According to research from Hiscox, no less than 40 per cent of students in London are either running their own business or are about to do so. And Hull, the city that has suffered from permanent economic depression for decades, is second in the chart of would-be entrepreneurs. It’s good news surely, but why is this, do you think?
This is what Hiscox has found. A mere 1 per cent of graduates believe that qualifications are the most important factor when thinking about setting up a business. Rather, they reckon creative thinking (40 per cent), the ability to network (38 per cent) and risk-taking (28 per cent) are the key attributes of successful entrepreneurs. And it seems our ambitious young students admire entrepreneurs who have made it, rating Sir Richard Branson (24 per cent) and Lord Alan Sugar (20 per cent) as the most inspirational entrepreneurs globally.
Of course, not all graduates opt for the career choice marked entrepreneur. There are more budding entrepreneurs studying IT and computing than any other discipline. Next in the list of studies most likely to throw up entrepreneurs is business studies.
As for where, London is the region which boasts the higher number of actual or wannabe entrepreneurs. Hull is second, followed by Glasgow, Cardiff and then Newcastle.
If you are a regular reader here you will know this column is a fan of the entrepreneur, and believes this particular type of individual can lead the UK’s economy out of today’s fiscal and personal debt mess, and ultimately, via creating real wealth, can solve the problem of how to fund the retirement of the baby boomers. So, it is not really necessary to point out why we think the findings of this report are such good news.
But here are a few observations.
Firstly, the rise of the entrepreneur may be an example of what the economist Joseph Schumpeter called creative destruction. An economic downturn can lead to the devastation of industry, but this in turn can create a vacuum. Entrepreneurs may emerge in such times, because for the budding business people, there is no other choice. State spending can have a counter effect, because it can prop up industries or firms that would otherwise have gone under. It can in effect crowd out entrepreneurial activity.
It seems like a cliché, but necessity really is the mother of invention. The US is one of the most entrepreneurial nations on earth, because it was founded by people who fled their own countries out of necessity (the Irish potato famine, for example), and had no alternative but to create wealth from the sweat of their brow and via living off their wits.
It is generally hailed as good news that UK unemployment didn’t rise as much as feared during the recession, and bad news that US unemployment rose much higher. But, for encouraging entrepreneurial activity, it is possible that the relationship is the other way round.
Another factor for encouraging the rise of entrepreneurs lies with schools and universities. Schools have their young entrepreneur of the year award, and entrepreneur studies are becoming more popular as a choice of subject at university. To be honest, we had been a tad cynical about the idea of studying how to become an entrepreneur – is that a contradiction in terms? But maybe we are wrong. Maybe the fact that this subject is now available has played an important part in changing cultural attitudes.
Then there’s TV. Many grandees in the business world have pilloried programmes like Dragon’s Den and The Apprentice, but they are surely wrong. Both shows may provide a misleading impression of what it is really like, but they have helped make business, and those who are willing to go it alone in business, sexy.
But there are still problems. Students might be waking up to the appeal of entrepreneurs, but there is still cultural resistance to the idea in the UK. Attitudes to failure may be key. In the US, failure is often seen as an inevitable experience on the road to making it; in the UK it carries enormous stigma.
The housing boom of the noughties was a disaster for entrepreneurial activity, because the allure of buy-to-let investing effectively sucked out would-be entrepreneurs and turned them into property speculators who do virtually nothing towards creating wealth.
Drilling into the data, it is interesting, but not surprising, to see IT students as the ones most likely to go it alone. After all, from Bill Gates to Mark Zuckerberg and Dustin Moskovitz, founders of Facebook, not to mention the Google boys Brin and Page, in the world of technology the entrepreneur is king.
As for the rise of Hull as a hot spot for entrepreneurs, this is surely very good news indeed, and may be reflective of what we said above about necessity being the mother of invention.
But there are ways in which the UK must do better.
Did you know there are courses in California, where theses and research papers from students are automatically sent to venture capital firms. Seed capital is vital for entrepreneurial Britain to emerge from the promise the Hiscox report alludes too. And this is one area where things are simply not good enough. Kids may be more entrepreneurial, but the next generation up, the one with the money, don’t have the same cultural attitude. The government must do more. This column has argued many times before, and we will repeat it now, that quantitative easing must entail some level of purchasing of venture capital bonds. Bank of England Governor Mervyn King has said it is not the bank’s job to pick and choose where the money it creates goes. But he is wrong. Commercial banks are woefully failing entrepreneurs, so the Bank of England must do more.
And then there’s demand. Here lies the dilemma with government efforts to stimulate the economy. Government stimulus packages can crowd out dynamic new businesses, but at the same time, without sufficient demand, new businesses cannot get going. This is a particular issue in Hull, where high unemployment means little local demand for the products entrepreneurs may want to create. Somehow, the government needs both to create this demand, but without crowding out entrepreneurs. It’s a tough one.
And finally, maybe, in part at least, the rise in would-be entrepreneurs is a legacy of New Labour. After all, it was on the last governments’ watch that the Young Entrepreneur scheme took off.
© Investment & Business News 2013