It’s no secret that the UK has a long-term growth and productivity problem.
The Office for Budget Responsibility (OBR) recently revised its GDP growth forecast for 2025 downward, from 2% to 1%, reflecting the negative impact of domestic business policies and the continued instability in global markets.
Against this backdrop, the government – like so many before it – has placed high-growth startups at the core of the UK’s economic recovery, aiming to create innovative new businesses today that can become world-leading, productive businesses of the future.
This is a laudable aim, but one that will come to nothing unless the UK reassess its attitude to risk.
Despite entrepreneurship being a more widely accepted career path, government policies focused on supporting founders and improving access to capital have not led to a corresponding increase in the number of people founding scalable businesses.
Data from HMRC’s Enterprise Investment Scheme (EIS) shows that in 2023/24, only 1,010 new companies sought investment, representing a staggering 45% decline since the peak in 2017. We’re now back to levels last seen at the depths of the credit crunch in 2009.
The root causes for the UK’s declining risk appetite remain unclear. In part, changes to financial incentives, such as the loss of entrepreneurs’ relief and high rates of personal and business taxes, mean that people are less willing to undertake the financial risks associated with starting a business.
A factor less commonly discussed is the demographic profile of successful founders, who are typically in their late 30s to mid-50s; just look at Nigel Toon (founder of Graphcore) or Anne Boden (founder of Starling Bank).
While those entering the job market in their 20s might be more willing to take a risk, the majority are unlikely to have the experience, connections, and seed capital to launch scalable businesses.
To reverse these trends, the government must continue to prioritise improving access to investment capital but this is only part of the challenge, it must also do more to foster a pro-business and pro-risk-taking culture.
In part, this means creating a stable environment for businesses and individuals.
Entrepreneurial journeys are often long, and people need confidence that the ground will not shift beneath their feet; they also need confidence that they will get to enjoy the gains of their labours.
The government should also look to help companies grow faster and more efficiently, for example, by incentivising public and private organisations to embrace innovation and engage with earlier-stage businesses.
It must also break down the barriers to growth by doing more to help smaller UK companies export and further streamlining visa access for high-potential talent with in-demand tech skills.
Ultimately, each generation of success tends to inspire the next and the UK has all the elements necessary for that success – it has provided the launch pad for global technology leaders such as Revolut, Monzo, and Darktrace, it boasts the third-largest venture capital ecosystem globally, and it is home to some of the world’s top universities.
However, building and sustaining this momentum will come from the government nurturing the “animal spirits” that drive entrepreneurs to think big and take a risk. This will be essential to ensure the UK remains an attractive place for people to start and grow the next generation of world-leading businesses.
Tim Mills is the managing partner of ACF Investors
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