When Bernard Fairman founded Foresight Group, Britain had a favourable tax and regulatory environment and a culture that encouraged entrepreneurialism – and the economy boomed as a result
Growing the economy is the “first mission” of the new government, with much of what Sir Keir Starmer wants to do over the next decade being reliant on its delivery. In fact, whether or not the government has the opportunity to serve a second term will surely depend on its ability to get the wheels turning on growth.
Wishing for something to happen doesn’t, however, make it so. To deliver growth, the UK government will need to create the right incentives and provide the right tools. I’m afraid that far more often than not, wealth is created irrespective of government action rather than thanks to it. It is not ideology that brings me to that viewpoint, but 40 years of launching, leading and working with businesses up and down the country.
The government has rightly made harnessing the potential of entrepreneurs central to its growth plan, as it aims to make Britain the best place to start and grow a business. The words chosen demonstrate too that an important point has been grasped – we need start-ups to scale here as well as start here. This is perhaps where we in the UK have the weaker record, certainly when compared with the gold standard of the US, where an unremittingly pro-business culture sees entrepreneurs try and try again until they succeed, supported at every stage by the deepest pools of risk-tolerant capital.
Some 900,000 start-ups launched in the UK last year. How many of those will become profitable enterprises? How many of those that do will stay, creating jobs and generating tax revenue here? The government’s efforts should be focused on ensuring these numbers are as high as possible, as growth delivered with an abundance of start-ups will be job-creating growth, as young businesses scale quickly.
In fact the ambition to build and innovate appears to be more present in those leaving full-time education now than at any time in recent memory
When I founded Foresight Group with my business partner some four decades ago, there was never any question that that is what I would do. Armed with a determination to succeed and a strategy we believed in, we had the two most important traits needed by any entrepreneur. Foresight is now a FTSE 250 business employing 400 people and generating over £140m of revenue. I would have made a dreadful employee. I am convinced that in the UK, we over-index for this personality type. In fact the ambition to build and innovate appears to be more present in those leaving full-time education now than at any time in recent memory. This is a powerful asset for an economy bent on growth, but only if we make it count.
In the 1980s when Foresight Group launched, conditions for starting a business were good. An increasingly favourable tax and a (de)regulatory environment, a booming global economy and a cultural shift which saw entrepreneurship encouraged and celebrated were some of the many factors which made it so. The younger generation we will need to support if we are to enjoy the prosperous future we all hope for will not remember the period of Foresight’s launch, but some of the policies pursued by that decade’s political protagonists are instructive.
Reviving the animal spirits
What will it take to get the animal spirits of this country, which are alive and well across the four nations of the UK, to create wealth and drive economic growth?
First a consistent, competitive tax regime. Put simply, let people keep more of their own money. In my experience, it is private capital which makes things happen, and the tax regime will only hold the country back if this fact is not recognised and embraced. Were capital gains tax to be increased to parity with income tax, entrepreneurship in this country would be killed stone dead, and the government will be heading down the tunnel for an early bath.
Second, there is scope for reducing anti-growth regulation across almost all industries. The dead hand of regulation, as Milton Friedman evocatively referred to it, never achieves anything for business, and the burden is greatest on small businesses. The need for good corporate governance is a given, but compliance with regulation costs UK businesses an estimated £70bn each year. Ultimately, it is the consumer and the taxpayer who pay the price.
Third, the ineffectiveness of London’s stock market inhibits growth and needs attention. Much work is going into this – some of it promising – but somehow we need to remove the incentives which see institutions favour Gilts over equities. Investing in Gilts doesn’t create growth or jobs, but takes capital away from the businesses which do.
Finally, champion entrepreneurs. We need to encourage young people to aspire to create something out of nothing. And when they fail, to see this not as the end of the road but a learning opportunity before trying again. If we can foster this ambition, and put those who have it in touch with those able to fund it, we will have taken a big step in the right direction.
If I were at the start of my career, I would do it all again. There is no more satisfying and rewarding pursuit than building a business and watching it grow. We are fortunate in the UK that so many agree with me on this. Let us make sure that the UK truly is the best place for enterprise. If we do, I’m confident the country’s growth problem will prove less intractable than its recent track record might suggest.
Bernard Fairman is founder and executive chairman of Foresight Group