tomorrow's enterprise
TRANSCRIPT
25Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise Building a public policy environment that reflects the changing state of enterprise
BUSINESS WITH CONFIDENCE icaewcom
2 Tomorrowrsquos Enterprise
ForewordThe governmentrsquos policy manual for enterprise needs an update
Why Take a closer look at the economy on a grass-roots level and it is obvious The UK is experiencing a remarkable surge in entrepreneurship There are now over 54m businesses a million more than there were before the financial crisis In 2015 alone close to 600000 businesses were created This has coincided with the biggest self- employment boom in 40 years Registration data gathered from Companies House shows that companies are being created at the rate of more than one a minute There are now more businesses being created than people going into full-time jobs cementing the UKrsquos position as Europersquos lsquocapital of enterprisersquo Furthermore the UK has become a world leader in the digital economy and the opportunities it holds for budding entrepreneurs This lsquorevolutionrsquo has powered the UK to become the most dynamic major economy in the world
According to the World Bankrsquos latest Ease of Doing Business ranking the UK is the sixth best place to start and run a business even coming ahead of the US This has led Lord Young to call this the lsquogolden agersquo for entrepreneurship in the UK and declare that there has never been a better time to start your own business The government now has the opportunity to lock this in for the foreseeable future This report explores what this means for government policy on enterprise and how it needs to be updated to reflect the changing reality of how people do business
When I speak to entrepreneurs across the country I get a sense of their ambition to grow However all too often these plans are not realised For every 10 new businesses which are created 6 existing ones are dissolved Business failure is a natural part of a competitive economy However the excessively high instance of business failure is a problem and one that we believe the government in partnership with the private sector can help fix
Michael Izza Chief Executive ICAEW
3Tomorrowrsquos Enterprise
At the last general election the government received a mandate for enterprise As we look ahead over the course of this Parliament Tomorrowrsquos Enterprise urges government to make the survival and growth of new businesses a matter of national priority This report makes the following four recommendations for policymakers both in government and outside government to consider We believe these points lie at the heart of a long-term plan for enterprise
Make business survival a national priority by recognising the importance of business advice
Release the untapped potential of home-based businesses by levelling the playing field
Connect new businesses with the fast-growing digital economy by getting them online
Encourage new businesses to start exporting by providing them with early-stage export advice
With the public finances still under pressure we understand that the government has little room for manoeuvre to significantly increase investment on business support programmes Tomorrowrsquos Enterprise does not recommend this Rather we focus on existing government policies that we believe have proven successful so far By putting further weight behind these programmes as opposed to initiatives which have not worked as well ICAEW believes the government can ensure that it provides the necessary support to aspiring businesses while also meeting its effort for a more efficient Whitehall
As chartered accountants advising 15m businesses across the UK we have a unique vantage point of the winds of change blowing across the economy Equipped with this insight this report highlights what government and businesses themselves can do to ensure the UK remains the lsquocapital of enterprisersquo
4321
4 Tomorrowrsquos Enterprise
A timely report hellipThis ICAEW report makes recommendations in four areas close to my heart unleashing the growth potential of home-based businesses increasing exports making the most of the digital opportunity and ensuring small businesses get access to the right advice at the right time
Tomorrowrsquos Enterprise does not call for an increase in small business support programmes funded by government a sensible reality in an age of budget cuts that have seen schemes such as Growth Accelerator and MAS (Manufacturing Advisory Service) abolished Rather it looks at existing schemes and suggests areas for improvement It comes at a critical time a new era for business support as government asks the private sector to step up and deliver
At Enterprise Nation we believe business support is best delivered by entrepreneurs who have been there and done it experts and advisers qualified in specific topics and small businesses supporting each other as peers
The role of government is to set the conditions for growth ndash decent tax rates superfast broadband good transport links and confidence in the economy It also has a role as chief purchaser with a target of pound1 in every pound3 of government contracts to be spent with small businesses
Placing contracts and facilitating private sector provision of business support is the future role for government The job of delivery is now down to organisations such as ICAEW This represents a new era and a move in the right direction for the growth of small business
Emma Jones MBE is founder of Enterprise Nation and was appointed as a Business Ambassador by Prime Minister David Cameron
Emma Jones Enterprise Nation
5Tomorrowrsquos Enterprise
Contents
Summary of key points
State of enterprise
Who are tomorrowrsquos enterprise
Business advice for a new generationRecommendation 1 Make business survival a national priority by recognising the importance of business advice
Hidden heroes businesses at the lsquohome frontrsquoRecommendation 2 Release the untapped potential of home-based businesses by levelling the playing field
Boosting connectivity in the digital ageRecommendation 3 Connect new businesses with the fast-growing digital economy by getting them online
Born global enterprise beyond bordersRecommendation 4 Encourage new businesses to start exporting by providing them with early-stage export advice
i
ii
iii
iv
6 Tomorrowrsquos Enterprise
Summary of key points
Make business survival a national priority by recognising the importance of business advice Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers beyond the current short-term shelf life of a few years to at least over the course of the Parliament A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Release the untapped potential of home-based businesses by levelling the playing fieldWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation Local Enterprise Partnerships and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring
Connect new businesses with the fast-growing digital economy by getting them onlineGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader when it comes to e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
Encourage new businesses to start exporting by providing them with early-stage export adviceTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
1
2
3
4
7Tomorrowrsquos Enterprise
lsquoThis is the golden age for enterprise ndash there has never been a better time to start a businessrsquoLord Young
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
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2 Tomorrowrsquos Enterprise
ForewordThe governmentrsquos policy manual for enterprise needs an update
Why Take a closer look at the economy on a grass-roots level and it is obvious The UK is experiencing a remarkable surge in entrepreneurship There are now over 54m businesses a million more than there were before the financial crisis In 2015 alone close to 600000 businesses were created This has coincided with the biggest self- employment boom in 40 years Registration data gathered from Companies House shows that companies are being created at the rate of more than one a minute There are now more businesses being created than people going into full-time jobs cementing the UKrsquos position as Europersquos lsquocapital of enterprisersquo Furthermore the UK has become a world leader in the digital economy and the opportunities it holds for budding entrepreneurs This lsquorevolutionrsquo has powered the UK to become the most dynamic major economy in the world
According to the World Bankrsquos latest Ease of Doing Business ranking the UK is the sixth best place to start and run a business even coming ahead of the US This has led Lord Young to call this the lsquogolden agersquo for entrepreneurship in the UK and declare that there has never been a better time to start your own business The government now has the opportunity to lock this in for the foreseeable future This report explores what this means for government policy on enterprise and how it needs to be updated to reflect the changing reality of how people do business
When I speak to entrepreneurs across the country I get a sense of their ambition to grow However all too often these plans are not realised For every 10 new businesses which are created 6 existing ones are dissolved Business failure is a natural part of a competitive economy However the excessively high instance of business failure is a problem and one that we believe the government in partnership with the private sector can help fix
Michael Izza Chief Executive ICAEW
3Tomorrowrsquos Enterprise
At the last general election the government received a mandate for enterprise As we look ahead over the course of this Parliament Tomorrowrsquos Enterprise urges government to make the survival and growth of new businesses a matter of national priority This report makes the following four recommendations for policymakers both in government and outside government to consider We believe these points lie at the heart of a long-term plan for enterprise
Make business survival a national priority by recognising the importance of business advice
Release the untapped potential of home-based businesses by levelling the playing field
Connect new businesses with the fast-growing digital economy by getting them online
Encourage new businesses to start exporting by providing them with early-stage export advice
With the public finances still under pressure we understand that the government has little room for manoeuvre to significantly increase investment on business support programmes Tomorrowrsquos Enterprise does not recommend this Rather we focus on existing government policies that we believe have proven successful so far By putting further weight behind these programmes as opposed to initiatives which have not worked as well ICAEW believes the government can ensure that it provides the necessary support to aspiring businesses while also meeting its effort for a more efficient Whitehall
As chartered accountants advising 15m businesses across the UK we have a unique vantage point of the winds of change blowing across the economy Equipped with this insight this report highlights what government and businesses themselves can do to ensure the UK remains the lsquocapital of enterprisersquo
4321
4 Tomorrowrsquos Enterprise
A timely report hellipThis ICAEW report makes recommendations in four areas close to my heart unleashing the growth potential of home-based businesses increasing exports making the most of the digital opportunity and ensuring small businesses get access to the right advice at the right time
Tomorrowrsquos Enterprise does not call for an increase in small business support programmes funded by government a sensible reality in an age of budget cuts that have seen schemes such as Growth Accelerator and MAS (Manufacturing Advisory Service) abolished Rather it looks at existing schemes and suggests areas for improvement It comes at a critical time a new era for business support as government asks the private sector to step up and deliver
At Enterprise Nation we believe business support is best delivered by entrepreneurs who have been there and done it experts and advisers qualified in specific topics and small businesses supporting each other as peers
The role of government is to set the conditions for growth ndash decent tax rates superfast broadband good transport links and confidence in the economy It also has a role as chief purchaser with a target of pound1 in every pound3 of government contracts to be spent with small businesses
Placing contracts and facilitating private sector provision of business support is the future role for government The job of delivery is now down to organisations such as ICAEW This represents a new era and a move in the right direction for the growth of small business
Emma Jones MBE is founder of Enterprise Nation and was appointed as a Business Ambassador by Prime Minister David Cameron
Emma Jones Enterprise Nation
5Tomorrowrsquos Enterprise
Contents
Summary of key points
State of enterprise
Who are tomorrowrsquos enterprise
Business advice for a new generationRecommendation 1 Make business survival a national priority by recognising the importance of business advice
Hidden heroes businesses at the lsquohome frontrsquoRecommendation 2 Release the untapped potential of home-based businesses by levelling the playing field
Boosting connectivity in the digital ageRecommendation 3 Connect new businesses with the fast-growing digital economy by getting them online
Born global enterprise beyond bordersRecommendation 4 Encourage new businesses to start exporting by providing them with early-stage export advice
i
ii
iii
iv
6 Tomorrowrsquos Enterprise
Summary of key points
Make business survival a national priority by recognising the importance of business advice Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers beyond the current short-term shelf life of a few years to at least over the course of the Parliament A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Release the untapped potential of home-based businesses by levelling the playing fieldWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation Local Enterprise Partnerships and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring
Connect new businesses with the fast-growing digital economy by getting them onlineGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader when it comes to e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
Encourage new businesses to start exporting by providing them with early-stage export adviceTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
1
2
3
4
7Tomorrowrsquos Enterprise
lsquoThis is the golden age for enterprise ndash there has never been a better time to start a businessrsquoLord Young
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
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ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
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3Tomorrowrsquos Enterprise
At the last general election the government received a mandate for enterprise As we look ahead over the course of this Parliament Tomorrowrsquos Enterprise urges government to make the survival and growth of new businesses a matter of national priority This report makes the following four recommendations for policymakers both in government and outside government to consider We believe these points lie at the heart of a long-term plan for enterprise
Make business survival a national priority by recognising the importance of business advice
Release the untapped potential of home-based businesses by levelling the playing field
Connect new businesses with the fast-growing digital economy by getting them online
Encourage new businesses to start exporting by providing them with early-stage export advice
With the public finances still under pressure we understand that the government has little room for manoeuvre to significantly increase investment on business support programmes Tomorrowrsquos Enterprise does not recommend this Rather we focus on existing government policies that we believe have proven successful so far By putting further weight behind these programmes as opposed to initiatives which have not worked as well ICAEW believes the government can ensure that it provides the necessary support to aspiring businesses while also meeting its effort for a more efficient Whitehall
As chartered accountants advising 15m businesses across the UK we have a unique vantage point of the winds of change blowing across the economy Equipped with this insight this report highlights what government and businesses themselves can do to ensure the UK remains the lsquocapital of enterprisersquo
4321
4 Tomorrowrsquos Enterprise
A timely report hellipThis ICAEW report makes recommendations in four areas close to my heart unleashing the growth potential of home-based businesses increasing exports making the most of the digital opportunity and ensuring small businesses get access to the right advice at the right time
Tomorrowrsquos Enterprise does not call for an increase in small business support programmes funded by government a sensible reality in an age of budget cuts that have seen schemes such as Growth Accelerator and MAS (Manufacturing Advisory Service) abolished Rather it looks at existing schemes and suggests areas for improvement It comes at a critical time a new era for business support as government asks the private sector to step up and deliver
At Enterprise Nation we believe business support is best delivered by entrepreneurs who have been there and done it experts and advisers qualified in specific topics and small businesses supporting each other as peers
The role of government is to set the conditions for growth ndash decent tax rates superfast broadband good transport links and confidence in the economy It also has a role as chief purchaser with a target of pound1 in every pound3 of government contracts to be spent with small businesses
Placing contracts and facilitating private sector provision of business support is the future role for government The job of delivery is now down to organisations such as ICAEW This represents a new era and a move in the right direction for the growth of small business
Emma Jones MBE is founder of Enterprise Nation and was appointed as a Business Ambassador by Prime Minister David Cameron
Emma Jones Enterprise Nation
5Tomorrowrsquos Enterprise
Contents
Summary of key points
State of enterprise
Who are tomorrowrsquos enterprise
Business advice for a new generationRecommendation 1 Make business survival a national priority by recognising the importance of business advice
Hidden heroes businesses at the lsquohome frontrsquoRecommendation 2 Release the untapped potential of home-based businesses by levelling the playing field
Boosting connectivity in the digital ageRecommendation 3 Connect new businesses with the fast-growing digital economy by getting them online
Born global enterprise beyond bordersRecommendation 4 Encourage new businesses to start exporting by providing them with early-stage export advice
i
ii
iii
iv
6 Tomorrowrsquos Enterprise
Summary of key points
Make business survival a national priority by recognising the importance of business advice Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers beyond the current short-term shelf life of a few years to at least over the course of the Parliament A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Release the untapped potential of home-based businesses by levelling the playing fieldWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation Local Enterprise Partnerships and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring
Connect new businesses with the fast-growing digital economy by getting them onlineGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader when it comes to e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
Encourage new businesses to start exporting by providing them with early-stage export adviceTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
1
2
3
4
7Tomorrowrsquos Enterprise
lsquoThis is the golden age for enterprise ndash there has never been a better time to start a businessrsquoLord Young
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
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ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
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ICAEW
linkedincom ndash find ICAEW
4 Tomorrowrsquos Enterprise
A timely report hellipThis ICAEW report makes recommendations in four areas close to my heart unleashing the growth potential of home-based businesses increasing exports making the most of the digital opportunity and ensuring small businesses get access to the right advice at the right time
Tomorrowrsquos Enterprise does not call for an increase in small business support programmes funded by government a sensible reality in an age of budget cuts that have seen schemes such as Growth Accelerator and MAS (Manufacturing Advisory Service) abolished Rather it looks at existing schemes and suggests areas for improvement It comes at a critical time a new era for business support as government asks the private sector to step up and deliver
At Enterprise Nation we believe business support is best delivered by entrepreneurs who have been there and done it experts and advisers qualified in specific topics and small businesses supporting each other as peers
The role of government is to set the conditions for growth ndash decent tax rates superfast broadband good transport links and confidence in the economy It also has a role as chief purchaser with a target of pound1 in every pound3 of government contracts to be spent with small businesses
Placing contracts and facilitating private sector provision of business support is the future role for government The job of delivery is now down to organisations such as ICAEW This represents a new era and a move in the right direction for the growth of small business
Emma Jones MBE is founder of Enterprise Nation and was appointed as a Business Ambassador by Prime Minister David Cameron
Emma Jones Enterprise Nation
5Tomorrowrsquos Enterprise
Contents
Summary of key points
State of enterprise
Who are tomorrowrsquos enterprise
Business advice for a new generationRecommendation 1 Make business survival a national priority by recognising the importance of business advice
Hidden heroes businesses at the lsquohome frontrsquoRecommendation 2 Release the untapped potential of home-based businesses by levelling the playing field
Boosting connectivity in the digital ageRecommendation 3 Connect new businesses with the fast-growing digital economy by getting them online
Born global enterprise beyond bordersRecommendation 4 Encourage new businesses to start exporting by providing them with early-stage export advice
i
ii
iii
iv
6 Tomorrowrsquos Enterprise
Summary of key points
Make business survival a national priority by recognising the importance of business advice Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers beyond the current short-term shelf life of a few years to at least over the course of the Parliament A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Release the untapped potential of home-based businesses by levelling the playing fieldWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation Local Enterprise Partnerships and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring
Connect new businesses with the fast-growing digital economy by getting them onlineGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader when it comes to e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
Encourage new businesses to start exporting by providing them with early-stage export adviceTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
1
2
3
4
7Tomorrowrsquos Enterprise
lsquoThis is the golden age for enterprise ndash there has never been a better time to start a businessrsquoLord Young
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
5Tomorrowrsquos Enterprise
Contents
Summary of key points
State of enterprise
Who are tomorrowrsquos enterprise
Business advice for a new generationRecommendation 1 Make business survival a national priority by recognising the importance of business advice
Hidden heroes businesses at the lsquohome frontrsquoRecommendation 2 Release the untapped potential of home-based businesses by levelling the playing field
Boosting connectivity in the digital ageRecommendation 3 Connect new businesses with the fast-growing digital economy by getting them online
Born global enterprise beyond bordersRecommendation 4 Encourage new businesses to start exporting by providing them with early-stage export advice
i
ii
iii
iv
6 Tomorrowrsquos Enterprise
Summary of key points
Make business survival a national priority by recognising the importance of business advice Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers beyond the current short-term shelf life of a few years to at least over the course of the Parliament A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Release the untapped potential of home-based businesses by levelling the playing fieldWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation Local Enterprise Partnerships and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring
Connect new businesses with the fast-growing digital economy by getting them onlineGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader when it comes to e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
Encourage new businesses to start exporting by providing them with early-stage export adviceTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
1
2
3
4
7Tomorrowrsquos Enterprise
lsquoThis is the golden age for enterprise ndash there has never been a better time to start a businessrsquoLord Young
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
6 Tomorrowrsquos Enterprise
Summary of key points
Make business survival a national priority by recognising the importance of business advice Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers beyond the current short-term shelf life of a few years to at least over the course of the Parliament A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Release the untapped potential of home-based businesses by levelling the playing fieldWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation Local Enterprise Partnerships and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring
Connect new businesses with the fast-growing digital economy by getting them onlineGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader when it comes to e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
Encourage new businesses to start exporting by providing them with early-stage export adviceTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
1
2
3
4
7Tomorrowrsquos Enterprise
lsquoThis is the golden age for enterprise ndash there has never been a better time to start a businessrsquoLord Young
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
7Tomorrowrsquos Enterprise
lsquoThis is the golden age for enterprise ndash there has never been a better time to start a businessrsquoLord Young
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
8 Tomorrowrsquos Enterprise
lsquoWhat is my message to government Simply put hellip ensure that the public policy environment reflects the changing face of enterprise in the UK and it allows it to grow and prosperrsquo Michael Izza Chief Executive ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
9Tomorrowrsquos Enterprise
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
Tomorrowrsquos Enterprise
0 2 4 6 8 10 12
Entrepreneurial activity score
Italy
Germany
France
Spain
Switzerland
EU average
Netherlands
UK
Source Global Entrepreneurship Monitor (GEM) 2015 Only Slovakia and Romania score higher than UK in Europe
UK is the lsquocapital of enterprisersquo in Europe
Growth in number of businesses in UK
2000ndash2015
Growth in UKpopulation as a whole
2000ndash2015
Number of businesses have grown five and a half times faster than the population as a whole
There are now a million more businesses than before the financial crisis
0
1
2
3
4
5
6
Total businessesHome-based businesses
20142013201220112010
Source ONS home workers rate
No of businesses (million)
Home-based businesses account for half of all businesses
After 1 year After 2 years After 3 years
Businesses not survivingBusinesses surviving
After 4 years Source ONS Business Demography 2014
Less than half of new businesses survive beyond their first four years
30
35
40
45
50
55
No of businesses (million)
201520142013201220112010200920082007200620052004
Source BIS Business Population Estimates 2014
State of enterprise
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
Tomorrowrsquos Enterprise
5
6
7
8
9
Businesspopulation density
201520122009200620032000
Source BIS Population Estimates ONS Annual Population Estimates
Business density in the UK remained strong during the recession
0
2
4
6
8
10
12
14
New business density
New registrations per 1000 people aged 15-64
Japan(2014)
Germany(2013)
Canada(2014)
Italy(2014)
France(2014)
UK(2012)
Source World Bank New Business Density No recent data available for the US in World Bank database
UK outperforms the G7 economies on new business creation
Large (250+)Medium (50ndash249)
Small (10ndash49)Micro (0ndash9)
No of exporters ( of total)
Source ONS Annual Business Survey 2014
LargeMedium Small amp micro
ExportersNon exporters
Source ONS Annual Business Survey 2014
Micro-businesses account for 75 of all exporters
However only 10 of small and micro businesses currently export leaving a huge untapped potential
Quick facts
UK is ranked No1 in the world for trading online
1ST
Only two of out five small businesses have access to superfast broadband
2 outof 5
70 of all new businesses start off in the home70
For every 10 new businesses created 6 existing ones are dissolved
6
Small businesses trading online receive double in export revenue than those that do not
DOUBLE
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
12 Tomorrowrsquos Enterprise
i Business advice for a new generationMake business survival a national priority by recognising the importance of business advice
The state of enterprise is evolving There has been a 55 increase in the number of businesses in the UK since 20001 To put this in context the growth in the UKrsquos population as a whole over that same period has been around 10 However despite the surge in this new generation of entrepreneurs less than half of new businesses survive beyond their first four years To reap the benefits of this lsquogolden agersquo of enterprise it is time that the government made business survival a national priority
New businesses that seek and get strategic business advice are more likely to survive and grow2 Despite the increasing availability of advice and support options for start-ups and small businesses it remains a challenge for government to get the right support to the right business at the right time3 If the UK is to establish itself as the
lsquoscale-up nationrsquo as Sherry Coutu the famed serial entrepreneur has termed it then there needs to be the right policy environment for survival and then growth Research carried out by Barclays in its Entrepreneurs Index shows that despite the expansion of the entrepreneurial base in the UK the proportion of businesses which are achieving high growth is actually falling4 If the base of the pyramid is allowed to become too broad without firms being able to scale-up by moving up the ladder then we will continue to see too many businesses not surviving those all too crucial early years Currently less than 50 of new businesses survive beyond their first four years This high instance of business failure has an adverse impact on other areas of government policy such as exports which is
discussed later on in the report For example over 80 of current exporters are those that have managed to survive their first four years Therefore a greater number of businesses surviving beyond this threshold will help support government ambitions to increase the number of UK exporters
In an open and competitive economy like the UK business failure is understandably part and parcel of the entrepreneurial experience Businesses compete with each other and it is this competitive element which encourages innovation productivity and growth Poor performing businesses will always be vulnerable to failure Policies which artificially keep afloat non-competitive and non-productive businesses are ultimately doing more harm than good However government program mes many of which are joint public and private initiatives which provide a springboard for innovative and exciting businesses to reach their true potential should be placed on a firmer footing The onus of business success or failure ultimately lies with the entrepreneur or business itself however government can play a strategic role alongside the business in its journey from start-up to scale-up
Why is this important
Despite the surge in entrepreneurship
less than 50 of new businesses survive beyond
their first four years
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
13Tomorrowrsquos Enterprise
Less than half of new businesses survive beyond their first four years The high instance of business failure reflects the failure of government to seriously tackle the problem with any long-term commitment As a first step government needs to extend programmes such as the Growth Vouchers and Business Growth Service beyond the current short-term shelf life of a few years to at least over the course of this Parliament to 2020 and beyond A stop-start approach to business advice and growth will only result in the continuing high rates of business failure
Over the course of the last Parliament the government worked closely with business organisations and the private sector to set up a range of initiatives aimed at helping businesses looking to grow Examples among many others include Start-up Loans Business Growth Service British Business Bank and the Growth Vouchers scheme In fact in 2014 ICAEW worked with the British Business Bank to produce the Business Finance Guide report which has become a seminal tool for ambitious businesses exploring financing options to help them scale-up
Since being set up these programmes have been successful in helping thousands of businesses across the country However as effective as these programmes may be far too many of the governmentrsquos policies designed to boost enterprise are short term in scope and vision The Business Growth Service had a shelf life of only a few years and contracts were set to expire in 20175 However the governmentrsquos decision to suddenly axe the scheme a couple of years before its original end date is an example of the short-sightedness within Whitehall
The Growth Vouchers programme had an even shorter lifespan of just over a year Launched in January 2014 it was designed to be a 15-month long pilot scheme aimed at helping small businesses access the strategic advice critical to their survival and growth through the provision of a voucher up to the cost of pound2000 The programme was used to explore how getting strategic business advice can help small businesses overcome barriers to growth It came to a close in March 2015 and the Department for Business Innovation and Skills (BIS) is currently evaluating the findings
However it is obvious that to fully evaluate the importance of business advice for small businesses the Growth Vouchers scheme should have been longer than only 15 months This explains why the take-up of these vouchers has failed to meet government expectations As shown by other government voucher schemes such as the Broadband Connection Voucher programme there is an initial time lag involved in raising awareness of the programme and this may result in a slow take-up of the vouchers by businesses at the beginning This has been the same for the Growth Vouchers It is important that the scheme is reinstated and placed on a longer-term footing Only by assessing the impact over a number of years rather than months can government fully recognise the importance of business advice
As the new generation of entrepreneurs and businesses come on line and look for opportunities to grow the public policy environment built to facilitate this must be long term in its approach Helping more and more businesses go beyond the three or four year survival threshold requires long-term commitment from government A constant lsquochop and changersquo culture in Whitehall will not achieve the results we want to see This is a suggestion which the BIS Select Committee has also raised6
What should be done
For every 10 new businesses which are
created 6 existing ones are dissolved
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
14 Tomorrowrsquos Enterprise
Around half of all businesses in the UK are home based a million of which have been around for more than two decades7 These are established businesses in their own right operating at the heart of the UK economy and are anything but the lsquofringe start-uprsquo they are usually labelled with To a large extent when we speak about tomorrowrsquos enterprise and the entrepreneurs of the future we are actually speaking about home-based businesses Around 70 of all new businesses start off in the home Home-based businesses are the vanguard of the UKrsquos enterprise lsquorevolutionrsquo There are now half a million more home-based businesses than there were in 2010 The implications and opportunities that this surge brings are huge For example if only half of all home-based businesses took on just one additional employee it would create close to 15m jobs
Home-based businesses that are growing and expanding may move into a business or commercial property after a few years but their most critical and formative years are spent being home based Therefore the policy and regulatory climate these businesses face must be one which is conducive to their growth How they will fare in the move towards greater devolution across the UK is one important example of this
The devolution of powers and responsibilities away from Whitehall to cities and regions represents both a challenge and opportunity for businesses especially those operating from home How will this transfer of power impact or not impact the roughly 3m home-based businesses in the UK How can we ensure that home-based businesses are not treated as lsquoinvisiblersquo businesses by these newly devolved authorities but rather as a core part of the local economy The role of Local Enterprise Partnerships (LEPs) and Growth Hubs will to a large extent determine this
ii Hidden heroes businesses at the lsquohome frontrsquoRelease the untapped potential of home-based businesses by levelling the playing field
Why is this important
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
15Tomorrowrsquos Enterprise
What should be doneWith 70 of all new businesses starting off in the home and with over half of current businesses still home based it is important that government policy reflects this reality Rather than being placed on the fringes of policy making home-based businesses should be front-and-centre of government efforts to boost growth across the UK especially when it comes to devolution and deregulation For example Local Enterprise Partnerships (LEPs) and Growth Hubs should provide greater lsquovisibilityrsquo to home-based businesses by bringing them into the local business networks and giving them access to the opportunities that devolution will bring The deregulatory agenda should also have home-based businesses in mind by making it easier for them to grow and expand by taking them out of the scope of business rates
LEPs which were introduced during the last Parliament will have a central role to play in ensuring that the voice of business is included in the devolution deals taking place
Many of the 39 LEPs across the country have been at the heart of the negotiations that have taken place between central government and the devolved city-regions One of the earliest city-regions to submit plans for a devolution deal was the Sheffield City Region It included plans to lsquodevelop a devolved approach to the delivery of business supportrsquo This is an early indication of how business support schemes will increasingly be delivered at the local level and through a regional lens rather than a national one Therefore as central government looks to recognise the importance of regional growth through devolution the regions in turn should recognise the
importance of businesses operating from the home This will represent a true devolution of economic opportunity
Recognising the growing clout of this particular business demographic the government recently made changes in the valuation of business rates so that in the majority of circumstances home-based businesses will not have to pay business rates However those home-based businesses that are looking to grow by recruiting employees are currently not included within this exemption and therefore incur business rates The additional cost acts as a barrier to growth and is an unnecessary regulatory burden on hard-working businesses looking to grow and push the UK economy forward Although the majority of home-based businesses do not employ additional staff or have any immediate ambitions to employ staff directly (outsourcing is a preferred option) research carried out by Enterprise Nation shows that home-based businesses are responsible for over half a million additional jobs in the UK We urge the government to free up the true potential of home-based businesses the so called lsquohidden halfrsquo by removing the burden of business rates which they accrue if they are looking to grow by taking on employees
If only half of home-based businesses took on just one additional
employee it would create 15m jobs
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
16 Tomorrowrsquos Enterprise
In his book The New Digital Age Googlersquos Eric Schmidt describes how the mass adoption of the internet is lsquodriving one of the most exciting social cultural and political transformations in history and unlike earlier periods of change this time the effects are fully globalrsquo It is clear that the mass adoption of the internet as well as other forms of digital technology have also led to an ongoing economic transformation and impacted the way entrepreneurs interact with the global marketplace The endeavour of enterprise continues to evolve and in many cases public policy is playing catch up
In this new digital age newer generations of start-ups and entrepreneurs think more globally from the beginning than their predecessors Why is this mindset so important Research by BIS found that the most important factor for business success is ambition Those businesses starting out with higher growth expectations perform more strongly than their counterparts
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
17Tomorrowrsquos Enterprise
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
18 Tomorrowrsquos Enterprise
The World Economic Forum recently ranked the UK as number one in the world when it comes to businesses trading with their customers online8 Itrsquos one of the only global league tables where the UK is in pole position highlighting the national competitive advantage the UK has in the digital economy HM Treasury estimates that the digital economy is now equivalent to 10 of GDP ndash greater than major sectors such as construction and transport The UK is already the second largest e-commerce market in the world relative to the size of the population9
In a lsquodigital firstrsquo world businesses need access to superfast digital networks if they are to remain competitive productive and visible to the marketplace The government is aware of the benefits of this and knows that small businesses which trade online receive on average double the revenue from exports than those businesses that do not trade online10 However despite this and the World Economic Forumrsquos top ranking of the UK still less than a third of small businesses currently trade online Research by BIS shows that only two out of five SMEs have access to superfast broadband at all11 It is clear that more needs to be done to encourage and facilitate more businesses especially new ones to have a digital footprint
The recent success of the governmentrsquos Broadband Connection Voucher scheme indicates the growing appetite and demand for a faster and more reliable internet connection The scheme enables small businesses operating in 50 cities across the UK to claim up to pound3000 to cover the cost of connecting or upgrading to superfast broadband Before the programme came to an abrupt end in October 2015 the vouchers were being issued to small businesses at the rate of 1000 a week Examine the scheme in further detail and it is obvious why the demand was so huge Early analysis on the success of the Broadband Connection Voucher scheme has found that over 80 of businesses reported that their broadband upgrade had improved both the productivity and efficiency of their business12 The results speak for themselves Putting in place lsquoworld class digital infrastructurersquo is a core part of the governmentrsquos Productivity Plan13 According to figures the government itself uses investment in high-speed broadband has the potential to add pound63bn in gross value-added to the UK economy over the next 10 years14 The pound40m price tag of the voucher scheme is equivalent to only 6 of this showing that any further investment in high-speed broadband will be an extremely small price to pay to unlock the vast returns from the fast-growing digital economy
iii Boosting connectivity in the digital ageConnect new businesses with the fast-growing digital economy by getting them online
Why is this important
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
19Tomorrowrsquos Enterprise
Research by BIS shows that only two out of five
small businesses have access to superfast broadband
What should be doneGovernment needs to give a long-term digital commitment to business To maintain the UKrsquos position as a world leader in e-commerce the government should start by giving business the message that it is serious about the UKrsquos place in the interconnected economy of the 21st century It should extend the successful Broadband Connection Voucher scheme to at least 2020 to make sure budding entrepreneurs are not left behind in the lsquodigital racersquo Government should also work with the private sector to encourage more businesses to trade online and establish a web presence which is critical in the digital age
The European Commission has identified the creation of a Single Digital Market as one of its main priorities The UK Government has pushed the European Commission to make it easier for digital businesses especially new and micro businesses to set up and trade online instantly across all EU member states British businesses will benefit from this more than their counterparts across the continent The UKrsquos number one ranking in the World Economic Forumrsquos table for businesses trading online stands in stark contrast to the other major European economies like Germany (ranked 13th) and France (ranked 29th) As
the UK Government looks to work with the European Commission to strengthen the single digital market across the continent it should increase its support and engagement with British enterprise to make sure that the UK maintains its premium position as the global leader The digital market begins at home
A first step should be to significantly increase the reach of the Broadband Connection Voucher scheme by extending the programme to the end of the Parliament Sufficiently resourcing the programme will be critical if the government is to meet its own ambition to make sure that the UK lsquomaintains its position as the best internet economy in the worldrsquo15 Therefore the pound40m fund allocated to the programme which is much reduced from the initial pound100m amount needs to be increased
In fact the reason behind the abrupt end of the scheme was due to its lsquofirst come first servedrsquo approach which meant that once the pound40m pot was empty the government pulled the plug on it regardless of the high demand from businesses Speaking about the scheme when it was first announced in 2013 the Prime Minister highlighted the importance of lsquokitting out SMEs for the 21st centuryrsquo to allow them to lsquocompete in the global racersquo It is clear that a short-term lsquofirst come first servedrsquo approach will not achieve this Government needs to give a long-term digital commitment to business
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
20 Tomorrowrsquos Enterprise
Digital technologies and platforms are empowering entrepreneurs to think big As the world becomes smaller and national borders become invisible through developments in technology and transportation the opportunities which exist for entrepreneurs from the outset are now global in scale This explains why a recent survey found that close to 70 of exporters have always exported ndash they were lsquoborn globalrsquo16
This signals a shift away from the traditional stage-theory approach to exporting where businesses start trading internationally once they have reached a certain size and have saturated their domestic market However recent trends and data paint a more dynamic picture Official figures show that over 90 of exporters are actually small businesses with micro businesses (0-9 employees) accounting for three-quarters of all those who currently export17
Come 2020 the independent Office for Budget Responsibility expects the value of UK exports to be just pound630bn around a third lower than the governmentrsquos pound1 trillion target18 The government wants to increase the number of exporters by 100000 ICAEW regularly speaks to small businesses about their exporting ambitions Their feedback indicates to us that despite the governmentrsquos target there arenrsquot 100000 export-ready businesses knocking at the door It is becoming increasingly obvious that any effort to reach the governmentrsquos target of 100000 new exporters will require nothing less than a fully-committed campaign to lsquowin the hearts and mindsrsquo of UK businesses The value of export needs to be sold to these businesses Marketing initiatives by UKTI and other parts of government are part of the solution but much more needs to be done
The First Time Exporters (FTE) initiative is one such example The programme launched by the government shortly after the general election in 2015 is a package of support offered by UKTI which includes training and advice for businesses selling overseas for the first time It will also help new exporters to take advantage of the digital and e-commerce opportunities by offering dedicated digital trade advisers to assist their export planning and also direct them to lsquoliversquo exporting opportunities This is an example of where government programmes have the potential to make a significant contribution to help new businesses realise their exporting ambitions
iv Born global enterprise beyond bordersEncouraging new businesses to start exporting by providing them with early-stage export advice
Why is this important
Public policy is playing catch-up
as the nature of enterprise
continues to evolve
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
21Tomorrowrsquos Enterprise
What should be doneTomorrowrsquos businesses must become tomorrowrsquos exporters The government target to reach pound1 trillion in exports by 2020 remains beyond reach It is clear that policies aimed at boosting UK exports demand a refresh In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour especially if the ambition to have 100000 new exporters is to be realised The awareness and take-up of the governmentrsquos First Time Exporters (FTE) initiative must be scaled up to help achieve the step change required in the UKrsquos export performance
It is important that more and more new businesses and start-ups go on to join the ranks of existing businesses that trade internationally In a similar way to how the government working with the private sector has targeted early-stage finance as a major bottleneck for new firms it must now explore the benefits of early-stage export advice with a similar vigour This fleet-of-foot and agility in government policy now needs to be applied to efforts aimed at boosting UK exports especially from new businesses and first-time exporters Currently the policy framework resembles an analogue system trying to keep up with a digital age Most government-backed trade missions are the preserve of larger businesses in the hope that any benefits trickle down the supply chain However that is an outdated model in the current climate and certainly not befitting the digital age we now live in
New and small businesses are the lsquogatekeepersrsquo for the UKrsquos export ambitions especially if there is to be any chance of increasing the number of exporters by 100000 Despite the fact that small and micro-businesses account for over 90 of existing exporters only 10 of them currently export19 This presents a huge untapped potential Considering that there are over 5m small businesses in the UK even raising the percentage of small exporters by a few points will significantly increase the number of businesses exporting The FTE initiative if properly resourced and communicated to new businesses has the potential to achieve this
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
22 Tomorrowrsquos Enterprise
The British Business Bank is a government-owned financial institution set up to support economic growth by making finance markets work better for smaller businesses in the UK
The British Business Bank supports smaller UK businesses in three broad areas
bull Start-up ndash mentoring and funds to lsquobe your own bossrsquo
bull Scale-up ndash finance for businesses growing quickly or those with the potential to do so
bull Stay ahead ndash more funding options and greater choice of providers for expansion and working capital
Find out more at british-business-bankcouk
ICAEWrsquos Business Advice Service offers help to businesses in England Scotland and Wales to overcome the challenges they face including
bull how to grow a business
bull securing loans capital and finance
bull keeping staff and creating new jobs
bull meeting tax and regulatory requirements
bull export planning
bull planning for long-term sustainable growth
bull debt management and
bull legal issues
Businesses are offered a free advice session with an ICAEW Chartered Accountant Visit businessadviceservicecom to find the nearest office participating in the scheme
UK Trade amp Investment (UKTI) is the government department that helps UK-based companies succeed in the global economy
UKTI offers expertise and contacts through its extensive network of specialists in the UK and in British embassies and other diplomatic offices around the world They provide companies with the tools they need to be competitive on the world stage
Get support
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
23Tomorrowrsquos Enterprise
Footnotes1 BIS Business Population Estimates 20152 Lord Young 20133 Lord Young 20154 Barclays Entrepreneurs Index 20155 httpwwwpublicationsparliamentukpacm201415cmselectcmbis77077011htm6 Report to government 20157 Enterprise Nation Home Business Survey 20148 World Economic Forum 20159 Boston Consulting Group10 HM Treasury 201311 BIS 201512 Connection Vouchers Early Impacts and Data Analysis13 HM Treasury Fixing the foundations July 201514 HM Treasury Fixing the foundations July 201515 HM Treasury 201316 Barclays17 ONS Annual Business Survey18 OBR Economic and Fiscal Outlook July 201519 ONS Annual Business Survey 2014
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW
copy ICAEW 2016 OTHPLM14612 0116
ICAEW is a world leading professional membership organisation that promotes develops and supports over 146000 chartered accountants worldwide We provide qualifications and professional development share our knowledge insight and technical expertise and protect the quality and integrity of the accountancy and finance profession
As leaders in accountancy finance and business our members have the knowledge skills and commitment to maintain the highest professional standards and integrity Together we contribute to the success of individuals organisations communities and economies around the world
Because of us people can do business with confidence
ICAEW is a founder member of Chartered Accountants Worldwide and the Global Accounting Alliance wwwcharteredaccountantsworldwidecom wwwglobalaccountingalliancecom
ICAEW EuropeT +32 (0)2 230 3272E europeicaewcom
ICAEW China (Beijing)T +86 10 8518 862223E chinaicaewcom
ICAEW China (Shanghai)T +86 21 6032 357778E chinaicaewcom
ICAEW Hong KongT +852 2287 7277E hongkongicaewcom
ICAEW Middle EastT +971 (0)4 408 0000E middleeasticaewcom
ICAEW South East AsiaT +65 6407 1554E southeastasiaicaewcom
ICAEW MalaysiaT +60 (0)3 2171 6022E malaysiaicaewcom
ICAEW IndonesiaT +6221 2358 5751E indonesiaicaewcom
ICAEW VietnamT +84 (4)3939 8786E vietnamicaewcom
T +44 (0)20 7920 8100E contactusicaewcom icaewcom
ICAEWChartered Accountantsrsquo Hall Moorgate Place London EC2R 6EA UK
facebookcomicaew
ICAEW
linkedincom ndash find ICAEW