SWZ: The UK is enjoying a good name for start-ups. Acclaim justified?
Malcolm Trotter: Well, as at 2017 the number of new companies formed has risen constantly, standing at 600,000 per annum – comparable to the US start-up rate which had always been ahead of the UK.
Is the rise in start ups to do with the vitality of the population, government intervention, or some other factor?
All have had a positive impact. Since 2010 government interventions to encourage start-ups have reduced and focussed more on supporting existing businesses identified as having growth potential. There has though been a genuine increase in support where business owners and social entrepreneurs help each other and those looking to start-up.
How important are start-ups to the general economy and in terms of reducing unemployment?
Start-ups – including self-employment – have a vital role in reducing unemployment. Official unemployment in the UK is now around 1.4 million which at 4.2% of the working population is almost the same as the US but still 0.5% behind Germany. With 600,000 new companies being formed a year, plus many more people becoming self-employed – but not incorporated – that is around half the total of those unemployed. This has brought greater flexibility to the labour market.
How easy and how quick is it to form a Limited company in the UK?
Ten times easier than in Italy, I can assure you.
And is registration for VAT and membership of a Chamber of Commerce easy?
Yes, both are, but neither are necessarily essential or obligatory. You can register for VAT online and Chambers of Commerce will accept any form of business for membership and without any requirements such as qualifications or referees. Regarding VAT there is no obligation to register if turnover is under £ 85,000.
Are there any particular areas of activity where innovation is outstanding in the SME economy?
The UK still has an ongoing science and technology innovation sector – with local initiatives in place where universities work in partnership with existing and start-up tech firms to develop new products etc. A view persists that we are overly cautious about investing in innovation and too many outputs of research and development either go outside the UK to find the finance they need to commercialise or never reach the market.
Can you tell us what you understand by the term „micro economy“?
In relation to enterprises, what is meant by “micro” is a firm consisting of less than ten employees. In the UK, 96% of all businesses are actually micros. These enterprises are vital to the economy in so many ways but also bring real strength to the local economy. Since the 1970s, the UK has suffered significant local and regional economic and social problems as a result of too great a dependence on one or two large industries or big businesses. When these decline or fail the whole area can be devastated. The presence of micro firms can reverse these difficulties, bring economic and social regeneration and create a more robust, sustainable economy for the future.
Shared working space is a well-known term but what about these neighbourhoods of development, such as the Balkan triangle in Liverpool, which are becoming real trendsetters. What’s the secret behind their popularity?
First is the dynamism and efficiency of working in the same space for those who are involved in complementary enterprises/sub-sectors. Second, personal enjoyment and well-being of working in and around such a dynamic and potentially supportive environment. For the self-employed or micro business, it is so much better than being isolated working from your home or small office.
And I believe banks are trying to jump on the bandwagon, supporting new enterprises with attractive conditions and support?
Yes, indeed – and some enterprising ones too! “Out of the box” thinking we might say.
Is the picture as rosy as the media makes out? Is every new business in the UK a success?
Regrettably not. It is acknowledged that the success rate of UK start-ups is around 60% in the first two years and perhaps as low as just 40% after three.
What are the most common reasons behind failures?
I would say that the top two are lack of customers and cashflow/financial management.
A mad entrepreneur is a dangerous thing after all is said and done?
True. “Entrepreneurship” is a term which is not consistently understood, sometimes applied to business/enterprise but also more widely to describe someone who is innovative, shows initiative, flair, ambition, drive etc.
Does the UK stand out in terms of training or qualification it gives to new businesses?
There is now a strong presence of entrepreneurship education and student groups and societies across the universities sector. A wonderful initiative is the Small Firms Enterprise Development Initiative/SFEDI. SFEDI was originally funded by the UK government in 1996, it has though been a real and effective leader in terms of bringing together a large and wide range of stakeholders all wanting to enable potential and new entrepreneurs to develop enterprise skills and business support to start and grow a business successfully. SFEDI’s work is truly of international standing and application.
Moving on from this, do you think there should be a greater requirement about showing your credentials before starting a business or is that “anti-capitalist” in nature?
No real grounds to make qualifications a requirement. However, there is a clear need worldwide to be more effective at helping persons starting a business to consider all: assess their own knowledge and skills, identify any gaps and address these through good access to affordable, high quality assured learning and external business support.
What about the question of gender in new business start-ups?
Certainly in the UK, over the past ten years or so there has been faster growth in women starting businesses. According to Aston Business School 45% more are becoming entrepreneurs as compared with 27% more men.
Is it true that university education is producing a generation of mid twenty aged unemployed in need of requalification after their degrees?
I am afraid so. Statistics indicate that only 50% of graduates aged 21-30 are in graduate level jobs.
Another much-felt problem is the silver haired workers who are made redundant or are simply unemployed?
Yes, a major problem and a challenge for society and the individuals themselves. Interesting is that in the UK much of the increase in new businesses has come through mature people starting up. Many are micro, home based businesses. In fact, home based businesses now contribute around £342 billion per annum to the UK economy. Now that we are living longer and pensionable age is being put back, supporting this age group into self-employment and to successfully start a business is even more important.
You travel a lot internationally. Have you picked up on any innovative approaches on how to better structure start-ups or ensure a decent success rate? How can we avoid the “here today and gone tomorrow” syndrome?
I have seen some innovative work in Brunei relating to making business knowledge and skills more widely accessible to those starting up or running a micro enterprise. A need – which is in fact common globally – is to make high quality learning accessible, flexible, at an affordable price and to make entrepreneurs aware of it. Perhaps the best example I have is a firm in New Zealand called The Small Business Company/tsbc that has been providing this type of self-learning content online for over a decade. New Zealand also has a reputation as a very supportive environment to start a business and with higher success rates than the UK.
And finally, what nuggets of advice would you give to a group of friends looking to start a new business together?
I would pick out four things. First, be clear about what you want to achieve personally. Second, be honest with yourself as whether or not the enterprise will actually enable you to attain those goals. Third, put together a well-researched, realistic business and financial plan drawing on the expertise from friends and from outside if necessary. Finally, from day one put in place a simple but effective financial management process. Too many businesses do the first three things well but not the final one: “Cash is King”. If you look after cash flow then entrepreneurship can flourish!