Is the government doing enough to encourage new businesses?

Whether the government is actually doing enough to support businesses throughout the UK is a subject of some debate, but the need for active government participation in creating a pro-business environment is beyond dispute. 

The overall health of the UK economy has taken something of a battering since the pro-Brexit vote delivered in the EU referendum on June 23rd 2016. Gross domestic product (GDP) figures for 2015 showed growth of 2.3 per cent, down slightly from 2.9 per cent in 2014. However, the projections for 2016 are much lower, with 1.4 per cent being quoted, as sterling has fallen against the dollar and consumer confidence has taken a hit. 

In terms of business start-ups, the figures had been looking encouraging. Figures from Company House show that in 2015, a total of 608,100 new businesses were registered, which was a record as well as a rise on the figures from 2014, when there were 581,173 start-ups.

The number of new start-ups in 2015 was helped no doubt at that time by the increase in net job creation and the positive growth in the economy, but a notable factor too has been the shift toward a more entrepreneurial culture in the UK. Changing work patterns, with an emphasis on autonomy and flexible working practices, are a factor, but they cannot be the only reason for the rise in start-ups. 

The policy environment in the UK has been pro-entrepreneur for some time now, with a favourable tax regime and start-up schemes encouraging people to strike out on their own. A flexible labour market has undoubtedly helped also.  

In the natural scheme of things, some businesses will fail, but the government must act to create an environment that allows start-up businesses to maximise their potential. Regional development has been the focus of some criticism and policymakers have to ensure that nationwide critical infrastructure, such as broadband, is evenly distributed, so that businesses based in rural locations have the same opportunities as those in major urban centres.

In the future, the challenge will be to ensure that that a similar approach to smart, sustainable development in the regions that has been at the core of the European Regional Development Fund is followed by domestic policymakers.

Government policy, across all sectors and not only for business, is fluid and evolving. For example, the decision to leave the EU will challenge the government to redirect policy to take account of new realities. For those involved in business, keeping up to date with relevant government policy changes is critical. One resource for doing so is Govnet, which provides learning and development courses on specific policy changes, sector by sector.

The uncertainty over Brexit and how long negotiations on UK withdrawal from the EU might actually take to conclude is not particularly helpful for businesses, given their obvious preference for a stable economic and political climate. The consensus is that businesses just have to get on with it and adapt to a challenging and changing environment, just as they have always done.

From the perspective of businesses in the UK, the government must set out a strong negotiating position in talks with the EU on any future trading arrangements, while doing all it can at home to stimulate business activity.

Although independent of the government of the day, the Bank of England has a critical role to play in stimulating business activity, and businesses will be encouraged by the its decisive move on August 3rd 2016, when it cut interest rates from 0.5 per cent to 0.25 per cent. It also rolled out a new round of bond buying, in respect of both government and corporate bonds, so that businesses have the opportunity to access cheaper financing, which could encourage those dissuaded by the uncertain economic outlook to proceed with expansion plans. 

The days of large-scale government intervention in business to the point of ownership of industries are gone, but both businesses and politicians recognise the critical role government has to play in encouraging and incentivising business activity. At a time when the UK must face the future outside the EU, the challenge for the government is to help reshape the domestic business environment, so that the country can thrive economically.