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UK ranked 14th in roll of entrepreneurial nations

23 April 2012

A new global ranking of the entrepreneurial performance of countries puts the UK in joint 14th place, behind the US (1st) and Australia (2nd), and European countries including Sweden, Switzerland, Iceland, Denmark and Belgium. The Global Entrepreneurship and Development Index (GEDI) compares the entrepreneurial characteristics of 78 nations and identifies the entrepreneurial strengths and weaknesses of their economies.

Minister for Universities and Science David Willetts
Minister for Universities and Science David Willetts

The researchers behind the Index, from George Mason University, the University of Pécs and Imperial College Business School, suggest that the main issues that need to be addressed in the UK are encouraging individuals to invest in start-ups, and giving entrepreneurs easy access to finance. They advise policymakers to look at how their initiatives can address these bottlenecks.

GEDI analyses three measures, using a range of data to explore the entrepreneurial activities, aspirations, and attitudes of each country. The 2012 edition uses mid-2010 data.

The UK scores strongest, ranking 5th, for its level of start-up activity - the share of technology sector start-ups, the quality of the human resources in start-up firms and the share of start-ups in areas where not many other businesses are offering similar products.

It is weak in its entrepreneurial aspirations, coming 12th in Europe and 30th overall, for the efforts of its early-stage entrepreneurs to introduce new products and services, develop new production processes, penetrate foreign markets, substantially increase the number of firm employees, and finance their business using venture capital.

The UK ranks in the bottom quarter globally for the number of individuals who have invested informally in other peoples’ start-ups over the past three years. Analysis suggests that the UK’s performance in this area was significantly affected by the financial crisis, although the rate of informal investment has subsequently increased.

It also ranks in the bottom quarter for the percentages of the population who personally know someone who has started a new firm; who perceive good opportunities to start a new firm in the area where they live; and who perceive entrepreneurship to be a good career choice.

The report’s authors believe that in the UK, access to capital for start-ups and small and medium-sized enterprises continues to be a constraint. They say that even with recent policy initiatives designed to address these weaknesses, it will be crucial to examine access to finance in particular, and look at how policies might be improved/adapted in light of the bottlenecks the Index has identified.

Professor Erkko Autio, Imperial College Business School said: "The good news is that there does not seem to be anything fundamentally wrong in the formal support system. The UK could significantly improve its performance through well-targeted policy measures, especially those encouraging individuals to invest in start-ups.

"It is timely and important to review the entrepreneurial health of the UK. Although weak signs of economic recovery are starting to appear in North America, the EU continues to feel the effects of the financial crisis. In the UK, the government faces the complex challenge of reducing debt while simultaneously promoting growth in the private sector. This set of conditions emphasises the potential of entrepreneurship as a mechanism to both restore the balance between public and private sectors as well as kick-start economic growth."

Minister for Universities and Science David Willetts (pictured) said: "Encouraging entrepreneurs to start and grow their business is vital to help rebalance and boost the UK economy. The Government is working with the private sector to help create an environment in which entrepreneurs can thrive and be successful. We are committed to improving the access to finance for small and medium sized enterprises (SMEs) through a range of non-bank lending channels. £100 million of the £1.2 billion Business Finance Partnership will be made available to businesses through Capital for Enterprise Limited to help entrepreneurs gain access to the finance they need.

"We also want to give budding entrepreneurs the best chance to succeed. That’s why we are working with the National Association of College and University Entrepreneurs (NACUE) to increase the number of enterprise societies in Universities and colleges that can offer real life business experience. We are also launching a £10 million pilot for enterprise loans to give young people access to small amount of capital as well as business training and mentoring."

The GEDI Index is officially launched on 24 April 2012. It can be read online here.

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