This week, the Labour Party published its blueprint for the future of the tech startup and investment ecosystem in the UK. Iain Alexander looks at the context, content, and implications of the report.
A small number of notable upsets in recent years – most significantly the Vote Leave win in the Brexit referendum and Donald Trump’s US presidential election victory over Hilary Clinton – have encouraged us all to take opinion polls with a pinch of salt. But such is the scale of the Labour Party’s lead over the Conservatives at the moment – even the installation of Rishi Sunak and Jeremy Hunt as more “sensible” successors to the ill-fated Truss-Kwarteng axis has given the Conservatives only a minimal “bounce” – that it is hard to imagine what would have to happen for the outcome of the next election to be anything other than a Labour majority Government.
Keir Starmer is increasingly positioning himself as PM-in-waiting, and every sector of the economy is closely monitoring his every utterance to see what the previously policy-shy Labour leader might have in store for them in a United Kingdom under the red team. This week it was the turn of the innovation and investment ecosystem to get some answers, as Shadow Chancellor Rachel Reeves used Labour’s business conference in Canary Wharf to reveal Start-up, Scale-up, a report outlining the party’s diagnosis of the factors limiting UK startups and its prescription for enabling homegrown tech innovators to reach their full potential and deliver maximum value to the UK economy.
Supported by a highly credible panel from across the innovation and investment ecosystem – including entrepreneur and investor Tom Adeyoola, former Hassle.com founder and current Resi co-founder and CEO Alex Depledge MBE, Director of King’s College London’s Entrepreneurship Institute Julie Devonshire OBE, and cross-bench peer, deputy chair of the Northern Powerhouse Partnership, and former Goldman Sachs chief economist Lord Jim O’Neill – and built on input from a wide-ranging call for evidence and national roadshow of roundtable discussions, Start-up, Scale-up is no mere lip service.
The proposals in the report appear weighty, and targeted towards resolving issues that leading voices in this space have been campaigning on for years – many of whom have given the report and its recommendations an enthusiastic reception.
With commissioners and authors of reports like this often over-eager to assert their own brand new ideas, Dom Hallas of Coadec – which hosted two of the roundtables that informed the report, with shadow BEIS and DCMS ministers Jonathan Reynolds and Lucy Powell – rightly praised Start-up, Scale-up for trying not to fix, but to build upon, what isn’t broken. There’s no need to rip up (S)EIS and start again, for example, but there is an opportunity – as the report identifies – to continue enhancing their scope and scale by increasing limits and qualifying periods, and to rejig the R&D tax credit system, especially following recent changes made to it by the Conservative Government that hinder startups.
It is noticeable, too, that Labour are not shy of recognising opportunities to replicate what’s working elsewhere – another frequent failing of this sort of policy exercise. The French Tibi scheme is highlighted as a model for bridging the gap between innovative startups and institutional money, with Start-up, Scale-up proposing a UK version to improve engagement and understanding between institutional investors and VCs to ensure more institutional money finds its way into UK startups.
Many of the recommendations in Start-up, Scale-up – from tweaking pension fund rules and other moves geared towards providing more patient capital, to transforming the British Business Bank and connecting it more closely to clusters of universities, to providing greater transparency around the spinout process – are evidently supportive of a UK economy that can increasingly be built on deeptech innovation that takes a lot of time and money to move from academia to commercial viability. With some concrete, relatively detailed plans, Labour has a real opportunity to steal a march here on the Conservatives, whose long-heralded “science superpower” vision for the UK has been high on rhetoric but sadly low on impactful action.
However, for all the positive reactions to Start-up, Scale-up from people whose requests and appeals it largely answers – and while I do welcome its recommendations and think they would improve outcomes for the UK’s high-growth tech innovators – I have to say I do also find something quite compelling in the argument made by the Progressive Economy Forum director James Meadway that the report is providing the same answers to the same questions that have been asked for at least 15 years.
Meadway highlights the 2006 Sainsbury Review, which also contained recommendations to track uni spinout numbers, provide more targeted funding support, and give startups better access to public procurement. His suggestion that the scope of the new report inevitably excludes consideration of broader issues such as the creation of public investment banks, overhauling the IP system, and the question of whether rising interest rates and ongoing recession challenge the primacy of venture capital as a funding model for startups might not be immediately popular – with Starmer and Reeves or with many in the ecosystem – but they are at least interesting. And it is probably worth considering seriously whether the decades-old problems Labour has identified can indeed be solved by the same old suggestions – whether those solutions will succeed now the ecosystem is more mature in a way they couldn’t have done previously – or whether some even more radical thinking is required.
In any case, Labour might be “proudly pro-business” – as Starmer said in his introduction to Reeves’ speech launching Start-up, Scale-up – but there were signs in Canary Wharf that there could still be a long way to go for business to reciprocate. Yes, there were banners from the likes of HSBC and SSE expressing support for the business conference, and donations to the party from the business world are apparently up recently. And – as Reeves herself noted when questioned – it is of course difficult for larger, particularly publicly-listed companies, to openly endorse a political party. But it was noteworthy that neither Starmer nor Reeves could name any company publicly lining up behind Labour for the first time.
Old habits die hard. But while the City and FTSE 100 bosses might take some more convincing, Start-up, Scale-Up appears to have seen Labour take a significant first step to showing founders and investors that it can – and perhaps already has, given the paucity of policy in this area coming out of the present Government – usurp the Conservatives as the party of entrepreneurship with an ambitious and achievable plan for making the most of UK innovation’s world-leading potential.