Fixing The UK Economy Over A Pint In The Ilkley Brewery

MPs enjoying a pint before being flayed alive by local businessmen (Thanks to Carol Buchan for the photo)

Most of my time spent with politicians takes place in meeting rooms or community centres, so it was a literally refreshing change to have a round table discussion with Mark Hoban, financial secretary to the Treasury and our local MP Kris Hopkins while propping up the bar at the Ilkley Brewery (Thanks to Paul Birch of the Ilkley Business Forum for arranging this).

When politicians meet small businesses they usually take a battering over the banks refusal to lend to SME’s, the death of the High Street and the minimum wage and this was no exception, and when Mark Hoban trotted out the well-worn line that banks are lending but only to commercially viable businesses he narrowly avoided being bludgeoned to death with large haddock by a local fishmonger.

Perhaps the last thing that ministers on walkabout to small towns are expecting is a discussion about innovation, but that’s just what they got on Friday. While organisations such as the TSB do what they can with limited budgets and mandates, it is hard to argue that Britain’s world class academic work is rarely translated into world class businesses (the subject of a debate currently raging on LinkedIn). As I work with governments around the world, I do notice an increasing gap between those who govern via a spreadsheet and those who get out a bit more.

Innovation is a tricky thing for governments to handle – the MPs I was dealing with on Friday were an ex soldier and a chartered accountant from PWC, so there experience of SMEs or innovation is minimal, and the rest of the political class doesn’t have much experience of anything other than law and politics.

There is also the question of accountability. While in the commercial world we can fund anything we want as long as we have some net success, the political world is judged by its failures rather than its successes. Spending £100 million on innovative start ups, 90% of which go bust within two years would be seen as a failure, and the headlines would scream about wasted money, rather than highlighting the few successes who are paying taxes and employing increasing numbers of people which over a longer timescale will provide a good return on the initial investment.

What can governments do to help? Mark Hoban seemed to imagine that handing out money to non viable businesses was the only (non) way forward, and that anything that costs money in the short term would be disallowed by the Treasury. It’s all complete rubbish of course, the UK Government has a recent history of making changes to the NHS, the Ministry of Defence and many others that all incurred a short term charge in return for longer term savings, so why not apply the same rule to innovation? Create a fertile climate for technology entrepreneurs by making it as painless as possible to grow an early stage business. It’s absurd that the tax and regulatory burden should be the same for a start up as for a multinational – something that is being tweaked but nowhere near severely enough – but the key to creating the climate for innovation is to reduce risk to investors.

Venture Capital Trusts and tax breaks are one thing, but providing matching funding for business angels would at a stroke increase the number of businesses funded through reducing investor risk, while letting investors pick winners rather than the government. But all of this still relies on the hands off private sector approach and just tinkers around the edges of the problem.

What the UK government (and many others) lack is a joined up approach to innovative and emerging technologies. There is no doubt in the mind of any economist that technological innovation generates wealth, but putting in place a ten or twenty year strategy while combining the competing political objectives of ministries dealing with finance, business and the various science funding bodies is a Sisyphean task. However as it is widely acknowledged that nanotechnology, industrial biotech and regenerative medicine are the transformative technologies of the future, there does need to be more coordination in encouraging these technologies to take root and be nurtured in the UK.

To give the MPs credit at least they are willing to listen. We have spent the past four years getting emerging technologies onto the agenda of the World Economic Forum, so I’m aware of the scale of the task. But without some creative and forward thinking by the Government and its advisors, the UK risks being left behind by the 21st Century.

In the meantime, we can always console ourselves with a pint of the rather excellent Ilkley Summer which will be launched this Friday.

 

 

 

 

 

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