Global Review

Speech delivered by Martin Wyn Griffith at the 
NDE Briefing: Enterprising Efforts in the UK

Washington DC
February 14, 2005

The British Government’s Small Business Service is an executive agency within the Department of Trade and Industry. Our prime role is to be the Government’s centre of expertise on issues affecting small business, an innovator - of new ideas, new policies, new interventions in the market and an engine for change within Government, making sure that the Government’s investment in the small business sector brings about greater growth in the economy.

Like most Governments around the world, we in Britain spend a lot of time doing all the usual things that Governments do to promote small business development:

• loan guarantees like your 7a programme;

• then there’s helping small businesses to get a slice of the Government’s research spend - like your SBIR;

• improving the regulatory and fiscal framework

• and reducing the administrative burdens on business. 

However we have found that a little spending on enterprise culture brings big rewards.

There are three areas I would like to cover today: first, some of the strengths and weaknesses in our economy; then some of the things we are doing in the UK to develop a more enterprising culture; and finally, to suggest a few areas where the UK and the US might usefully collaborate.

The UK is doing well. We have the lowest unemployment in 29 years and the highest employment rate ever. We are enjoying the lowest inflation for 30 years and the lowest mortgage interest rates for 40 years. In the last seven years, living standards have gone up, on average, by almost 3% per year. In 1997, people living in France, Germany and Japan were all wealthier than us. By 2002, we had overtaken them.

For the first time in half a century, the UK has been growing faster, for longer, than any of the G7. As a result, we have overtaken France to become the fourth largest economy in the world.

Britain’s scientists are the most successful in the world. We are but 1% of the world’s population, but we undertake 5% of the world’s science and have 12% of all citations.

Britain’s creative industries – design, advertising, music, film and TV, fashion, computer games and publishing – produce a higher proportion of our total wealth than anywhere else in the world. UK firms register more trademarks and designs with the European Union than any other country. Behind this success are the entrepreneurs starting and growing, successful businesses. 

Although, the productivity gap has been steadily closing since 1992, there is still a 20% gap between the UK and US, which we are seeking to close. In a fast moving world, all economies need to be flexible, innovative, and competitive. The extent to which they increase their productivity parallels the extent to which they remain competitive in the world.

The UK has over four million businesses - 300,000 more than seven years ago – with a new business start-up rate of more than 1,000 a day. And the failure rate is lower than at any time since 1993. Despite this, levels of enterprise in the UK remain modest compared to yours.

In comparison with the US, we suffer from a considerable gap in the number of businesses being started per head of population. And the most significant gap is in women-owned businesses – if the female owned start-up rate were the same as in the US, we would have 750,000 more businesses in the UK.

Why does this matter? It matters because increasing start-up rates increases productivity – because more entrants create more competition, more innovation, more dynamism. And it is imperative that we invest in closing the UK/US enterprise gap because it is critical to closing the UK/US productivity gap. 

But for enterprise to take-off and thrive, a business environment must be created that both encourages and supports the entrepreneur. It will not happen if the burden of business regulation is unmanageable, if protection of intellectual property rights is weak, if raising finance is almost impossible.

Some of you may have seen already the World Bank’s report ‘Doing Business in 2005’. It is an annual report that looks at the scope and manner of regulations that enhance or constrain business activity. 

The UK is ranked seventh in the top 20 economies on the ease of doing business – with the US ranked second. So one of our objectives for my visit to the US is to find out how we can reduce the administrative burdens on UK businesses so that they can become more competitive and more productive.

The Chancellor of the Exchequer has one prime to grow the growth rate of GDP per annum – and he is roughly on target at between 3 and 3.5 per cent a year. There are only two ways he can do it. One is to increase productivity; the other is to increase the number of people who are economically active. It’s logical - the more people you have contributing to wealth creation and the more they are productive, the more you will increase gross output. It is not surprising then that the Chancellor gives high-priority to enterprise as one of the five key drivers of productivity. 

And the Small Business Service is at the heart of the government’s enterprise policy – encouraging partners across government and beyond, to develop their understanding of the small business sector to the growth of the economy. And to make them aware of the impact, both positive and negative, that their actions can have on small businesses.

With so many government departments and agencies working with small businesses, it was clear that a bigger impact could be achieved if we all collaborated more effectively. So we brought about 150 players from all over Government over the course of six months to agree our strategy and action plan which comprises seven key themes. 

Most of these themes will be familiar to the Governments of many developed economies – but there is one which is unusual - the focus we have placed on building an enterprise culture. This is because there is evidence that countries with high performing economies are those with the most enterprising cultures. 

We’ve started by tackling the perceptions of the young, who are, I was interested to discover in our research, turned-off by terms like “entrepreneur” and “enterprise”. We believe that it is far more difficult to reverse an entrenched attitude than to influence developmental thinking – and so we have started by building a more enterprising culture amongst our next generation of potential entrepreneurs – and, I would add, potential intrapreneurs.

A key initiative in taking this challenge forward is a campaign with the strap line ‘Make Your Mark: Start Talking Ideas’. Research had shown us that the concepts embodied in this strap line were appealing to the young – they wanted to make a difference – make their mark. And they responded warmly to the call to action: Start Talking Ideas. 

But what buy-in can we expect from today’s young people? And can we really expect to see a fledgling enterprise culture spring-up from a campaign of this sort? It is early days – we only started last year. But the focal point of the year-round campaign was the UK’s first ever ‘Enterprise Week’ in November. I can tell you that ‘Enterprise Week’ was a huge success, far greater than we had dared imagine. Events were run across the nation, promoting the very spirit of enterprise – not just to the young but also to those who influence them. We were delighted that Carl Schramm of the Kauffman Foundation was able to accept our Chancellor’s invitation to come over and take part, and support what we were doing. To give you a feel for what was achieved, I would like to show you this short clip.

To close that gap in enterprise levels which I talked about earlier, we don’t want to focus solely on the young in coming years. We will want more women to see starting their own business as an exciting and viable career option. In the UK, nearly a million women are self-employed and this number has increased by around 10% over the last four years. 

But despite constant increases in the numbers, still only 26% of the total self-employed are women and only 15% of all businesses are majority-owned by women. And this differential between men and women owned businesses has hardly changed in a decade.

Since women are under-represented in the economically active population, it makes economic sense to reduce barriers to entry, increase incentives and provide tailored business support.

And since several drivers of productivity are areas in which the evidence tells us that women outperform men, it makes even more sense.

• Women are more likely to be innovative than men and are, on average, more qualified than men. 

• Women are more likely to move from unemployment to self-employment; one in five women, compared to one in fifteen men. So, on entering self-employment from unemployment, women make a more immediate contribution to GDP and we see less economic displacement. 

A pound invested in developing women’s enterprise provides a greater return on investment than a pound invested in developing male owned enterprise.

We first recognized the need to make a step change in our approach in 2002 when we developed our Strategic Framework for Women’s Enterprise. It has a clear aim - to create an environment and culture that encourages more women to start and grow businesses and where every woman with the desire to start or grow a business has access to appropriate help and support. And it contains a key Government target – to raise the proportion of businesses that are majority owned by women from 15% to between 18% and 20% by 2006.

Female entrepreneurs are holding themselves back. They use less formal sources of finance than men and typically, women-owned businesses are under-capitalised compared to male-owned businesses. This has much to do with a different attitude to risk. Also, lack of self-confidence in three areas - their entrepreneurial skills, their ability to spot good business opportunities and their perceived inability to succeed in business is also holding women back. 

Because so many entrepreneurs are utterly useless at pitching their ideas and plans to investors, mainly because they don’t understand what an investor is looking for, we have started investment-readiness training programmes to prepare potential entrepreneurs to more effectively pitch their businesses to business angels and venture capitalists.

And you won’t find the lack of sales skills of aspiring entrepreneurs more apparent than in ‘Dragons Den’ - a prime-time BBC television programme (it has a peak slot on Tuesday evenings at 8pm) which captures the drama inherent in matching private investors – business angels – with entrepreneurs. Few entrepreneurs appearing on the programme are successful at attracting investment – but out of a total of five investments to date, three women have been funded, two of whom have benefited from our investment-readiness training. This BBC promo clip focuses on the downside but I can assure you that if you watch the series as we all are, you do get the upside of success when a deal is finally struck. But to give you an idea, here is a clip - and it is called ‘Dragons Den’ for a reason, as you will see! 

That particular woman at the end was one of the two who did our ‘investment readiness’ training. And it’s interesting – research shows that women are as successful as men at acquiring external finance for their companies when they apply, but fewer women than men actually seek external finance.

So we’ve found that if you combine concentrated ‘on the ground’ activity right across the country, such as our ‘Enterprise Week’ – on which we spent only £750,000 with media collaborations such as ‘Dragons Den’, and other TV shows such as ‘Mind Your Own Business’, ‘The Apprentice’, and ‘Risking it All’ – which cost nothing for Government along with constant Ministerial messaging about the importance of entrepreneurship – which costs nothing but the fixed overhead of political office then you really can start to have an impact which will lead in time to increased start-up rates, higher productivity and the Government’s economic objectives achieved.

There has been dialogue between John Snow and Gordon Brown about building a Trans-Atlantic Alliance to support enterprise promotion. As a starter for ten, there are a few areas on which we may wish to consider more collaboration:

• Clearly, the development of measures to reduce the barriers to women’s enterprise is high on my list of priorities. But do we understand enough about what gender difference means for enterprise development? What are the best ways to challenge and remove entrenched negative attitudes towards women’s enterprise?

• On making it easier to do business – how can we in the UK reduce the administrative burdens that are placed on business? What can we learn from the US approach? And perhaps more importantly - what does it take for us both to knock New Zealand off the number one spot?

• On public procurement – how can we get more small businesses successfully bidding for publicly funded contracts at the same time as achieving best value for money for the taxpayer and stimulating a competitive market? Are tendering procedures simply too burdensome for small businesses? Or is it too easy for procurers to hand their prime contracts to the large corporates? I know that in the US you have certain set-asides as a policy. I want to explore the pros and cons of that policy.

So to summarize, I have explored our strengths and weaknesses; shared with you some examples of our approach to building an enterprise culture. And I have suggested some areas where we might collaborate.

I hope also that I have convinced you that even a little spending on enterprise culture brings big rewards.

And I’d like to think that if I have we might see you join in and kick off your own Enterprise Week in the US – in November 2005; or at worst in 2006, when we expect to see all the Member States of the European Union promoting and stimulating enterprise at the same time. Wouldn’t it be marvelous if the US and Europe could hold hands across the water and share our common endeavor?

Thank you for your kind attention. 

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Martin Wyn Griffith
Chief Executive
Small Business Service
UK Dept. of Trade and Industry