Tax incentives have their place, but new business start-ups need mentors if the economy is ever likely to grow again

When an economy is flat-lining and teetering dangerously on the brink of a double-dip recession, something needs to be done urgently to avoid potential disaster, and to kick start growth. The answer to the problem is wholly dependent on which side of the political divide you fall on: Labour advocates increased public spending to stimulate growth, whilst the Coalition comes down firmly on the side of tax incentives and tax breaks to drive the economy onwards. Yet, we don’t often hear from those at the sharp end: the small to medium sized businesses that find themselves caught in the middle of this economic debate. What do small businesses and new start-ups really want the government to do? Do they want increased investment in services or reduced taxation and bureaucracy? Well, surprisingly the answer is neither. What start-ups really want are business mentors and specialised mentoring, according to a news report in the latest edition of Business Weekly.

Tax incentives and additional money are all well and good, but won’t necessarily help to create the new businesses needed to drive the economy and replace the job losses in the public sector. What start-ups really need are business mentors, according to Cambridge-based entrepreneur, Nathan Hill, who spoke soon after leaving the angel-inspired breakfast at Number 10 with Prime Minister David Cameron. The Coalition has repeatedly called for more co-operation and involvement from the business sector to help stimulate growth, and has set up the newly launched Angel Co-Fund and Business Growth Fund and Seed Enterprise Investment Scheme to achieve this. The British Business Angels Association has already come on board, as has the British bankers Association surprisingly, though the latter appears to be offering assistance through mentoring, not money.

Speaking after the meeting, Mr Hill commented:

“Whilst the event tried to cram an awfully big subject into a three hour session, the politicians impressed me with their openness and willingness to listen. Businesses got across their message, particularly that finance and tax incentives are necessary, but not sufficient to kick start this part (start-ups) of the economy.  Companies need to be able to access the skills and support of experienced business people and specialist mentors, if they (start-ups) are to be able to recognise and achieve their full potential.”

Cameron and his Cabinet have spoken about the need to make the UK a great place for companies to attract investment and grow. At the breakfast meeting he spoke about the tax incentives for investors introduced over the last two years, and added that the government had increased the rate of income tax relief for the Enterprise Investment Scheme to 30 percent to encourage more equity investment in start-ups, doubled the investor limits to £1 million per year from April, 2012, launched the new Seed Enterprise Investment Scheme, providing a 50 percent rate of income tax relief for those who invest in new early-stage businesses, and intends to kick start the scheme with a capital gains tax holiday for 12 months from April, 2012.

Mr Hill added:

“Whilst I’m not yet fully convinced by the details of SEIS, there’s no doubt that a 50 percent income tax and 28 percent capital gains tax relief makes for an extraordinary generous attempt to kick start seed investment, and I shall be looking for an Accelerate to Investment  seed opportunity right now. Lord Young in his talk emphasised that now is a great time to start up and grow business. I heartily agree with this perspective. Whilst others are locked in corporate stasis and gloom, it’s time for the up and coming businesses to defy recession and go for growth.  However, companies do need to be able to access the skills and support of experienced business people and specialist mentors, if they are to be able to recognise and achieve their full potential.”

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