It now looks almost certain that more new businesses will be launched in the UK this year than ever before – the third successive year in which records have been broken. Nine months into 2017, almost 520,000 new start-ups had been launched, according to new data from the Centre for Entrepreneurs, well on the way to eclipsing last year’s final total of 658,000.
However, there is evidence that the government is growing anxious about the growth of start-ups. Its whole tone has shifted this year – where ministers once rushed to praise entrepreneurialism, they now fret publicly about the impact that growth in self-employment may be having on the tax take.
The government is proud of the huge increase in start-up business numbers in recent years. But it wonders what these businesses are achieving – and whether the cost of taxpayer support is being repaid. Successive governments have lavished support on start-up businesses, reasoning that innovative entrepreneurs getting new ventures off the ground will drive improved economic performance to the benefit of all.
The logic may be sound – the evidence shows that the fastest-growing small businesses are responsible for creating the majority of all new jobs in the UK – but if those ventures aren’t scaling up, the results may be disappointing. The UK currently ranks as the third most successful country in the world when it comes to creating business start-ups, according to figures from the Organisation for Economic Co-operation and Development (OECD), but we slip to 13th when it comes to such businesses successfully scaling up. (See the column on the right for where to find advice and resources that can help business to grow.)
So just a few weeks before the Budget, many fear the chancellor will take another look at tax on self-employment. Philip Hammond was forced to backtrack from proposals to change the rules earlier this year, but the Treasury continues to argue that the self-employed may not be paying their fair share.
It points to research from the Institute for Fiscal Studies showing that the self-employed pay an average of £1,240 less tax per person per year than the employed; those that incorporate their business pay an average of £9,040 less, as the tax rate on corporate dividends is lower than that on income. Ministers have also responded to a recent government review into long-term funding for growing businesses by questioning the money spent on the enterprise-investment scheme and venture-capital trusts, which provide tax relief to investors in small and medium-sized enterprises.
Where to find support for growth
There are a number of organisations that offer help to established small businesses who want to develop further and accelerate their growth.
• Growth Hubs – a network of 38 hubs around the UK led by local enterprise partnerships and offering both national and local business support.
• The ScaleUp Institute – a not-for-profit group that aims to share resources with businesses in the process of scaling up.
• New Entrepreneurs Foundation – offering support and mentoring to entrepreneurs building up their businesses.
• Goldman Sachs 10,000 Small Businesses programme – aiming to provide high quality, structured and practically focused support to small business leaders who are seeking to grow their businesses.
• UK Business Angels Association – a network of business angels (private investors) who provide a range of support, including equity and debt finance, to growing businesses.