Raising start-up finance is the main barrier holding back entrepreneurs from starting innovative businesses in the UK, according to a new study.
Highly qualified graduates who pick up business ideas from their employers are identified by the report Venturing Forth: Increasing high value entrepreneurship as the key players in the market.
The report, published by think-tank the Social Market Foundation, explains that although almost half said they wanted to leave their jobs to start a business, around two-thirds felt the risk of financial failure stopped them from doing so.
Since 2012, the government has churned out initiatives aimed at aiding funding business start-ups, including the Seed Enterprise Investment Scheme (SEIS) and the British Business Bank.
Despite SEIS offering some of the best tax breaks anywhere in the world for small business investors, entrepreneurs still seem to be starved of funds.
Lack of support
The foundation also highlights too few women take on the mantle of entrepreneurship – and if they were encouraged to do so, the number of start-up businesses would increase drastically.
The research also found Britain is lagging many countries in supporting entrepreneurs in new business ventures.
Start-up rates are 50% higher in Sweden and double that in the UK in the USA and Netherlands.
The foundation recommends the government takes action to address the problem, including:
- Stopping employers from restricting employees who leave from setting up businesses in the same sector
- Offering entrepreneurs flexible hours so they can devote time to their new business while continuing to work
- Giving entrepreneurs a right-of-return to a former job if their new venture fails
- Offering more enhanced tax reliefs
Report author and the foundation’s chief economist Nida Broughton said: “Britain needs more entrepreneurs to kick start the economy into action because recovery and growth are weak.
More women needed
“The government talks about helping small business, but the truth is Britain is still far behind the progress made in many other countries.
“This is an opportunity the government has to address before it’s too late.”
Looking at women in business, the report disclosed only one in four of all entrepreneurs are women.
“If we could encourage as many women as men to start a business, the number of new start firms would almost double,” said Broughton.
Chancellor George Osborne introduced SEIS in Budget 2012 to aid start-up companies by giving investors generous income tax and capital gains tax breaks to offset the risk of funding a new business.
