2023 POLICY ROADMAP

The UK economy has been growing slowly since the pandemic, with UK GDP some 2% larger in June 2023 when compared with the last quarter before the pandemic (three months to end of December 2019). However, growth in 2023 has been sluggish at best and GDP showed no growth in the three months to September 2023.

However, business insolvencies increased by 17% in the year to September 2023, pushed up by higher business costs including interest rates. Inflation was beginning to fall, from 10% at the start of 2023 to just 5% in October, but still more than twice the Bank of England target rate of 2%.

The UK government confirmed its continued funding of the Help to Grow: Management program launched in 2021 to help small businesses develop a growth action plan. In response to the cost-of-doing- business crisis, the government introduced the Energy Bill Relief Scheme for all businesses and non-domestic contracts. The British Business Bank’s Start Up Loan program has delivered more than £1 billion of funding to over 105,000 businesses since 2012, and funding has been secured until 2025, which will continue to be a vital component of the entrepreneurial ecosystem in the UK.

2023 Framework Conditions Review1

In 2020, the overall quality of the UK entrepreneurial environment, as assessed by its own national experts and as measured by the National Entrepreneurial Context Index (NECI), was rated as just satisfactory, with a score of 5.0. Since then, that overall quality score has declined slowly, moving further and further away from satisfactory, and reaching 4.6 in 2023, placing the United Kingdom 22nd of the 49 economies participating in the GEM National Expert Survey (NES).

This decline in overall score reflects the cumulative impact of declines in nine individual Entrepreneurial Framework Condition (EFC) scores from 2022, compared to increases in just four. Most of these changes were small, but the net effect was an overall reduction. The scores for the two entrepreneurial finance EFCs have fallen over the last three years, with both rated less than sufficient in 2023, surely a major concern for a leading international finance centre.

The United Kingdom’s national experts rated its social support for women entrepreneurs as
much less than satisfactory at 3.2, ranked 36th of the 49 economies. Access to resources for women entrepreneurs relative to men fared better, with a score of 5.8. This is much better than sufficient and 10th highest overall.

Since the pandemic, the United Kingdom has been part of an increasing group of high-income economies with an assessed overall entrepreneurial environment that has slipped from sufficient to less than sufficient. By 2023 there were 12 high-income economies with NECI scores of less than 5.0.

2023 Entrepreneurial Activity Review

In the GEM Adult Population Survey (APS), almost one in four UK adults reported that their household income had declined in 2023, although this proportion has been slowly reducing from just under one in four in 2020.

The United Kingdom has a reasonable profile for entrepreneurship, with more than one in two adults knowing someone who had recently started a business, or considering they had the skills and knowledge to do so themselves. Just under a half of adults saw good opportunities to start a business, but more than half of these would not start a business for fear it might fail. This fear of failure rate has been growing slowly, up from just four in 10 pre-pandemic in 2019. Nevertheless, the proportion of adults intending to start their own business in the next three years had also been growing slowly, from 8% in 2019 to 11% in 2023.

Many new entrepreneurs in the United Kingdom are outward-looking, with two in five having customers beyond the borders and three in five expecting to use more digital technologies in the next six months. Growth expectations are strong, with one in four new entrepreneurs anticipating employing at least another six people over the next five years. Finally, to build great wealth or very high income is the dominant motivation among new entrepreneurs, agreed by more than two out of three.

1 A brief description of the GEM approach is given in the footnote on p. 107.