience, a bit like the benefit you get from having experienced investors work with your business.”
Dragons' Den and The Apprentice boost UK’s entrepreneurial culture
According to the report, Government support for innovation through the tax system, business awards – including EY’s Entrepreneur Of The Year Awards programme – and the rise of popular TV shows such as Dragons' Den and The Apprentice have helped to foster an entrepreneurial culture in the UK. 71% of entrepreneurs surveyed felt the UK had a culture that encourages entrepreneurship, compared to the G20 average of 57%.
“There has been a real shift in the perception of entrepreneurs over the last 10 years. The advent of popular TV shows and well known business personalities has undoubtedly had an impact on the number of young people who now list ‘entrepreneur’ as a career aspiration,” says Watson.
Last piece of the jigsaw
But there is room for improvement. Just 13% of UK entrepreneurs said that business failure is perceived as a learning opportunity in the UK, compared to the G20 average of 23%.
Concluding, Watson adds: “Over 400,000 new businesses are set up every year but over a fifth fail within 12 months. To become a truly entrepreneurial culture, the UK needs to adopt more of the US attitude, where business failure is seen as a learning experience and something that can be recovered from, rather than a barrier to future business aspirations.”