Friday, June 29, 2012


The latest sketchbook video from the Kauffman Foundation examines the way in which women are facing greater challenges than men in getting financing for their companies, which is one of the reasons why this untapped population is not scaling businesses. It examines some of the underlying causes for those challenges. 

According to the narrator, Alicia Robb (who is also one of the authors of A Rising Tide, a new book that delves into the topic of financing strategies of women-owned firms), "You hear a lot about the number of women-owned businesses growing faster than firms overall, but that's really just a reflection of the lower base. "If you look at revenues or employment or payroll, [women-owned firms] are not growing faster than male-owned businesses; they are actually growing slower."

This reflects the findings of a paper I recently co-authored on the subject of financing for female entrepreneurship.  "Differences in perceptions of access to finance between potential male and female entrepreneurs: Evidence from the UK", published in International Journal of Entrepreneurial Behaviour and Research(Vol 18, No 1) examined whether being female increases the probability that an individual feels difficulty in obtaining finance is a barrier to starting a business.  

Although the actual financial barriers faced by female entrepreneurs have been extensively studied, this is one of the first studies to focus on the concept of perceived financial constraints faced by potential female entrepreneurs.  The results suggest that a greater proportion of women are solely constrained by financial barriers than their male counterparts. The gender of the respondent was also found to interact with a number of other personal characteristics in a significant manner. In terms of practical implications, this finding suggests that policymakers should be encouraged to market the availability of start-up finance from various sources to encourage women to attempt to obtain the necessary finance rather than being discouraged at the first hurdle.

Tuesday, June 26, 2012


Earlier this week, the accountants Ernst and Young released their annual UK Attractiveness Survey, a study that examines inward investment and the attitudes of global investors.

It showed that whilst the UK attracted 679 projects and nearly 30,000 jobs in 2011, this represented a decline of 7 per cent on the previous year.

More worryingly, Germany is now becoming the major country within Europe for investments from Asian economies such as China and Japan, although the UK remains the most attractive country for Indian businesses. Regionally, the picture was mixed.

Whilst the UK economy as a whole has lost ground, London actually increased its share of foreign direct investment by 13 per cent. In contrast, Wales showed the largest decline of any part of the UK and its share of UK inward investment projects is now only 1.3 per cent as compared to 9 per cent eight years ago. Indeed, if we compare Wales to Scotland, we see that our fellow Celts enjoyed the highest level of inward investment employment in the UK, with 5926 new jobs being created in 2011. In contrast, new overseas projects established only 1090 jobs over the same period in Wales.

When asked to comment on this depressing performance, the Welsh Government wisely kept their counsel, stating they would rather wait for the official government data on inward investment to be published later this summer. But if the Ernst and Young report is accurate, it suggests a serious decline in the attractiveness of the Welsh economy to foreign investors.

The question for many is why Wales has shown such a decline when, at one stage, it was attracting more inward investment than any other region in the UK? Some will argue that the abolition of the Welsh Development Agency (WDA) has had a significant impact on the ability and, more importantly, flexibility of those looking to bring in major projects from overseas.

Certainly, those who want to bring back the WDA can point to the fact that Scotland has maintained its own development agency at arms length from government in the form of Scottish Enterprise and that this body has managed to attract nearly six times the number of jobs found in Welsh new inward investment projects.

One could also point to the mixed messages to investors that came out of the previous Labour-Plaid Government announcements were made in 2010 that no more grants would be available to businesses when the reality was that any major project coming into Wales would have received support from the public purse. Fortunately, that situation has been reversed by the current Minister although we will wait and see what long term effect this strategy has had on Wales’ ability to bring in foreign investment.

In addition, International Business Wales, the body specifically created to attract new companies, was closed without any replacement being put into place. Not only was the expertise of experienced individuals lost to Wales as a result of its abolition but the momentum that the organisation had built up since its creation in 2005 disappeared literally overnight.

Given this, it is no surprise that Wales’ performance currently lags behind that of other nations. But there is also the question of whether inward investment is actually as important to the Welsh economy as it clearly was twenty years ago. In fact, many would argue, and the academic evidence backs them up, that if the focus of current government policy is on job creation, then it would be better for policymakers to put their efforts into supporting Welsh businesses, rather wasting resources in competing against other better financed regions for large overseas projects.

Despite this, and you may be surprised to hear me say this, I still believe there is a role for inward investment. However, rather than accepting any project that is going, the focus should be on bringing world class innovative companies that complement the strengths found in our indigenous business community and, more importantly, our university sector.

And imagine if we could get companies such as Microsoft, Google and IBM setting up operations in Wales. It would change the brand image of the nation overnight and send a clear message to the global community that the best companies want to be based in our economy. Policymakers should also focus its efforts on keeping and expanding those businesses that have already located in Wales. 

Too often we have seen major employers such as Bosch leave Wales because there was no relationship between their senior managers and the Welsh Government with Ministers usually being the last to know that the companies had decided to pack their bags and leave.

As any entrepreneur will tell you, it takes ten times the effort to attract a new customer when compared to keeping an existing customer and the approach to foreign direct investment in Wales should be the same.

Therefore, whilst the Ernst and Young report is disappointing, it nevertheless sets a real challenge to policymakers to address this issue over the remaining four years of the current Welsh Government. However, any approach to inward investment strategy will only benefit the Welsh economy if it is part of an overall strategy that not only attracts the best global businesses but also encourage entrepreneurship and helps indigenous businesses to grow.

Monday, June 25, 2012


This is the latest sketchbook from the Kauffman Foundation.

It features Alana Mueller, who was kind enough to meet with the Global Academy when we visited Kansas City last month and with whom we hope to work in the future.


Monday, June 18, 2012


In various newspaper columns and blog entries, I have returned regularly to the theme of business rates and the failure, to date, of successive Welsh Governments to use them as a means of reducing the financial burden on hard-pressed businesses across Wales.

 In particular, I argued, on numerous occasions, for part of the Welsh Government's economic development budget to be used to reduce rates for thousands of businesses rather than focus mainly on grants for large companies to come into Wales.

And I am not the only one to have done so.

Back in 2007, my fellow Daily Post columnist Lord Wigley stated that “a significant reduction in the business rate might cost between £100m and £200m, depending on how it was applied, but it certainly can be afforded within (the economic development) budget, and it would be better for that money to be re-circulating within the business sector, enabling it to take on more people, to set up new projects, and to have a new confidence and incentive for its work, than being gobbled up in the bottomless pit of bureaucracy, where so much of it ends up at present."

I am sure that businesses across Wales would find little to disagree with in that statement, which it why it was so disappointing that Plaid Cymru, when sharing power during the last Welsh Government, did nothing to change the business rates regime in Wales.

Fortunately, the new Minister Mrs Edwina Hart is taking the issue more seriously. She recently tasked Professor Brian Morgan of Cardiff Metropolitan University to chair a group which would examine what Lord Wigley and myself have called for on numerous occasions, namely how the business rate regime in Wales can be used to encourage economic development and growth. Last week, they released their interim findings.

Whilst some of the recommendations made were a case of tidying up technical anomalies, such as giving certain exemption from empty property rates to premises which are part of a property which comprises both residential and commercial elements, others were more controversial.

Indeed, the main conclusion from the group is a proposal to break the links with the jointly calculated England-Wales business rates regime and devolving this to Wales alone. This would make business rates a fully devolved tax and, according to Professor Morgan, make the Welsh Government responsible for properly managing a business tax that it raises itself.

Given that Council Tax in Wales is already devolved, the present arrangements on business rates look increasingly like an anomaly that needs to be addressed. And the argument from Professor Morgan’s group is that we don’t have to ask permission from Westminster to do this as the National Assembly for Wales already has the power to determine all aspects of business rates including the rate, exemptions and reliefs. More importantly, it has responsibility for the administrative arrangements for its calculation, including the current pooling arrangement with HM Treasury.

Therefore, if it so wishes, the Assembly can end the arrangement tomorrow if the political will is there to do so and thus create a new business rate system in Wales. Some have suggested that this report may end up gathering dust on the Minister's desk as the impression given by some Labour politicians is that they have little appetite for devolving further fiscal powers to Wales.

I doubt that will happen but as dialogue is continuing with Professor Morgan's group, I would urge every business in Wales to make their views known and ensure that we finally have the business rates regime that we need in Wales taht will give us the ability to create a more competitive environment for the Welsh economy.

Wednesday, June 13, 2012


Last Thursday, there was finally some good news for the beleaguered high street as figures from the British Retail Consortium revealed that sales in May 2012 were 3.4 per cent higher as compared to a year earlier.

On the same day, 4,500 jobs were saved in 397 stores, including a number in Wales, when Clinton Cards were bought by the US retailer American Greetings. That is not to say that there are still major challenges facing the retail sector. For example, the number of businesses in the UK retail sector going into administration increased by 15 per cent in the first quarter of this year.

These have included household names such as Peacocks, Blacks Leisure, La Senza and Game. Fortunately, as with Clinton Cards, a number of these businesses have been bought out of receivership and, as consequence, jobs have been saved.

Nevertheless, it is estimated that employment in the retail sector has decreased by around 100,000 in the last year and this decline is set to continue unless radical action is taken. That is why the UK Government asked the retail marketing consultant Mary Portas to identify what politicians at national and local level, along with businesses and other stakeholders, could do together to promote the development of new models of prosperous and diverse high streets.

Reporting last December, it made a series of recommendations, including creating a visionary, strategic and strong operational management team for high streets, establishing a new “National Market Day” where budding shopkeepers can try their hand at operating a low-cost retail business and considering whether business rates can better support small independent retailers.

Other suggestions included free controlled parking schemes for town centres, restricting out of town developments, and disincentivising landlords from leaving units vacant. However, to ensure that the report did not merely remain gathering dust on a shelf in Whitehall, Portas suggested that a number of high street pilots should be run to test some of these ideas.

And rather than having civil servants choose which high streets were to benefit from the government’s largesse, towns were invited to put forward their own proposals as to how they would implement their ideas to regenerate their retail sector.

As a result, around 370 high streets submitted applications and last week it was announced that twelve high streets would benefit to the tune of support worth approximately £100,000 each. Some cynical commentators have said that this funding is derisory and the whole scheme was a publicity gimmick at a time when there are far greater economic problems facing retailers. Others have noted that the competition itself has generated real local interest and, regardless of the fact that only around one in thirty applicants were successful, it has enabled communities to come together and plan for their economic futures.

Indeed, you only have to view the hundreds of videos that have been posted on YouTube in support of bids to see local businesspeople demonstrating their passion and conviction for their town centres. The two featured below are from Bedford, one of the winning bids and Burnham on Sea, which didn't win but is already preparing a second bid.

As a result, the failure to win a cash prize will, in itself, probably not stop many of the towns from pursuing their plans, having created a group of stakeholders who have a real interest in the future of their high streets and, more importantly, a strategy for the future.

Unfortunately, as with the start-up initiatives discussed in this column last week, the Portas Review only applied in England and, given the state of many of our town centres, it is a shame that Wales did not participate in such a scheme.

Certainly, given the work already undertaken by Mary Portas, there would be scope to examine this further in the context of Welsh High Streets. Indeed, speaking to a sold-out audience at the world famous Hay Festival last week, the 'Queen of Shops'  said that there was still hope for many town centres in Wales, despite the threat of out of town developments and internet shopping.

And we could start by developing a similar programme to that envisaged for English towns that would enable those with enthusiasm for regenerating our high streets to come together to start a renaissance in the fortunes of many local economies at a time when it is sorely needed.

Wednesday, June 6, 2012


Back in 1971, John Bolton published what was to become known as the most important report on the state of small business in the UK. It set the benchmark for policy on entrepreneurship for decades, influencing the development of small firms across the World.

Last week, Lord Young of Graffham, the former enterprise minister in the Conservative governments of the 1980s, published his review of entrepreneurship in the UK.

His report, “Make Business Your Business: supporting the start-up and development of small business” is not as comprehensive as Bolton’s massive tome from forty years ago.

Nevertheless, in examining whether the right conditions and support are in place to enable the current and next generation of entrepreneurs to build and sustain successful businesses, it does propose a number of useful policy interventions that could increase the rate of entrepreneurial activity in the UK.

One of the main recommendations, and one that heavily featured in the press during the last few days, is the new StartUp Loan for young people. This was originally proposed in a report from VirginMedia on young entrepreneurs last year and is based in the premise that if young people can get a loan to go to university, then why shouldn’t they also get a loan to start up a new business. As a result, the UK Government is now making £82.5 million available immediately to enable potential entrepreneurs aged between 18 and 24 to get £2500 to kick-start their business.

Another proposal from Lord Young, which has already been agreed by the UK Government, is the opening up of vacant or under-used space in its estates so that business start-ups can get access to premises. Making such managed spaces, which would also have support and coaching available to tenants, could help many more new businesses to get off the ground.

This blog has regularly discussed how small firms can get better access to the £230 billion of goods and services that are procured by the government every year. One of the obstacles to accessing such opportunities is the amount of bureaucracy involved in putting together bids for such work and the proposal, to remove prequalification questionnaires for all contracts worth less than £100,000 should help entrepreneurs, whose time is limited, to get a better chance of success in supplying goods and services to the public sector.

Finally, the main part of Lord Young’s report focuses on one the biggest obstacles to start-up success, namely access to finance. Despite the UK Government’s best efforts, it is clear that many start-ups are struggling to gain access to vital funding from the most traditional source of cash, namely the banks. To counter this, it is suggested that start-ups could, and should, access alternative sources of finance from other providers such as microcredit, crowdfunding and business angels.

Therefore, Lord Young’s report is to be welcomed as a wake-up call to what can be done to support small firms in the UK. However, it is worth noting that is far less comprehensive than the Entrepreneurship Action Plan produced by the Welsh Development Agency twelve years ago when Wales led the world in the development of a regional enterprise strategy that would boost the entrepreneurial potential of the nation.

Indeed, we need to re-examine the whole approach of Welsh Government policy towards entrepreneurship as the number of new businesses has plummeted from 11,525 new businesses in 2004 to 7,505 in 2010, costing thousands of jobs and hundreds of millions of pounds to the Welsh economy.
And one place to start would be by clarifying how the proposals in Lord Young’s paper actually apply to Wales as it would seem that the start-up loans for 18-24 year olds are only applicable in England.

In addition, there has been no announcement from the Welsh Government on whether it will make some of its vacant buildings available to new firms, despite the fact that there have recent news reports of such premises lying empty across Wales. Certainly, a good place to start any entrepreneurial renaissance in Wales is with young people who have the ideas, drive and energy to take advantage of new opportunities in a digital globalising world.

We therefore need to ensure that they are not at any disadvantage as compared to young people elsewhere in the UK, especially when it comes to accessing the vital finance and access to premises that can help or break a new business.