Brave start-up entrepreneurs may be set for a positive 2013

Annabel Denham
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LAST year’s employment market was characterised by insecurity, scarcity of supply, and job losses in once buoyant sectors. Previously good reasons for staying in a City job could now be gone. While an uncertain jobs market may not be incentive enough alone for you to take the equally difficult path into entrepreneurship, according to Stuart Watson of Ernst & Young “the balance of risk is on the move”.

By some measures, Britain is steadily becoming a more entrepreneurial society. Research by the Centre for Policy Studies (CPS) found that 2012 saw the number of small enterprises increase for the first time since 2008. Roughly half of this rise was due to changes in HMRC categorisations, with previously excluded businesses added for the first time. But Ryan Bourne of the CPS still thinks it is reason for optimism. 2013 may see British entrepreneurship flourish.

The trend is not necessarily new, but is certainly accelerating. According to Global Entrepreneurship Monitor (GEM) data, 5.7 per cent of the 18-64 population was either a nascent entrepreneur or owner-manager of a new business in 2009. By 2011 this had jumped to 7.3 per cent. Recently, GEM also found that 20 per cent of the working age population intend to start their own firm in the near future.

Despite gloomy headlines, this is partly because the resources at an entrepreneur’s disposal are better than ever before. It is now relatively cheap to start a business, with advances in technology giving startups the chance to build a presence online without significant investor funding.

The UK government has also taken steps towards helping entrepreneurs. The Business Finance Partnership aims to ease the flow of credit to small firms by making it easier to access finance. And it is just one part of a larger programme of credit easing measures announced by the chancellor last year. A total of £1.2bn has been made available, with £100m allocated to small businesses.

And promoting entrepreneurship looks set to continue. The Seed Enterprise Investment Scheme (SEIS) has been designed to help small, early-stage companies raise equity by offering tax relief to investors. Investment platform Seedrs has described the scheme as “one of the most generous available”. If an investor disposes of an asset, and reinvests the gain in shares that qualify for SEIS relief, the amount invested will be exempt from capital gains tax – up to £100,000 in the tax year.

Another notable incentive is research and development relief. This is effectively a subsidy of 25p for every £1 spent on qualifying expenditure for small to medium-sized, according to SME web, and can substantially reduce corporation tax payments. Additionally, the government’s new Patent Box scheme, which comes into effect this year, seeks to encourage companies to locate jobs and activity associated with the commercialisation of patents in the UK. It will allow companies to apply a reduced 10 per cent corporation tax rate to profits attributed to certain forms of intellectual property.

Business lending by banks has been shrinking since 2008, leading some entrepreneurs to shun traditional ways of raising capital.

Crowdfunding, provided in the UK by companies like Seedrs and Crowdcube, was originally conceived as a way to fund projects like indie films or album recordings. But Crowdcube also allows start-ups to sell shares – currently not possible in the US. Investors pool together their capital to support entrepreneurs. Crowdfunding is still relatively new in the UK, the market is small, and the FSA also warns that many crowdfunding opportunities are high risk. But innovative new financing solutions could offer support where banks cannot.

There’s no denying that it still takes bravery and courage to start a new business in the current economic climate. But the underlying trends are auspicious. Perhaps it’s time for a new start