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Dishy Rishi has got it done. Again. Today the Chancellor stepped up to the despatch box and delivered a statement as perfectly put together as his suit.
All the measures unveiled by the Chancellor focused on the (relatively) short term – getting consumers back into restaurants by offering a discount, offering cash to firms who bring back furloughed workers and keep them employed until new year, etc. Despite the eye-watering sums involved, and eyebrow raising slogans deployed, it was all very admirable, not to mention necessary.
That doesn’t mean there weren’t glaring gaps, however. The measures largely revolved around existing firms and ignored supporting those who, by choice or necessity, might decide to start their own. Many freelance workers have been excluded from Suank’s schemes throughout this crisis and this is a variation on that same theme. The crucial difference though is that freelancers want to be employed, start-ups ultimately want to employ people.
Start-up troubles are obviously particularly pertinent to the tech sector and, before lockdown, walking through London’s Old Street would lead to encounters with all sorts of people running all sorts of companies and dreaming of starting others. Some were successful. Many weren’t. However, the desire to create something, making money, and employing people, was always there. Entrepreneurs starting something, experimenting, is critical to a thriving, modern economy. Having the guts to go it alone is hard enough at the best of times, but a lack of government support at this moment will make those with ideas for new businesses less inclined to take the required risks. They will surely try and stay with a more conventional firm for as long as possible.
While getting customers shopping and dining out may help the government talk of a “V-shaped recovery”, neglecting start-ups and entrepreneurs limits how much the economy can recover and grow. There’s limited encouragement for the young computer science graduate who has just left university and is entering a vastly compressed jobs market to make their own thing, the kind of thing that may end up with them employing dozens, or hundreds, of people. Bluntly, start-ups create jobs, and there are going to be many in need of a job in the coming months and years.
It’s not that the government has done nothing. In April, it launched the coronavirus Future Fund, which issues convertible loans of between £125,000 and £5 million “to innovative companies which are facing financing difficulties due to the coronavirus outbreak”. There are Bounce Back loans, too, which offer loans of up to 25% of turnover to small and medium-sized firms. It’s all helpful to existing companies, but none of it is going to encourage someone to start something, which is surely required to drive long-term economic growth. It is also not going encourage a VC or potential investor to put money into new ideas – better to sit on the cash and ride out the storm.
It’s not all bad. Yes, inevitably some firms will fail, but there are plenty of tech firms that will thrive in this increasingly tech-dependent environment. And the UK’s start-up scene did enter the crisis in good shape. As William Reeve, who is currently CEO of lettings platform GoodLord having been involved in other start-ups, wrote for The Next Web:
“[The UK’s] start-up infrastructure is one of the strongest in the world. The portfolio of UK-based tech companies is impressive, diverse, and well-backed. VCs and access to funding might be clipped, but it won’t disappear. A crisis throws us into chaos, but technology provides the tools that enable life to go on. And the recovery shines a light on the role leadership, teamwork, and ingenuity has in the building of great businesses.”
So, while I understand the concern for existing SMEs who could fail during the crisis, and this site has rightly highlighted the Save Our Start-Ups campaign, my real worry is around the start-ups we may never see. With all the money being splurged around by the government, I would have liked the Chancellor to have offered investment schemes or loans to support would-be founders. He could at least increase the threshold for the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme, again an issue highlighted here on Reaction.
Rishi Sunak is seriously impressive. He is on the path to becoming Prime Minister, possibly the next one. However, Sunak does not appear to have the same appreciation for the tech sector that another Chancellor who seemed destined to be PM, George Osborne, had. As he guides post-lockdown Britain through its economic recovery, that will have to change.