Take red tape burden away from UK startups

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Smaller companies may struggle to deal with the regulatory aspects of hiring a foreign national (Source: Getty)

As an economically-literate and highly-educated reader of City A.M., you will no doubt be familiar with the theory of “bootleggers and baptists”, coined by regulatory expert Bruce Yandle.

It goes as follows – regulations are typically supported by self-styled moral crusaders (the baptists), but also by commercial interests that stand to benefit from the measures. Harsh restrictions on the sale of alcohol in the US, for example, were a great boon to bootleggers for much of the 20th century.

Strict or complex regulations are not, Yandle explained, always bad for all businesses. Some firms, typically the large and established, find that high barriers to entry insulate their activities from emerging challengers. Thus, one should always raise an eyebrow when large businesses call for government-backed interventions in the name of raising standards; it is rarely public wellbeing that they are looking to protect.

Migration is one area that significantly favours big companies with hefty HR departments; such firms can easily navigate the web of rules that come with hiring a foreign national. And so it is refreshing to see one business lobby group, the London Chambers of Commerce (LCC), sticking up for the little guy.

The LCC will argue today that a radical change must be made to help small firms compete on a level playing field – namely, that sector-specific organisations such as Tech City should be able to sponsor key foreign workers on behalf of startups.

In areas such as fintech, where small firms need quick access to highly-skilled and heavily-in-demand international workers, this bold idea could reap significant economic rewards.

Labour’s mayoral candidate Sadiq Khan told City A.M. last night that the proposals “deserve looking at”, while Tory Zac Goldsmith recognises that “London’s businesses, big and small, need to be able to attract the brightest and the best from overseas".

Just last week, the migration advisory committee proposed a £1,000 annual levy on skilled migrants – a move that would be brushed off by big business, but impose a harmful tax on smaller employers.

The government must ignore populist demand for such measures, and move in completely the opposite direction. Backing the LCC’s innovative idea would be a decent start.

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