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80/00

23 June 2000

CHANCELLOR GORDON BROWN CALLS FOR ENTERPRISE FOR ALL

New figures show differences in small business creation around the country

Enterprise for all in every region should be a reality, not a dream, said Chancellor Gordon Brown today, as he announced a new package of help for anyone in Britain wanting to start up in business.

Speaking in Birmingham, the Chancellor set out the next stage of reform to equip Britain with the skills and knowledge needed to compete successfully in the modern global market place. He announced that making enterprise open to all will be a priority for the Government's spending review, with:

• a major new package to make sure that anyone anywhere who seriously wants to start a business can get the advice and assistance they need; deprived areas will get extra help;
• a new initiative aimed at getting more private sector investment to tackle the problems of our poorest communities, with an initial fund target of £20 million, including a matched contribution by Government;
• a new drive to encourage enterprise in schools, with a call to all businesses to 'Adopt a School', particularly in disadvantaged areas.

Speaking as figures published today show a sharp difference in business creation between different areas around the country, the Chancellor said:

"Opportunity for all means a Britain where all have the opportunity not just to work, but to work their way up, to gain promotion, start a business, become self-employed, upgrade their skills, and rise as far as their talents and potential can take them; a Britain where there is not so much a narrow ladder of opportunity for the few, but a broad and expansive highway of opportunity for all.

"When the most important resource of a firm or country is not its raw materials or favourable location, but the skills, talents and potential of its workforce, we need to develop the talents of the best people and get the best out of people. Only 16% of people in the UK think there are good opportunities to start a business, compared to 57% in the US. And figures published today show dramatic variations in business creation around the country. It is clear that the denial of opportunity has become a barrier to prosperity.

"We cannot stress enough the importance of individuals making the most of their talents and contributing to their community around them. The Government's aim is to help people help themselves.

"That is why I can announce that in the spending review, we will make it possible for anyone anywhere who seriously wants to start a business to get a free package of advice, information and access to mentoring through the Small Business Service, worth up to £500. And in the high unemployment areas of the country, we will support intensive programmes of help worth up to £2000 for each business start-up. Our priority in the spending review will be to extend enterprise to all and finance new measures in the poorest areas."

The Chancellor outlined the barriers to getting private sector investment into deprived areas, and announced a new scheme to help overcome this: "I have asked the Social Investment Taskforce, led by Ronald Cohen of Apax Partners & Co, to plan a new social venturing initiative targeted at promoting investment in our low income areas. As a first step we have agreed to invest £10 million on a matching basis, making an initial target fund of £20 million."

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The Chancellor stressed the need for a culture change, starting in our schools:

"I want to see all schools encourage our young people to consider enterprise as a career, and we have begun to improve the national network that brings schools and businesses together. But I want to see more businesses get involved with their local schools, especially in disadvantaged areas. So today I urge all businesses throughout the country to 'Adopt a School' - by taking students on work experience and teachers on work placements, sending employees into schools to help run enterprise classes, or being business governors. By adopting a school, every business in the country will be helping to build the new enterprise culture that we all want to see.

"Our mission is to make a reality of enterprise for all."

The Chancellor also announced that:

"We will fund the new Regional Development Agencies to work on pilot projects with experts from the USA - learning from hands on experience of developing entrepreneurship in inner cities as part of urban renewal.

"We will also sponsor - with the private sector - a survey of the 25 fastest growing firms in deprived areas, to show that there is real growth potential here. For too long, that has been neglected."

A table of VAT registration figures around the country is attached. These show a sharp regional and local divergence in small business creation, with VAT registration up to six times higher in richer than poorer areas.

NOTES TO EDITORS

The Chancellor's remarks in Birmingham today are attached.

The Small Business Service, launched in April 2000 and run by David Irwin, aims to maximise the opportunities for start ups and small business growth across the country with a coordinated delivery of existing programmes of support for SME's, help to improve service quality and help for business to comply with regulation. The package of help to be announced in the forthcoming spending review will comprise:

• extra funding for the business support network, to deliver high quality services consistently across deprived areas, with a package of advice, training and better access to mentoring;
• more support for business incubators, which provide workspace and a supportive environment for people trying to start or grow businesses;
• new initiatives - often web-based - aimed at groups including women and the disabled.

The Social Investment Taskforce, led by Ronald Cohen, was set up in February 2000. It is independently managed by the UK Social Investment Forum in partnership with the New Economics Foundation and the Development Trusts Association. HM Treasury has an observer role. The Taskforce is examining how entrepreneurial practices can be applied to obtain higher social and financial returns from social investment and to unleash new sources of private and institutional investment in low income areas. The Taskforce will report to the Chancellor in the autumn.

Social venturing - a concept developed in the US - involves applying the principles of venture capital to the task of reviving poor communities - helping to fill the gap between grants and subsidies and existing sources of commercial capital, and so helping to develop new markets that bring people into the economic mainstream.

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LEAGUE TABLES OF ENTERPRISE

The UK has traditionally seen itself as an enterprising economy in comparison with many other European countries. Recent evidence from the Global Entrepreneurship Monitor (1999) suggests that the UK does compare well with much of Europe, but lags behind some of its other leading competitors in providing the right environment and culture to support entrepreneurial activity:

• entrepreneurial activity in the UK (planning to start a business and investing directly in such enterprises) is around half that of the most entrepreneurial country - the US. Increasing Britain's level of entrepreneurial activity towards that in the US would have a positive effect on net job creation and productivity growth;
• the UK has a risk-averse culture, with respect for entrepreneurs in the UK lower than any other G7 Country except Japan. Moreover, only 16 per cent of people in the UK think that good entrepreneurial opportunities exist, compared to 57 per cent in the US; and
• Britain has low levels of entrepreneurial activity among women - 2 per cent of women are trying to start a business, compared to 5 per cent of men. In the US, the proportion of women trying to start a business is around 7 per cent, compared to nearly 10 per cent for men.

There are significant differences in business start-up rates across the regions of the UK and within the regions. The tables below show the number of VAT registrations per 10,000 resident population across Local Authority Districts of the UK. Note - VAT registrations do not measure all business starts. However, they are the most precise measure available. To be precise, the measure shows the number of enterprises registering for VAT (including those who register voluntarily and those who are required to register when their turnover exceeds the VAT registration threshold (£50,000 in 1998)). The number of VAT registrations in London may be disproportionately skewed due to special factors i.e. the creation of business headquarter in a number of areas of London.

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Remarks by the Chancellor of the Exchequer to the Chairmen of the Regional Development Agencies on Friday 23 June.

It is a pleasure to be here in Birmingham today.

I want at the outset to thank all of you for the work you do, the service you give and the difference you make in every area of the country.

Through the Regional Development Agencies under your leadership we are not only recognising the many regional centres of initiative in Britain today and giving them new strength, but we are creating, at a regional level, the economic policy of the future: the strategic strengths that will foster innovation, develop the skills for the future, - and this is my theme today - build a Britain where the opportunity for enterprise is open to all.

When the Government came to power, our first duty - the foundation for all else we do - was the pursuit of economic stability.

Instead of a short-termist and ultimately irresponsible approach to interest rate and public spending decisions, we instituted, for both monetary and fiscal policy, a new long-term framework of discipline and responsibility.

Our objective was a stability that not only gave individuals, families and businesses the chance to plan their long-term future but also spurred the creation of new jobs and prosperity.

From this platform of stability, our second duty has been to rebuild the work ethic in Britain.

When we came to power one in five working age households had no one working.

So we sought to restore the work ethic both by expanding opportunities through the New Deal and by imposing obligations through new sanctions.

By creating new opportunities to work our aim was to tackle an obvious injustice which harmed both our economy and our society - high unemployment.

And by creating new responsibilities to work, we started to tackle the 'why work' syndrome and create a Britain where work is expected of all who are able to work. Now I believe there is a new consensus developing which recognises that a right to work means a responsibility to work also.

Here in the West Midlands, I am pleased to note that employment has risen by 40,000 since the election, long-term unemployment has been halved and youth unemployment cut by almost two thirds.

Building from this greater stability and this stronger work ethic based on opportunity and responsibility, Britain is now ready to move forward .

Our ambition is to make Britain a country where opportunity for all is a reality not just a dream.

By opportunity for all, I mean a Britain where all have the opportunity not just to work but to work their way up, to gain promotion, to start a business, to become self employed, to upgrade their skills throughout their working life and to rise as far as their talents and potential can take them; a Britain where there is not so much a narrow ladder of opportunity for the few to climb but a broad and expansive highway of opportunity open to all.

And it is a Britain where the enterprise culture is no longer seen as confined to a closed circle of the few, or ceases to have relevance the minute you enter a high unemployment area. It is a Britain where the opportunity for enterprise is genuinely open to all.

Whether it be in education, employment or enterprise, opportunity for all has always been, for many of us, at the core of our beliefs. It is today also an economic necessity.

Today, when the most important resource of a firm or a country is not its raw materials, or a favourable location, but the skills, the talents and the potential of its workforce, we need to develop the talents of the best people and get the best out of people.

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Opportunity for all - enterprise

As we seek to help people help themselves by extending educational opportunity and employment opportunity, we also wish to do so by extending the opportunities for enterprise to all.

Our aim is in every area of the country, an enterprise culture, one that is founded on opportunities for all, starts in the classroom, offers incentives to business development everywhere and shows people there are no longer any barriers to them moving forward.

So all our new measures - not just new incentives for businesses starting up, employing, investing, taking equity, and exporting, but help for the unemployed to become self employed, enterprise courses in our schools, the new national campaign for enterprise - are based on the proposition that we encourage all the talents of all people, and that we make the enterprise culture work for people and places too often forgotten.

Our priority in the Spending Review will be to break down the barriers to enterprise and employment in the poorest areas .

In Britain, the number in business start-ups is less than half the number in the US, and in high unemployment areas we do much worse. According to one study, at any point in time 8.5 per cent of the US adult population is trying to start new businesses

The rate of business start-ups in the UK is 3.3 per cent.

And in the UK only 16 per cent believe opportunities exist for new start-ups, and only one third think that if good opportunities exist they would start businesses.

It is but one illustration of how much more we have to do to extend the enterprise culture more widely.

Research by the London Business School suggests that with US rates of entrepreneurship we would create another 250,000 small businesses a year.

Stability is critically important. Research shows that the recession of the early 90's not only destroyed existing businesses but discouraged new businesses.
Indeed, we can track interest in starting small businesses over the 80's and 90's.

Interest grew in the mid-80's when around 180,000 businesses where growing and being set up. The recession of the early 90's meant that the number of small businesses starting and growing fell by a third.

This crisis of confidence continued throughout most of the 90's.
Today, however, as stability becomes more entrenched, the number of businesses starting up has increased. What is more, the number of businesses surviving and continuing to grow is now at its highest for a decade.

But stability is a necessary but not sufficient condition of business success.

Now that we have greater stability, the next stage is to build stronger enterprise culture.

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While in the recent study I have mentioned only 16 per cent of people in the UK thought there were good opportunities to start a business, the figure was 57 per cent in the US.

And figures we are publishing today show we face an even bigger challenge - a sharp regional and local divergence in small business creation.

Last year small businesses VAT registrations were six times higher in high employment areas than in high unemployment areas; five times higher in St Albans than in Wansbeck.

Every attempt to master technological change and lead in the inner cities and our high unemployment areas has failed.

I have long thought that if we are to tackle not just the consequences of poverty and unemployment but their causes, the old palliatives - benefits and subsidies - are not the best way forward.

We will not regenerate Britain's high unemployment areas simply by compensating people for their poverty. We need to attack the causes of poverty, too few jobs and too little economic activity.

There is one approach to regeneration that has been tried and found inadequate. The bricks and mortar approach was tried with tax incentives for property development. But too often in the high unemployment areas we witnessed a relocation of existing business rather than what we need - the encouragement of new enterprise.

In the USA, cities like Baltimore and Hartford, Connecticut, have taught us the benefits of business-led regeneration, as local people create new jobs in new firms.
From them we learn that the way forward is not just tax incentives for property development , but empowering local people with the skills and confidence they need to build the enterprising businesses that work.

What are the building blocks for a new approach?

Finance

First, access to finance.

The Cruickshank Review said that competition isn't working effectively in the small business market as a whole. We have therefore referred this issue to the Competition Commission.

But there are also quite specific barriers to getting finance to businesses in deprived communities, for small loans tend to be less profitable than big loans, whatever the benefits to society.

I favour the expansion of what are sometimes called Community Finance Initiatives.

There are probably 100 or more Community Finance Initiatives in existence today. Some, like the Prince's Trust, are well known, providing loan or grant micro-funding for business start-ups. But most are small and - crucially - have, as yet, little private sector support.

The £30 million Phoenix Fund that we announced last November was our first step to the new approach. It will provide grants to help Community Finance Initiatives get off the ground and grow.

But the time has come to do more and to extend private sector investment in high unemployment areas .

I have asked the Social Investment Task force led by Ronald Cohen to plan a community venture capital fund targeted at promoting investment in our low income areas. As a first step, we have agreed to invest £10 million on a matching basis, making an initial target fund of £20 million.

We would like to see banks taking a bigger role in financing business success in our poorest areas. That is why we have asked the Bank of England to monitor banks' activities in these areas.

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Business support services

Good quality support is vital to boost the chance that businesses in deprived areas will succeed.

And that support needs to start before the business does - with pre-start training and advice. There's no point beginning a business if you haven't begun to think it through.

After that, we need advice and mentoring to help people get off the ground and learn from others experience.

Finally we need workspace and incubators where new businesses can get established - business centres in places where firms are few.

The amount and quality of support still varies too much across the country - what you get often depends on the accident of where you live.

And too little attention has been given to deprived areas, to women and minority ethnic communities.

This Government has now launched the Small Business Service.

I met David Irwin, the head of the Small Business Service last week.

We share the same ambition to maximise the opportunities for start-ups and small business growth - right across the country and especially in our poorest regions and areas.

We agreed that in the Spending Review we will implement a new national strategy for supporting enterprise across society.

We will take a consistent approach.

Anyone anywhere who seriously wants to start a business will be able to get a free package of advice, information and access to mentoring through the Small Business Service, worth up to £500.

And in the high unemployment areas of the country, we will support intensive programmes of help worth up to £2000 for every start-up. Our priority in the Spending Review will be to extend enterprise to all and finance new measures in the poorest areas.

There will be new initiatives - often web-based - to help women entrepreneurs and the disabled.

The Regional Development Agencies and local authorities can make a vital contribution.

Many local authorities, for example, have workspace they let to small firms. But many have been unable to take the next step, and turned this into an incubator - offering practical help on-site to ensure firms succeed.

A strategic view for what is needed and what can be done in each region can be taken by the Regional Development Agencies. And we will fund the Regional Development Agencies to work on pilot projects with experts from the USA - learning from hands on experience of developing entrepreneurship in inner cities as part of urban renewal.

Too many people think there are no successful businesses in our poor areas. Experience in the US, and the work of organisations like Greater London Enterprise, shows that just isn't true.

As a first step, we will also sponsor - with the private sector - a survey of the 25 fastest growing firms in deprived areas to show that there is real growth potential here. For too long, that has been neglected.

Our agenda for enterprise has to be linked with our agenda for employment. That is why we have the self-employment option in the New Deal - already operating in the New Deal for 18-24 providing specialised help and support.

From April 2001 we will build on this with a self-employment option in the New Deal for 25+.

For self-employed people with children the Working Families Tax Credit provides an income bridge. And for those over 50 the Employment Credit offers up to £3000 in the first year.

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Enterprise culture

Most of all we need an enterprise culture where people feel they do have the opportunity to start a business, become self-employed or rise where their talents can take them.

And this starts in the schools.

Curriculum 2000, starting in September, will include for the first time the teaching of enterprise and entrepreneurial skills in our schools.

I want to see all schools encourage our young people to consider enterprise as a career - not just through the curriculum but through programmes like Young Enterprise.

That is why we have begun to improve the national network that brings schools and businesses together.

From next April, the new local Learning and Skills Councils will be the focal point in the regions for closer school-business liaison.

We are helping to increase the scale of enterprise classes in our schools, with extra funding for Young Enterprise and Understanding Industry.

And we are looking at how to improve the quality of work experience for year 10 students and business placements for teachers.

I applaud the new national enterprise campaign - "Enterprise Insight" - which will bring schools and businesses closer together.

The campaign's business ambassadors will take part in local events involving young people, aimed at inspiring them to go into business themselves.

But I want to see more businesses even more involved with their local schools. Businesses gain from these links - not just schools.

They gain from stronger communities, and being valued in those communities.

They gain by making kids more aware of what business is about - their staff or customers of tomorrow.

Around Britain there are many successful examples of schools and businesses working together for the benefit of both. I want all schools - especially those in disadvantaged areas - to benefit.

So today I urge all businesses throughout the country to 'Adopt-a-School' - by taking students on work experience and teachers on work placements, sending employees into schools to help run enterprise classes, or being business governors. By adopting a school, every business in the country will be helping to build the new enterprise culture that we all want to see.

We will work together with schools and businesses to ensure that:

• Schools and businesses work together, with business people going into school and taking part in enterprise classes;
• every student has a quality experience of working in a local business before they leave school;
• more enterprise courses are available to students and more quality business placements are available to teachers.

Conclusion

So all our new measures - not just new incentives for businesses starting up, employing, investing, taking equity, and exporting, but help for the unemployed to become self-employed, enterprise courses in our schools, the new national campaign for enterprise - are based on the proposition that enterprise does not stop at the entrance to a high unemployment area, but that we make the enterprise culture work for people and places too often forgotten.

Opportunity for all means not just educational and employment opportunity but the chance to work your way up and to start a business.

Here in Birmingham and throughout the whole of Britain our mission is to make a reality of enterprise for all.

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Press Notices 2000 January to June index