With National Entrepreneurs Day on 21st August a recent memory, more needs to be done to encourage entrepreneurialism - a key growth factor in the UK economy.

Entrepreneurs are the ones who take the leap, build businesses from the ground up, and create the opportunities that allow investors like us to do what we love: backing brilliant companies. Sadly, last year saw a record low in new business creation, while business closures continued at pace."

Start-up trends*:

2016    Peak startup - 414,000 new UK businesses were launched (a ‘birth rate' of 14.4% of active companies and one of the highest rates on record)

2022    First net decline - business closures outnumber start-ups for the first time in more than 10 years

2023    Slowest start up rate since 2010 - only 316,000 new companies were formed, representing an 11% birth rate; the lowest annual rate in more than a decade

2024    Record lows - in Q4 2024 only 65,450 companies were formed which was the lowest quarter on record, representing an 8.5% year on year fall

Given that early-stage business formation is the lifeblood of the entire investment ecosystem and those being founded today could be the ECI portfolio stars of tomorrow, we all have a keen interest in the UK reigniting its entrepreneurial spirit."
Here are some insights on how the UK can reignite its entrepreneurial spirit

Expand access to capital

UK pension funds currently allocate just 4.4% of their assets to UK equities, which is approximately 30% lower than most markets, except for Canada, Denmark, and the Netherlands, according to New Financial. Reallocating even a small fraction of the UK's £3 trillion pension assets into venture and growth funds could inject tens of billions into British startups. This is a key objective of the Mansion House Reforms with the Accord announced in May stating that half of pension funds' defined contribution to private markets should be into UK companies. However, this initiative is voluntary and not legally binding.

Investment incentives for later-stage businesses should be introduced to bridge the gap between startups and scale-ups. Expanding seed investment incentives like SEIS/EIS to support later growth stages could help more entrepreneurs successfully navigate a challenging growth phase.

Skills and talent

Many founders that ECI Partners speak to, were inspired by a family member or friend who ran a small business. Yet, few recall entrepreneurship being encouraged, or even mentioned as part of their formal education. Embedding it more visibly in the school curriculum could help shift perceptions, making entrepreneurship feel both positive and accessible. It would also promote valuable skills such as teamwork, problem-solving, resilience, and financial literacy, which will benefit any career path.

Untapped pools of entrepreneurial talent

Women currently account for just 18% of new company founders in the UK, which is a vast pool of untapped entrepreneurial potential and economic growth. Targeted support programmes for female and minority entrepreneurs could help unlock potential. At the same time, attracting global talent by expanding initiatives like the Global Talent Visa to welcome more entrepreneurs, scientists, and engineers, could attract more innovators to the UK.

Support innovation

The UK has long been a leader in commercialising research, but this has declined over the last 10 years. One contributing factor is that UK universities typically take around a 16% equity stake in spinouts - more than double the average in the US and EU. This higher stake can deter founders and investors alike.

More universities could also benefit from fostering industry and start-up ecosystems similar to Cambridge's Silicon Fen, where close collaboration between academia and enterprise drives innovation. This is especially critical in fast-moving fields like AI. For example, ECI partnered with Manchester Business School to explore new models to support its proprietary AI platform, AmplifindTM."

Streamline policies

Entrepreneurs should not feel constrained by red tape, complex incentives, or burdensome taxes. However, current fiscal trends suggest that tax contributions are more likely to rise than fall. For instance, recent changes to Business Asset Disposal Relief (formerly Entrepreneurs' Relief) have resulted in higher tax rates.

Introducing a ‘rollover relief' could allow an entrepreneur who sells one venture to reinvest the proceeds into a new start up without an immediate tax hit. This would create a flywheel where success breeds more startups.

Celebrate entrepreneurial success

The celebration of entrepreneurial success in the UK often feels muted and cautious compared to the US, where hustle is admired and being a CEO is seen as aspirational. The vital role played by entrepreneurs and business owners in building a thriving economy should be shared - both the wins and setbacks, to normalise risk-taking and make entrepreneurship feel more attainable.

At ECI, we've had the privilege of backing businesses that have scaled impressively, such as MiQ and Wireless Logic. The stories of their founders, Gurman Hundal and Oliver Tucker, offer powerful examples of what's possible and serve as inspiration for future CEOs to envision their own business becoming European unicorns. If we want more people to start businesses, we must collectively work to provide the inspiration and visibility that makes them believe they can.

For further information please visit ECI Partners