In conjunction with this year’s Budget, the Government announced a new Enterprise Strategy. At this time of uncertain economic conditions, The Business Lounge examines how the UK apparently fails when it comes starting and growing new businesses.

The Vision

The Government’s Enterprise Strategy wants to make the UK “the best place to start and grow a business”. Ambitious definitely, but what indicates that this is not the case already, and what are the reasons for this? Our second article in this series examines what the Government’s Strategy aims to do about it.

Why a Strategy is needed

Of course, from a Government perspective, enterprise is needed in order to increase the UK’s productivity. The good news is that by 2006, there were already 4.5 million businesses operating in the UK. That sounds pretty good, but by comparison with the US (a comparison that seems necessary in everything the UK does) small business activity fares badly.

The US apparently has 20% more businesses per head than the UK. The Business Lounge is reminded of Dave Gorman’s recent road trip across America, which he tried to do without giving any money to “The Man” i.e. massive faceless corporates epitomised by chain hotel brands, global oil companies and fast food outlets prolific across the face of the Earth. Instead, Gorman almost managed the task (barring the odd empty petrol tank), staying in family-run motels, and visiting independent gas stations. He commented on his return that it would probably be impossible to do the same across the UK.

However, quantity is surely not everything? Unfortunately, the Government’s Enterprise report also stated that 40% more businesses in the US than in the UK, managed to achieve what it classed as “high” growth. So the upshot of the report is, we could be doing better, and to use that horrible phrase “something needs to be done”.

What hinders enterprise?

One reason given for the difference in business formation and growth rates between the US and the UK is our fear of failure. We are told that 36% of people in the UK compared with 21% in the US state that the fear of failure prevents them from starting a business. Over one third of established UK businesses apparently have no ambitions for growth.

The Government has identified five “enablers” to enterprise – ways to help promote enterprise, not least to the groups which have lower rates of business formation compared with the US, including women’s businesses, and these are summarised in our next article.

If you wish to read the full report visit the website of the Department for Business Enterprise & Regulatory Reform at www.berr.gov.uk

As with all our information in The Business Lounge, this is not comprehensive business advice, and may not apply to your specific circumstances; to discuss how these issues affect you, contact your accountant.