An exciting path

Posted by Danielle Harvey on 5 March 2024

Martin McTague, National Chair of the Federation of Small Businesses, looks at howstartups are a powerful catalyst for economic growth.

three people at desk at computers The term start-ups can be traced back to the late 1990s, when the early tech wave swept across the globe. These small businesses, filled with massive potential, include now-giants like Amazon, Disney, and Google. All these companies started small, in a climate where taking risks and dreaming big were the rule, not the exception. The Federation of Small Businesses (FSB) has guided small businesses through the toughest of times, from the Covid-19 pandemic and now, the cost of living crisis. Still, it was them who took the wheel during our rebound from the economic recession of 2008. And nine out of 10 people who found their way back from unemployment did so either by rolling up their sleeves at a small fi rm or by charting their own course, through a start-up. The latest Small Business Index (SBI) shows a 5.5 percent growth aspiration increase from Q1 to 51.3% in Q2. FSB's message to policymakers is clear: think small first, encourage start-ups and back the 99% of business population on which our recovery will depend.

Start-ups contribute to our GDP and create a more balanced distribution across the country. They can also offer an exciting path to self-employment for service leavers – FSB research shows that around 6 percent of small businesses are run by exmilitary personnel. But, in the first quarter of 2023, the UK's GDP only grew by a meagre 0.1 percent. In addition, a record number of individuals remain out of work due to health issues, further highlighting the need for a robust start-up strategy. That's why we were particularly pleased to see the Department for Work and Pensions' Select Committee recommend the Government create a fresh version of the New Enterprise Allowance (NEA). This will help inspire an influx of fresh enterprises, by providing proper support to help people who are out of work launch their new idea.

Access to investment and trade opportunities is a crucial pillar for nurturing startups. While Government initiatives such as venture capital funds and angel investor networks have enabled early-stage funding, the focus predominantly lies on highgrowth tech startups. It's high time to extend these resources to startups from other sectors. It's equally essential to simplify the funding application process, which currently proves challenging for 28 percent of small businesses applying for start-up loans and a staggering 71% for equity finance.

That's why we're calling on the Government and financial institutions to streamline these procedures and increase transparency. Additionally, expanding the Start Up Loans scheme from 11,000 to 15,000 loans per year will help more female and ethnic minority-led entrepreneurs establish and grow their business, according to the British Business Bank (BBB). While the UK Government has made strides in facilitating global market access for startups through international trade agreements, the complexities of regulations, trade tariffs and the limited support for market entry remain obstacles. To overcome these barriers, we propose a holistic approach that assists SMEs in identifying new markets, equips them with essential knowledge, and simplifies the administrative burdens of trade. Regulatory hurdles can also make it difficult for startups to trade. To tackle this, the government must ensure that regulations are well-designed, consistent and flexible enough to foster innovation. Regulation must be proportionate, taking into account business size and capacity to comply.

Startups have the unique ability to tackle inflation in the UK due to their focus on innovation and their potential to disrupt established markets. Their novel products and services can lower costs and prices, while potentially creating new job opportunities and economic growth, reducing demand-pull and cost-push inflationary pressures.

As the UK's business support group, FSB is the voice of the UK's small businesses and the self-employed. Established over 40 years ago to help its members succeed in business, FSB is a non-profi t making and non-party political organisation that's led by its members, for its members. As the UK's leading business campaigner, FSB is focused on delivering change which supports smaller businesses to grow and succeed. FSB offers members a wide range of vital business services, including access to fi nance, business banking, legal advice and support along with a powerful voice in Government. Each year FSB also runs the UK's Celebrating Small Business Awards.
More information is available at You can follow us on twitter @fsb_policy and on Instagram @fsb_uk.

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