Entrepreneurs in the UK Face Ścieżkowych Zagrożenia, Warnuje Założyciel Cobra Beer
Is the U.K.'s entrepreneurial landscape currently thriving? While appealing statistics can substantiate this, they may not fully depict the reality. In 2023, approximately 900,000 new businesses were registered, marking a new record and a 12% increase compared to the previous year, as indicated by data from NatWest Bank and Beauhurst. During this period, Britain managed to secure £72 billion in venture capital funding, placing it third globally, behind the U.S. and China. The number of unicorn businesses is on the rise as well.
However, these figures do not necessarily paint a complete picture of the challenges faced by entrepreneurs operating amidst political and economic volatility, both domestically and internationally. When taking into account the hurdles faced by business owners at a grassroots level, the scenario might not appear as optimistic as suggested by the headline numbers.
One individual who may have some valuable insights is Lord Karan Bilimoria. With a long-standing reputation as a distinguished U.K. entrepreneur, he held the position of chairman for Cobra Beer until late November 2023. Over the course of his career, Bilimoria has not only focused on managing his own business but has also utilized his platform to advocate for entrepreneurship, business education, and international trade.
Cobra Beer, which was founded by Bilimoria and his partner Arjun Reddy in 1989, aimed to fill the void in the market left by major beverage companies with its lighter, food-friendly alternative to gassy lagers. Initially, the drink was targeted at Indian restaurants as a complement to spicy Asian cuisine. As curry could indeed be considered the national dish of the country, Cobra quickly carved out a niche for itself. From then on, the brand's trajectory was largely characterized by growth, with a profit of £15 million generated from sales of £54 million in 2023.
Cobra has experienced its ups and downs. During the financial crisis in 2009, the company struggled and was placed into pre-pack receivership. Determined to revive his creation, Lord Bilimoria partnered with Molson Coors to acquire the business back, vowing to return losses to investors through profits. His decision to step down as chairman coincides with the fulfillment of this pledge.
Beyond his role at Cobra, Lord Bilimoria has participated in business school programs and held positions such as chairman of the Confederation of British Industry. In 2024, he will take on the role of chair for the International Chambers of Commerce UK, while also remaining active in British politics as a non-aligned peer in the upper house.
Is This a Suitable Time to Establish a Business?
I begin by asking if this is an opportune time to be an entrepreneur in the U.K. According to Bilimoria, the necessary components are in place.
"We are now one of the most appealing countries globally to establish a business, barring the tax environment. We have vast entrepreneurial networks and support systems. We have some of the world's best universities, along with the U.S. We have exceptional research, not to mention top-notch accountants, lawyers, and courts," he remarks.
He notes the marked improvement since the early 1980s, when he first arrived in the U.K. from India. "When I arrived, the U.K. was struggling economically and did not appear to be in a promising position. The cities were not appealing, with many derelict buildings," he recalls. "Entrepreneurship was not celebrated."
Lord Bilimoria attributes the surge of entrepreneurship in the U.K. to the administration of Margaret Thatcher, specifically business minister David Young, and its continuance under the leadership of Tony Blair, Gordon Brown, and David Cameron. However, he also acknowledges that the entrepreneur-friendly policies proposed by policymakers have been somewhat eroded by certain political decisions.
Brexit is exemplary of this, as Lord Bilimoria explains. "Before the Brexit vote, the U.K. was particularly attractive to foreign investment. It was a gateway to the EU. Many foreign companies, including from India, would set up headquarters in the U.K. as a gateway to Europe. However, Brexit has undermined our investment appeal and damaged our attractiveness as a magnet for inward investment," he explains.
Furthermore, trade between the U.K. and the EU has suffered as a result, with around 40% of British exports going to EU countries and accounting for half of its imports. Small businesses have particularly encountered issues with the additional paperwork and costs associated with the U.K.'s new status as a "third country."
However, there may be some hope on the horizon, as indications suggest new U.K. government has been speaking behind closed doors with Brussels to discuss potential adjustments to the trading relationship. The feasibility of this remains to be seen.
Meanwhile, Bilimoria is critical of recent taxation decisions, such as the rise in corporation taxes under the previous Conservative government and the increase in national insurance employer contributions under the new Labour government. He argues that businesses of all sizes are currently grappling with these increases, as well as the impending National Minimum Wage rise and reforms to labor laws intended to provide workers with more job security.
"According to Lord Bilimoria, this blend of policies makes it tougher for Small and Medium Enterprises (SMEs). He expresses his concern to the government, asking them to listen to the business sector, engage with us, and collaborate. By doing so, SMEs can drive the necessary growth for the country. However, the business community seems discontented with a budget that greatly increased taxes.
On the other hand, the government increased taxes to compensate for a deficit in funds for public services. A rise in the minimum wage could potentially increase consumer spending in certain sectors. Additionally, employment-boosting laws might boost economic confidence due to the sense of job security. Yet, the question arises: has the government struck the right balance, or has it jeopardized growth instead? The answer will unfold over time.
A Persistent Ecosystem
Despite these challenges, Lord Bilimoria highlights positive aspects of the current policy. He emphasizes that Britain's entrepreneurial ecosystem remains strong and that there are beneficial policies in place. One such policy is the government's commitment to forging agreements with pension funds and institutions, channeling billions of pounds into entrepreneurial businesses, as per the Mansion House agreement.
"This is the kind of action we need to stimulate billions into entrepreneurship," he says. "We have a limited number of genuine scaleups that generate growth and employment. Our goal should be to produce more scaleups and support the ones we currently have."
Furthermore, the Help to Grow Management Program, an educational initiative, is continuing. Offered by approximately 60 business schools, it primarily targets SMEs, with these businesses bearing only 10% of the cost. "It aids in generating growth and productivity, and it enhances the skills of SMEs," says Lord Bilimoria. "In essence, it's a mini MBA."
So, it appears to be a combination of advantages and disadvantages for SMEs and entrepreneurs. The government is striving to implement growth-promoting policies, simultaneously addressing financial discrepancies in the public sector. Balancing these two aspirations might prove to be challenging."
Lord Bilimoria, a renowned U.K. entrepreneur, shares his perspective on the current entrepreneurial landscape. He commends the U.K.'s appeal as a business establishment location, highlighting factors such as robust networks, top-notch universities, and skilled professionals. However, he expresses concern over the impact of policies like tax increases on employers' national insurance and the National Minimum Wage hike on Small and Medium Enterprises (SMEs). Lord Bilimoria urges the government to engage with the business sector and collaborate to drive growth, emphasizing the importance of support for entrepreneurship and scaleups.
