Memo to government: our enterprise culture is thriving

Nothing could be sillier than members of the Government exhorting entrepreneurs to pull their socks up
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The Independent Culture
DO WE, as a society, approve of entrepreneurs? I believe we do. But I raise the question because, over the weekend, I happened to read that cabinet ministers are proposing to tell Britain's wealth creators that they are not matching up to their American counterparts - in other words, that we don't have much of an enterprise culture.

But whether we do or do not, nothing could be sillier than members of the Government exhorting entrepreneurs to pull their socks up; they might as well tell the England football team to play better. I hope the story was erroneous.

That Britain's enterprise culture compares poorly with the situation in the United States is expected to be shown by a study which will be launched on Thursday at a breakfast meeting to be held by Margaret Beckett, President of the Board of Trade, and Geoffrey Robinson, Paymaster General.

I know the kind of figures that can be used to support this assertion. The amount of private capital put up for new businesses in the UK last year was just over pounds 1bn compared with nearly pounds 28bn in the US. Plus, only 10 per cent of the British total went to high technology companies compared with 70 per cent across the Atlantic.

The other statistic which is often quoted is that the miserly pounds 1bn also compares badly with the large amount of finance made available in this country by banks and investment institutions for management buy-outs, approaching pounds 20bn annually.

Management buy-outs take place when the directors of a company that is part of a larger group decide that they could achieve a better performance if their business was independent. Given their freedom, they might be able to raise much-needed fresh capital that their parent company had been unable to supply, or provide better incentives for staff, or introduce improved working practices and so on.

Management buy-outs are really a way of unpicking the unwise mergers of the past. To my mind, it is very welcome that a lot of such deconstruction is going on.

Not enough high tech start-ups? Perhaps not, but entrepreneurs tend to operate wherever they find attractive prospects. The list of the nation's top 100 entrepreneurs published in the latest issue of Enterprise magazine is revealing.

It shows that 10 of them made their fortunes in computers, nine in software, and six in mobile phones. Thus, one quarter of those listed have been working in information technology, which lies at the heart of the industrial revolution though which the world is passing. Their predecessors 175 years ago would have been developing steam power in all its forms.

The entries on the current list are just what one would hope to find. And in software, by the way, British companies are greatly respected in the American market for their sheer inventiveness. When you go to see Microsoft or Intel, a British address on the visiting card is almost an advantage.

A discussion devoted to entrepreneurs took place on Talk Radio on Friday morning on the Scott Chisholm Show in which I participated. It was an excellent seminar on the subject.

There you heard the authentic voices of entrepreneurs, as listeners called in to recount their experiences: "Somebody told me that if I bought a particular type of lorry, they would give me work for it," said one who went onto to make a success of a haulage business. A woman who is now running her own market research company said: "I was lucky, opportunity came along and I took it. Often people don't recognise opportunity until it's gone."

There were many different ideas of what made a good entrepreneur. One advanced the Japanese doctrine of kaizen or continuous improvement. Tim Waterstone, the bookseller, argued that the crucial quality is getting people to go along with you - staff, suppliers, banks, shareholders. "Somehow to work the alchemy so that people want to support you, want to go with you - that is a precious attribute." Tim Waterstone's view was that the first four to five years "are always brutal".

Most new businesses begin in the proverbial back room or garage, and then skim along with funds either previously saved or provided by family and friends until they are solid enough to turn to conventional sources of finance. That is why they do not show up in the statistics for raising start-up capital.

The original financing of The Independent in 1986 was an exception to this rule, because a national newspaper cannot begin in a tiny way and then grow. It has to be started full-out. But when called upon, the City institutions did put up pounds 18m. And a few years later their pounds 1 shares were bought out for over pounds 3 each. The system worked for the launch of The Independent and will continue to do so whenever an interesting proposition is put forward.

We do indeed have an enterprise culture, not least because, for 20 years, successive chancellors of the exchequer, beginning with Geoffrey Howe in Mrs Thatcher's first cabinet, have found ways of encouraging the entrepreneurs.

Last week, for instance, Gordon Brown announced the creation of three new venture capital funds with pounds 240m to invest; part of the money comes from the European Union. In the Budget, the Chancellor outlined a pounds 50m University Challenge Fund to provide scientists with "seed" capital.

This culture, too, is spreading. A recent report for Demos, by Charles Leadbeater, argued that social entrepreneurs will be as important in the next decade as business entrepreneurs.

In Mr Leadbeater's formulation, social entrepreneurs are like business entrepreneurs in the methods they use - they can make something from nothing, and create innovative forms of welfare, health care and housing which are both cheaper and more effective than the traditional services provided by government.

The final proof is surely that successful entrepreneurs are greatly admired.

Richard Branson's achievements in business are so highly regarded that people put forward his name to be president should the country become a republic, or to be mayor of London in the forthcoming elections. Similarly, Anita Roddick is a role model for many. Chris Evans is beginning to earn additional kudos for being an entrepreneur as well as a radio personality.

I say two things to government ministers. Look past the statistics and comparisons with other countries to what is really going on around you. You will not be disappointed.

Second, even if you accept my thesis that we have a healthy enterprise culture, do not relax. Adopt the notion of kaizen in government and engage upon a programme of continuously improving the help which the state can provide.