WILL WALES FOLLOW SCOTLAND IN PROVIDING SUPPORT FOR START-UP BUSINESSES?
They say a week is a long time in politics and the last seven days has certainly demonstrated that old adage remains true.
Last Saturday, I again made the case in this column that those entrepreneurs who had started new firms in Wales in 2019 and 2020 would not be supported by the Welsh and UK Governments’ interventions to support businesses during Covid 19 and needed help urgently.
Simply put, this meant that at a UK level, 12,000 Welsh startups would not get a Covid-19 self-employed grant as are clearly unable to provide self-assessment data for 2018-19 nor would they be able to get a business rates grant as most do not have premises and either sub-lease or work from home.
In Wales, the fact that they are less than two years old and with the vast majority not VAT registered, those start-ups based in Wales cannot get access to the £500m Economic Resilience Fund announced by the Welsh Government including the new £100m loan programme from the Development Bank of Wales.
The response to this gap in funding by the Welsh Government was a statement that they cannot support every firm in Wales, despite the promise at the beginning of this crisis that “if you had a good business in 2019, you will have a good business in 2021”.
Despite £1.4bn of business support being made available, the mantra from Cardiff Bay last week was that it was up to UK Government to fill the gap for startups in Wales and that a new programme of support was imminent after pressure from tech entrepreneurs in London.
And as if on cue, the Chancellor of the Exchequer announced a £1.25 Bn package of support on Monday for startups that would help the sector.
Unfortunately, this proved too good to be true as the UK Treasury definition of startups seemed to be based on those tech firms which had been funded by equity, excluding the vast majority of new businesses in Wales.
As a result, It would largely benefit tech businesses in the more prosperous parts of the UK that probably didn’t need this funding as much as other startups elsewhere, especially as London had only recently been celebrated as the venture capital centre globally.
Whilst this was probably a major reality check for Welsh politicians and policymakers about what the UK Government would do to help new businesses in Wales, the reality hit home when the Enterprise Research Centre released figures which showed that Wales had seen the biggest increase in dissolutions of businesses (with most of these new firms) and the third biggest decrease in new firm registrations.
This was supported by additional data from business research specialists Beauhurst that demonstrated that Wales had one of the highest proportions of high growth companies in the UK critically impacted by Covid 19.
Was the Welsh Government going to continue to ignore the evidence on the impact of doing nothing for the start-up community in Wales? More importantly, would it now, as promised, fill the gaps left by the UK Government’s focus on tech firms in London and the South East of England?
Fortunately, the answer may be a tentative yes over a month after the Welsh Government announced its package of support for the Welsh economy.
In a press conference on Thursday, the Economy Minister suggested that something was going to be done, stating that non-VAT registered businesses (including startups) would be supported in the next round of the Economic Resilience Fund.
What that will look like is uncertain but it may be worth examining what is happening in Scotland where politicians and their officials have recognised the gaps in support for new firms and announced, last Tuesday, a £100 million fund to support the self-employed and SMEs
This includes a £34 million to be allocated to the newly self-employed facing hardship through £2,000 grants. There will also be a £20 million for creative, tourism and hospitality companies not in receipt of business rates relief and £45 million for vulnerable SME firms who are vital to the local or national economic foundations of Scotland.
Of course, it would be easy to ask why the Welsh Government did not react in the same way as their Scottish counterparts when the gaps in support for startups was clear to those working in the entrepreneurship ecosystem and was needed far more urgently than for other Welsh firms?
That is probably a question for another day when we are through this crisis.
However, the most important thing now is to ensure that a similar package to that developed by the Scottish Government is quickly rolled out to new businesses across Wales and that it is adapted to ensuring the right level of support goes to those startups that we will need to reboot the economy when this crisis is finally over.