Speech by Chancellor of the Exchequer, RT Hon George Osborne MP: high-growth firms
A Speech by Chancellor of the Exchequer about high-growth firms and entrepreneurship.
Thank you for that kind introduction.
I’d like to start by thanking our hosts today, Unruly Media – I’m talking about the company, not the people at the back of the room.
Unruly Media is a great British success story.
You are a brilliant demonstration of the power of entrepreneurship to create jobs and innovation right across the country.
That’s what I want to talk about today- but first, let me say something about the GDP numbers this morning.
They show that the economy expanded by 0.3 per cent in the first quarter of this year.
It’s an encouraging sign that the economy is healing.
Despite a tough economic backdrop, we are making progress.
The deficit is down by the a third.
Business have created over a million jobs.
Our economy has gone from being the 13th most competitive in the world, to the 8th most competitive.
Our business taxes are falling to the lowest of any major economy.
And interest rates are at record lows.
We all know there are no easy answers to problems built up over many years, and I can’t promise the road ahead will always be smooth.
But by continuing to confront our problems head on, we are building an economy fit for the future.
And that means as well as dealing with the deficit, and restructuring our economy, we need to back the insurgent businesses that create the majority of new jobs and innovations in the economy.
A modern industrial strategy means not only supporting important established industries like aerospace – it also means supporting the dynamic new entrants and the businesses of tomorrow.
So we’re backing British entrepreneurs and investors.
And we’re creating a policy environment that supports, not holds back, fast-growing firms.
We’ve done this because we understand that in the 21st Century, business models and industries are fundamentally changing.
In the internet age, start-ups can reach global markets almost immediately, and make use of technology to scale their business in ways never before possible.
The global economy is increasingly being shaped by new, young and fast-growing firms.
In 1950, the average lifespan of an S&P 500 company was 47 years.
By 2020, it will have fallen to just ten years.
Indeed, it’s predicted that two thirds of the businesses that make up the S&P 500 in ten years time will be companies that don’t even exist today.
We understand this shift, and we are doing everything we can to translate that insight into concrete policies and action.
I’d like to give you three practical examples of this commitment to entrepreneurship and innovation.
First, Tech City.
The Prime Minister launched the Tech City initiative in November 2010 in response to direct requests from local entrepreneurs.
Two and a half years on, and we’ve brought companies like Amazon, Cisco, Intel, Microsoft and Google to the area, supporting the innovation ecosystem and creating new jobs here in East London.
We created the world’s first Entrepreneur Visas to make it as easy as possible for entrepreneurs from outside the EU to come to Tech City to start their business.
And we have created new research centres in Tech City, such as the Open Data Institute, chaired by Sir Tim Berners-Lee, and the Smart and Connected Cities Lab funded by Intel and jointly run by UCL and Imperial College London.
Let me illustrate the impact of all this hard work with a single statistic.
When we launched the Tech City initiative in 2010, there were around two hundred digital and technology companies in East London.
Today, there are over 1,300 companies, employing over 40,000 people – making Tech City the fastest growing technology cluster in Europe.
Governments across the world are now following our lead.
To give you one example, Germany has just launched its own Tech City initiative in Berlin.
We’re always told to learn lessons from the German economic model.
There’s an example of the Germans learning a lesson from us.
It’s an example of our industrial strategy in action – and you can see a similar impact in other technology clusters across the country, from Cambridge to Daresbury to Dundee.
So we are making progress on the necessary task of rebalancing the economy towards new industries and high-value activities.
This rebalancing can’t take place overnight, but it is absolutely the right thing to do for the long-term strength of the UK economy.
If Tech City is one way in which the Government has thrown its weight behind high-growth firms, another is our determined agenda to incentivise entrepreneurship and early stage investment through the tax system.
In Budget after Budget we’ve pulled out all the stops to make sure that entrepreneurs can keep more of the value and wealth they create in our economy.
We have expanded Entrepreneurs’ relief, ensuring that founders pay just 10% Capital Gains tax when they sell their shares.
And a 10% Capital Gains Tax rate will apply to SMEs and start-up companies granting shares to employees through the enterprise management incentive scheme.
This will help young British businesses compete for top talent, and ensure that employees that take a chance by joining a start-up are properly compensated for taking the plunge.
But that’s not all we’ve done.
We understand that accessing risk capital is critically important for high-growth firms, so we’ve introduced the world’s most generous tax breaks for angel investment.
These tax breaks - the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme - offer 30% and 50% tax relief respectively on investments in start-up companies.
And because investing in new businesses is inherently risky, these tax breaks provide relief on losses too.
So at a time when politicians across Europe - and at home - are clamouring for ever more draconian policies to penalise enterprise, we are doubling down on entrepreneurship and angel investment.
We will continue to back our start-up founders and investors, becuase that is the right thing for the economy, and the right thing for the country.
We have a plan, and we will not shirk from this course.
The third element in our plan to build a modern economy of the future is to make sure these firms stay and create jobs in the UK.
For too long, many high-growth companies in the UK have been looking to move to the US to list on the NYSE and NASDAQ, because of the perception that the London Stock Exchange main market is closed to innovative businesses.
At the same time, AIM was seen to have a problem with liquidity, which was deterring smaller high-growth companies from listing on that junior market.
So we’re dealing with the situation.
In last month’s Budget, I announced that we will abolish stamp duty for AIM shares, to take some of the cost out of buying and selling shares on that market, and so improve liquidity.
Some countries in the world are thinking of introducing a damaging financial transaction tax.
Here in Britain we’re abolishing a financial transactions tax.
We are also consulting on plans to open up investment in ISAs, to include a wider range of small company shares, like those traded on AIM.
This is a huge step forward, which will help more fast-growing firms access the investment they need to grow into world beaters.
But that’s not all we’ve done.
Starting last summer, we have worked with the Stock Exchange to create what we’re calling the “High Growth Segment”, which will open up the main market to fast growing technology companies from across Europe.
This High Growth Segment has been specifically designed with dynamic and high growth businesses - like Unruly Media - in mind.
All this adds up to a truly world-beating package, which will open up London’s public markets to a new generation of high growth businesses from across the UK and beyond.
But having launched these ambitious policies to open up our public markets, we’re not going to be content to sit back and wait for the world to notice.
We’re going to get out there and make sure people know Britain is open for business.
To do this, I can today announce the creation of the Future Fifty Programme, which is a concierge service for the 50 most promising high-growth companies that we want to see listing in London in the years ahead.
We’re going to be rolling out the red carpet to the world’s fastest growing companies, and making it as easy as possible for them to list in the UK.
Measures like this not only unlocking new opportunities for British entrepreneurs; they are also bringing new investment and jobs to our shores. Indeed today I can announce five new investments being made here in London.
Box, one of the fastest-growing and most influential technology companies in the world, is today announcing that it will open a major new facility in London, creating 100 new jobs.
Lookout, the world leading mobile security company, is announcing that it will establish its European head office in London, bringing new jobs and investment to the UK.
Ticketmaster, the global ticketing and events company, is consolidating all of its London operations and offices into a new base in Angel.
If You Can - the new computer game studio created by the founder of Electronic Arts - is today officially launching its new office in East London.
And EE is today announcing a new partnership with Tech City.
As a result of this partnership, EE will roll out Mobile Wi Fi hotspots in selected locations from June.
These five new investments are a clear demonstration that the world’s most innovative companies are choosing to invest in the UK.
They’re investing here because we have created a world-class environment for high-growth firms, and rebalancing our economy towards innovation and entrepreneurship.
Yes, fixing the economy takes time.
And yes, we do so in a tough global economic backdrop.
But as we have seen today, the impact of this rebalancing is already clear.
We have record levels of start-up companies in the UK.
Record levels of investment in UK early stage technology companies.
And the explosive growth of Tech City in East London.
Our economy is growing.
Jobs are being created.
This is the right long-term course for the UK.
We will not shift from the entrepreneurial path we have chosen.
Thank you.