A Budget for entrepreneurs?

The UK government's 1999 Budget introduced changes in three key areas designed to help entrepreneurs: investment, research and development (R&D) and employee incentives. But if business culture does not change too, then these initiatives will prove to be money wasted.

On the face of it, the news is good. The Department of Trade and Industry (DTI) will launch a Small Business Service this autumn to distribute £100m of new money to high-tech start-up companies over the next three years - and to offer guarantees to other investors. Moreover, start-ups and technology companies can wave goodbye to the taxes on their R&D programmes. And shareholders - whether employees or financiers - won't have to pay income tax on their shares after three years.

That's on top of a raft of other business measures, such as cutting tax on corporate mobile phones and sensible VAT adjustments.

Industry is agreed that the government has done the best it can, although it has increased the burden of red tape on small and medium-sized enterprises (SME). Thomas Hoegh, founder and MD of Arts Alliance, a venture capital firm, called it "a step in the right direction".

David Baxter, director of the Information Society Initiative, told Silicon.com: "The Budget was particularly helpful for those small businesses which are looking to get into the information age."

But financial support for entrepreneurs is only the first step. The 'one strike and you're out' culture has to change. In the UK, if an entrepreneur fails at the first attempt, we point the finger and say the CEO is obviously not good enough to succeed. In Silicon Valley, it means that he or she has got the experience to do better a second or third time.
Unless this culture changes, most of the UK government's new funds will go to waste. Of the 500,000 start-ups created each year, around 60 per cent fail within a year. Currently, their assets are sold off instantly and any experience gained is scattered to the winds.
Stephen Alambritis, head of parliamentary affairs at the Federation of Small Businesses (FSB), says the UK needs to change tack. "We want a culture of survival, where insolvency firms hold off for at least 28 days before selling off assets," he said.

Alambritis added that in the US, the Internal Revenue Service doesn't sell off a bankrupt company to the lowest bidder, but instead sends in an administrator to save the business - or resell it strategically. The FSB recently received a commitment from Trade Secretary, Stephen Byers, to include its demands in a forthcoming consultation paper on bankruptcy laws.

So IT start-ups are getting not just the money, but are beginning to receive the support they need if things go wrong. But government can only do so much to encourage innovation. Every organisation, from college to recruitment firm to multinational, needs to recognise that failure leads to experience, which can then be recycled to breed success.

Silicon.com's new Entrepreneur Channel will do what it can to document the cultural shift, but the UK will only become a nation of entrepreneurs if businesses re-evaluate their view of failure. UK plc, the ball's in your court.