Wealth creators assessing the impact of UK entrepreneurs on society

Wealth creators Assessing the impact of UK entrepreneurs on society

Contents
Executive summary

2

About this report

3

Introduction

4

Entrepreneurial driving forces

5

Entrepreneurs and social responsibility

11

The role of government

15

Conclusion

18

Appendix: Survey results

20

© The Economist Intelligence Unit Limited 2013

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Wealth creators Assessing the impact of UK entrepreneurs on society

Executive
summary

Entrepreneurs are seen as a key driver of the UK’s economic
recovery, and new businesses are on the increase. This year
alone, over 44,500 start-up businesses had registered by
mid-February, according to the government’s StartUp Britain
website. But beyond their economic importance as taxpayers
and employers, these wealth creators make other positive
contributions to society. Yet the UK often has a distinctly
ambivalent attitude towards the affluent individuals who
succeed in their business ambitions.
To explore the motivations of Britain’s entrepreneurs, their
attitudes to social responsibility and the challenges they
face, the Economist Intelligence Unit, on behalf of Lloyds TSB
Private Banking, conducted a survey of 300 wealth creators
as well as interviews with business owners, academics and
government officials.

Key findings of the research include:
Entrepreneurs believe they make a positive contribution to
society
Almost three-quarters (70%) of business owners see the role
of entrepreneurs as a good thing for society in general. They
have become increasingly generous with their time and money.
Two-fifths of respondents now contribute hours of personal or
business time to charitable work—up from 32% five years ago.

2

The proportion giving money to local organisations has also
risen, with 86% giving to charity.
Determination and independence drive entrepreneurs
Freedom to be their own boss is the key motivation for starting
a business for 55% of respondents, while almost 40% identify
work satisfaction as a major driver. Once in business, almost
two-thirds of respondents pinpoint determination as the main
source of their success.
Tax and a sluggish economy are the biggest challenges for
wealth creators
Almost half of respondents (49%) view government policy and
tax as the top constraint when creating personal wealth from
their businesses, and a similar number (46%) see the economic
situation as the main limitation.
More governmental support is needed for wealth creators
There is a strong sense (85% of respondents agree) that the
government could do much more to encourage and support
potential entrepreneurs. And although 45% of respondents
believe the government recognises entrepreneurs’ contribution

to society, there is less conviction that they are given the
practical support they need to provide further social input.

© The Economist Intelligence Unit Limited 2013


Wealth creators Assessing the impact of UK entrepreneurs on society

About this
report

In January 2013 the Economist Intelligence Unit, on behalf of
Lloyds TSB Private Banking, surveyed 300 UK entrepreneurs to
explore their motivations, challenges and attitudes to social
responsibility.

 Rupert Hodson, co-founder of the online financial services
marketing firm, Dianomi

In addition, in-depth interviews were conducted with
entrepreneurs and experts. Our thanks to the following for
their time and insight:

 A spokesperson from the Department for Business,
Innovation & Skills

 Simon Deakin, assistant director of the Cambridge Centre for
Business Research

 Stephen Unwin, founder of the soft drinks firm, Cawston

Press, and a business coach with the Actioncoach franchise

The report was written by Faith Glasgow and edited by Monica
Woodley of the Economist Intelligence Unit.

 Jonathan Haward, founder of the property search firm,
The County Homesearch Company, and the online memorial
service, Friends and Relations

© The Economist Intelligence Unit Limited 2013

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Wealth creators Assessing the impact of UK entrepreneurs on society

Introduction

It is no secret that the entrepreneurial spirit plays an
increasingly significant role in the UK economy. In 2011 Prime
Minister David Cameron called for an “enterprise-led” recovery
from the financial crisis and its economic fallout, and the
figures suggest that despite challenging economic conditions,
the country’s entrepreneurs remain eager to take the plunge
and set up new businesses.
Figures from the Department for Business, Innovation & Skills
(BIS) show continuing steady growth in the number of small
and medium-sized enterprises (SMEs) in the UK. There were
a record 4.8 million SMEs at the start of 2012—up from 4.5
million in 2011, and an increase of almost 40% since 2000

(the earliest point for which comparable data exists). The
vast majority (99.2%) of those SMEs were small businesses
employing less than 50 people.
Yet their economic contribution is critical. Apart from the
potential private wealth generated by the owners themselves,

4

BIS figures show SMEs account for 60% of employment in the
private sector and almost half of private-sector turnover.
The government has launched diverse initiatives to attract new
entrepreneurs into the business arena, and to nurture existing
small businesses. Yet at the same time there is continuing
debate about the appropriate use of wealth, and about the
social, environmental and financial responsibilities of those
who acquire it.
This report explores the motivations driving Britain’s
entrepreneurs and the challenges they face. It examines their
attitudes to corporate and individual social responsibility, and
considers how far such responsibility is embedded in the dayto-day operation of today’s SMEs. Finally, it looks at the extent
to which the government is succeeding in its efforts to provide
entrepreneurial business ventures with practical support and
to inspire new entrepreneurs to join their ranks.

© The Economist Intelligence Unit Limited 2013


Wealth creators Assessing the impact of UK entrepreneurs on society

1

Entrepreneurial driving forces

In line with the government statistics quoted
above, this survey highlights the fact that small
businesses are the UK’s real economic bedrock:
more than four-fifths (81%) of respondents’
primary businesses have an annual turnover of
less than £3m, and indeed 38% turn over less
than £150,000 a year.
So what motivates entrepreneurs to take the
risks associated with setting up and running a
business? It is definitely not all about making
money per se, according to the survey findings.
Ambitious owners of small businesses are likely
to plough much of their profits back into the
business at that stage of development. In fact,
wealth is a somewhat elusive concept for many:
almost three-fifths (59%) of respondents have
less than £1m in personal investible assets, and
only 5% have more than £5m.
When asked to identify up to three motivating
factors, 55% of business owners cite
independence—the fact that it enables them
to be their own boss—while almost two-fifths
(38%) are driven by the personal satisfaction
they get from the job. Only 12% of respondents
admit to being driven by the sheer enjoyment of
making money.
These results strike a chord with our

interviewees. “True entrepreneurs are ambitious,
restless and looking for new challenges; they’ve
always wanted to do their own thing and hate to
be constrained,” says Stephen Unwin, founder
of the soft drinks firm, Cawston Press, and a
business coach with the Actioncoach franchise.
“But I think that the inclination to break the
mould and the desire for success, including
financial success, tend to go hand in hand.”

Rupert Hodson is co-founder of Dianomi, which
provides online marketing for financial services
firms. His main motivation for setting up the
company was the desire to be his own boss
and the flexibility that goes with it. “Financial
security for my family is also increasingly on my
mind; you can achieve that in other ways, but this
is a more focused and exciting way, and you get a
great sense of achievement,” he says.
Motivations may change to some extent once
the business is up and running. The desire for
personal satisfaction in one’s work becomes
stronger, while the novelty of running one’s
own show loses some of its appeal. Retirement
considerations—financial security and the
potential to retire early—also become more
pertinent, unsurprisingly.
Mr Unwin makes the interesting point that many
entrepreneurs find themselves being business
owners by chance, rather than as a result of

strategically planning a start-up. “Cawston
Press started because I was running a juice firm
called Copella, which included the Cawston
brand, and was offered the chance to buy back
the Cawston part of it when the whole firm was
sold to Tropicana,” he says. “It’s not unusual
to end up with a business through such an
opportunity or because you inherited it, but it
still takes an entrepreneurial mindset to commit
to that route.”
What factors do entrepreneurs consider most
influential in their success as business owners?
Sheer determination to succeed is considered
by far the most important element in success,
with 62% of respondents citing it. Perhaps
surprisingly, bearing in mind the ebullient
character of many high-profile wealth creators,
© The Economist Intelligence Unit Limited 2013

True
entrepreneurs
are ambitious,
restless
and looking
for new
challenges;
they’ve always
wanted to
do their own
thing and

hate to be
constrained.
I think that
the inclination
to break the
mould and
the desire
for success,
including
financial
success, tend
to go hand in
hand.
Stephen Unwin
Founder of Cawston Press,
Business coach with the
Actioncoach franchise

5


Wealth creators Assessing the impact of UK entrepreneurs on society

Chart 1
What were the main motivations for you to start your business and create wealth?
What are the main motivations for you to run your business and create wealth?
(% respondents)

When starting business
Ability to be my own boss

Personal satisfaction in my work

Now running business

55%

43%
38%

Financial independence
A better personal lifestyle

45%

31%

30%

25%

29%

18%

Seizing opportunity
Being able to create something
new/innovative

17%

12%

14%

Financial security in retirement

22%

12% 12%

Enjoyment of making money

11% 15%

Ability to retire early
Personal development

6%

10%

Financial security for children

7%

Being able to contribute to the
economy/society (eg, through
employment, etc)

7%

Being able to help others
(eg, through philanthropy, etc)

4%

Status

3%

7%
13%
7%
9%
4%

Note. Figures do not add to 100% as respondents were able to select up to 3.
Source: The Economist Intelligence Unit.

few respondents (8%) claim any innate talent for
wealth generation, and only 12% put it down to a
hearty appetite for risk.
However, Jonathan Haward, founder of the
property search firm, The County Homesearch
Company, and, more recently, of the online
memorial service, Friends and Relations, makes
the point that anyone who sets up their own
business has to be a risk-taker. “The important
6

© The Economist Intelligence Unit Limited 2013

thing is that it is a calculated risk and you have all
your ducks in a row when you do it,” he adds.
As noted, accessible wealth can be an elusive
concept for many business owners, particularly
those in the early stages of business growth.
Almost one-third (29%) of respondents say that
the need to reinvest profits presented a challenge
to creating personal wealth from their businesses
during that time.


Wealth creators Assessing the impact of UK entrepreneurs on society

But while the need to plough everything back
into the business may be a short-term irritant, it
is likely to be viewed as an inevitable step in the
growth process. “Our focus is very much on the
business and growing it,” Mr Hodson says. “On
that basis we put everything we can back into it,
taking a salary that covers our day-to-day living
costs, but sadly not much else.”
Mr Haward takes a similar view that continuous
investment is essential, particularly in technology
and data security. “I can’t really say that I have
had much conflict between taking personal wealth
and investing into the business, because I so
enjoy it,” he says. “I get a lot of job satisfaction
when I can see a business investment is paying

dividends in terms of improved quality.”
On the whole, respondents perceive their biggest
challenges in amassing wealth to be at a macro
rather than a micro level. Mr Haward cites tax as
the biggest disincentive to running a business
in this country. “We have to employ people
specifically to ensure we comply with the tax
legislation,” he says. “It’s expensive and there
are huge penalties if you’re late. It’s a massive
turn-off.”
But other interviewees are more sanguine. Both
Mr Hodson and Mr Unwin accept their personal
and business tax obligations as being “in the
nature of success”.
“Some companies I’ve coached have received
penal tax bills, especially in the downturn, after
a previous much more successful year,” Mr Unwin
says. “Those did cause headaches, but HMRC [HM
Revenue & Customs] showed some leniency and
was able to arrange payment plans.”

Chart 2
Which of the following factors do you believe have been the
most influential in helping you achieve your business success?
(% respondents)

62%

Determination
An understanding of money

from an early age

38%
33%

University education
Independence from
an early age

22%

Modest family background

18%

School education

17%

Peer group
High appetite for risk
Innate talent for
wealth generation

15%
12%
8%

Strong family ties

7%

Support from individual
family member

7%

Financial advice (from banks,
accountants, advisers, etc)

4%

Local business networks

1%

Wealthy family background

1%

Note. Figures do not add to 100% as respondents were able to select up to 3.
Source: Economist Intelligence Unit.

Simon Deakin, assistant director of the Cambridge Centre
for Business Research (CBR), points out that there are many
regulations that help small businesses, but their effects
may not be particularly visible. “A lot of corporate social
responsibility is about maintaining the reputation of the
brand, demonstrating accountability, being seen to observe
industry standards and paying tax,” he explains. “Of course

businesses want to compete, but no one benefits from a race to
the bottom.”

The government, meanwhile, points to its efforts to reduce
red tape for companies. “We are continually working both
to reduce regulation and to enforce necessary regulations
more adroitly, minimising burdens on compliant businesses,”
says a BIS spokesperson. Businesses are expected to save an
estimated £1bn by June 2013 as a result, she adds.
The government has also implemented a ‘one in, two out’
requirement, which means that for every regulatory cost
imposed on businesses, government departments must

© The Economist Intelligence Unit Limited 2013

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Wealth creators Assessing the impact of UK entrepreneurs on society

implement savings worth double that sum. “This
is a major culture change that puts Whitehall
on the side of business,” the BIS spokesperson
claims.
BIS has evidently had some success in its
campaigns to reduce the burden of bureaucracy—
the spokesperson flags up the fact that in 2012
the World Bank ranked the UK seventh out of 183
countries for ease of doing business, “meaning
the regulatory environment in the UK is open to

starting and operating a business”.
Despite headlines about small businesses being
choked by a lack of readily accessible finance,
only 10% of survey respondents say that they
have been hamstrung. Mr Hodson makes the point
that the banks are ready to lend, but corporate
borrowers have to find the collateral—typically
their own homes—to back their loan. He and his
co-founders were lucky in that they were able to
call upon investment from friends and family, and
also received some venture capital input; they
were not prepared to put their family homes on
the line.
But Mr Unwin maintains that the biggest
challenge for a lot of his clients is simply their
overly cautious mindset. “A lot of what I do as
a coach is to equip business owners with the
business skills and tools for growth in order that
they can realise their full potential and greater
rewards; better skills gives them the ability to
make better decisions and often encourages them
and gives them the confidence to move forward
and take new investment opportunities —the
recession has sapped their confidence,” he says.
Beyond the financial issues associated with
running a business, the survey identifies other
drawbacks to life as a successful entrepreneur.
Too much commitment, in terms of long working
hours and work pressure, is the prime culprit.

Chart 3
What are your greatest challenges when creating personal wealth
from your business?
(% respondents)

49%

Government policy (eg, taxation)
An underperforming
economic environment

46%

Having to reinvest profits
into your business

29%

Keeping personal and professional
finances separated

28%

Ambition (eg, business takes
priority over lifestyle)

27%

I do not face a challenge in this area

12%

Lack of reliable/readily
attainable financial advice

10%

Note. Figures do not add to 100% as respondents were able to select up to 3.
Source: Economist Intelligence Unit.

Chart 4
Which of the following do you think are the most significant
disadvantages of being a successful entrepreneur?
(% respondents)

58%

Excessive working hours

43%

High amounts of pressure
Pressure to meet
government regulations

31%

Risk of losing large
sums of money

31%
27%

Lack of financial security
Requirement to fulfil a high
number of different roles
Fear of failure
Lack of corporate
support network
Keeping personal wealth
separate from your
business activities

25%
16%
12%
5%

Note. Figures do not add to 100% as respondents were able to select up to 3.
Source: Economist Intelligence Unit.

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© The Economist Intelligence Unit Limited 2013


Wealth creators Assessing the impact of UK entrepreneurs on society

The UK’s wealth creators in profile
The number of entrepreneurs in Britain may be rising in

the 21st century, but the gender and location profile of
respondents indicates that as yet there isn’t equal access to
entrepreneurial opportunities.

Chart 5
What is the approximate value of your personal
investible assets?
(% respondents)

Female

47%

£250,000 - £500,000

28%
29%

£500,000 - £1m

28%

£1m - £2m

10%

£2m - £5m

8%

£5m - £10m

More than £10m

Male

28%
12%
4%
2%
2%
3%

Women entrepreneurs account for only 16% of survey
respondents, and are also much more skewed to the lower
echelons in terms of personal wealth. But that imbalance may
be explained in part by the fact that women respondents also
tend to be younger and therefore to have had less time to
accrue wealth.
Overall, entrepreneurial energy and opportunity appear to be
things that most people still come to later in life—only 6% of
respondents are aged less than 40 and three-quarters (74%)
are aged between 50 and 70.
The survey also provides clear evidence of the strength of the
north-south divide as far as personal wealth and SME activity
are concerned. Two-thirds (66%) of respondents are based in
London and the South. In contrast, less than 9% are located
in the Midlands, 8% in Yorkshire and the North, and 7% in
Scotland.
Given the entrepreneurial legacy of these regions, such

pronounced disparities raise the question of what could be
inhibiting business growth and wealth creation there. Less
access to start-up resources, poorer infrastructure, a lessdynamic business environment and less-prosperous local
markets might have something to do with it, suggests Mr
Unwin.
It is also unsurprising that the business focus of today’s
entrepreneurs has shifted away from traditional areas such as
retail towards the service sectors. Almost one-third (31%) of
respondents are involved in professional services.

Source: The Economist Intelligence Unit.

© The Economist Intelligence Unit Limited 2013

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Wealth creators Assessing the impact of UK entrepreneurs on society

2

Entrepreneurs and social
responsibility

Business owners have a strong sense that their
role is an important one in social terms—93% of
respondents believe that entrepreneurs make a
positive contribution to society.
This conviction is most pronounced among
those with more than £2m in personal investible

assets (98%), and also among those who have
set up four or more businesses over the course
of their career (100%). That may be because
they are able to take a longer, less-introspective
perspective on the wider impact of their business;
less generously, it could also reflect a tendency
towards self-aggrandisement among longerestablished entrepreneurs.
There is also a perception that social problems
are increasingly being identified, managed and,
in some cases, resolved using entrepreneurial
principles. Overall, 57% maintain that social
entrepreneurship is on the rise, with women
particularly aware of its growing impact (71%).
When it comes to active business engagement
with wider issues, respondents are less
committed. Less than half (46%) say that they
actively consider the social impact of their
business, with a similar proportion actively
concerned about the environmental impact.
According to the BIS spokesperson, however, it
is increasingly the case that businesses do go
beyond their minimum statutory obligations in
various areas, including social and environmental
issues. “This may have a short-term [dampening]
effect on profit, but the motivation for
undertaking such activity is rooted in a more
long-term, sustainable ambition,” she says.

10

© The Economist Intelligence Unit Limited 2013

Mr Unwin suggests that where sustainable
values lead, a profitable business should follow.
“A lot of what I do as a coach is to get business
owners to recognise their own core values and
how important these are to the business and its
success,” he says. “For example, if they consider
business integrity, environmental awareness
and support of their workers are key values of
their business, they can proactively communicate
that to their customers, and it can provide a
competitive advantage, enabling the business to
prosper.”
But as Mr Haward observes, in a small business,
decisions to do with social and environmental
responsibility are likely to be a reflection of
what makes financial and business sense. “We
recycle and have a travel policy involving fewer
flights and more train journeys,” he says. “But
although these are green policies, the decisions
are partly driven by the bottom line; the two
are often linked.” In fact, recycling is the area
that has seen the biggest increase among the
entrepreneurs surveyed, with 71% currently
doing so compared with 39% five years ago.
Entrepreneurs have increased their active social
contributions in the past five years in a range of
areas, although there is wide variation in levels
of activity.

Two-fifths of respondents contribute their own
or their business’s time to local organisations
or charitable causes. Time is donated most
generously by wealthier individuals (62% of
those with more than £2m in personal assets),
who may be less personally involved in the dayto-day operation of their companies.


Wealth creators Assessing the impact of UK entrepreneurs on society

Chart 6
What are you currently doing to contribute to society? What did you do to contribute to
society five years ago?
(% respondents)

Now
Recycling

5 years ago

71%

Donate to local organisations
Contributing hours of personal /
business time to charities

39%
43%

32%

40%

32%

Offering apprenticeships

16%

12%

Members of focus groups in local
economy (ie, sit on local council)

15%

12%

Corporate Social Responsibility days
(eg, fund raising days)

12%
4%

Other

11%
4%

Note. Figures do not add to 100% as respondents were able to select up to 3.

Source: The Economist Intelligence Unit.

Mr Unwin observes that companies tend to
feel some responsibility to support local good
causes, and also have a certain self-interest in
doing so, particularly if they trade with the local
area. “They do it in part to foster a good working
relationship with their neighbours,” he says. “But
overall, the smaller the company, the less spare
money or time there is.”
In contrast, other contributions such as
apprenticeships (16%) and business support
groups (15%) are less popular. Mr Haward makes
the point that community-focused business
organisations such as the Round Table do a lot of
good work, but membership fees are considered a
non-essential in these straitened times.
So what form do these social contributions take
in practice? The idea of support for newcomers is
an appealing one among interviewees. Mr Unwin,
for instance, does not charge for his coaching
expertise if clients are young, enthusiastic and
keen to get his help with their business, but
cannot afford to pay.

Mr Haward, meanwhile, is providing paid work
experience for two young people as part of the
Unlocking Cornish Potential scheme. “I think we
have done the right thing in going through the
official work experience channel, but we would

have been much better off financially if we had
offered unpaid internships,” he says.
For Mr Deakin’s Cambridge community, the
involvement of members of business associations
and the Chamber of Commerce with the CBR’s
research and initiatives has been an important
factor. “Once their business is established, a lot
of local business people want to be seen to be
giving something back, in this case by sharing
their time and expertise with the university and
other businesses,” he says.
They are likely to raise their own standing in
the business community by doing so, but as he
observes, “there is not necessarily a conflict
in having some self-interest in following a
particular course of apparently altruistic action”.

© The Economist Intelligence Unit Limited 2013

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Wealth creators Assessing the impact of UK entrepreneurs on society

are asked to make two selections as to how they
would spend their free time if they had more of it
as a result of selling the business.

Chart 7
If you have (or were to have) more free time as a result of

selling your business, how do/ would you spend it?
(% respondents)

Female

76%

Travel

71%
39%

Spend more time with family

29%
18%

Hobbies/leisure activities
Taking on an advisory role
in another business
Philanthropic activity

Setting up a new company
Taking on an operational
role in another business
I would never sell

Male

35%

14%
14%

Travel is the big attraction, selected by almost
three-quarters (72%), but around 30% say they
would spend more time with their family, and a
similar number would focus on leisure activities.
Women are less interested in leisure pastimes
(18%) than in more family time (39%).
Significantly, only 14% would take on an advisory
role in another business—a surprising finding in
light of earlier comments by interviewees—and
only 14% would look for philanthropic activities.
Nonetheless, Mr Unwin believes that
philanthropy is becoming more common in the
UK. “I think that even though times are harder,
those who are well off see that they’re lucky and
want to share it,” he says. But UK philanthropists

8%
15%
6%
11%

Chart 8

6%
2%

What proportion of your wealth do/

will you give to charitable causes?

4%

(% respondents)

2%

% of annual income
% of estate on death

Note. Figures do not add to 100% as respondents were able to select up to 3.
Source: Economist Intelligence Unit.

0%

Again, however, smaller businesses tend to be
hard-pushed to contribute in this or other ways
because they are short of both ready cash and
free time. “If you can make some kind of local
contribution where you can see its value, then
that’s a rewarding idea, but I’m not able to do
that while growing a business and bringing up
three kids,” says Mr Hodson.
So are business owners really giving enough back
to society? Mr Haward stresses that they already
play key roles and should not be automatically
expected to do more. “We provide employment,
we pay and collect taxes—what more do you
want?” he says.

That perspective is widespread, as is evident from
the findings of the survey when respondents
12

© The Economist Intelligence Unit Limited 2013

14%
44%
26%
26%

1-5%
5-10%

13%

10-30%

3%

30-50%

50-75%

75-100%

14%
7%
0%
3%

0%
3%
0%
4%

Source: The Economist Intelligence Unit.

69%


Wealth creators Assessing the impact of UK entrepreneurs on society

Innovative social contributions
Although there is a clear sense that SME owners
have plenty on their plates simply running and
growing their businesses, it is equally clear that
many people would like to give something back
to the community, whether on an individual or a
corporate basis.

the world for a huge range of activities, from
gardening for an elderly neighbour or cleaning
beaches to donating blood. “It shows there’s
a willingness to volunteer time, even though
people don’t have much money to spare
generally,” says Mr Haward.

Mr Haward, who is based in Truro, Cornwall, was
involved in setting up the Jubilee Hour project,
whereby companies or individuals pledged an

hour doing something charitable or helpful to
mark the Queen’s Jubilee year in 2012. More
than 2.75 million hours were pledged around

Following Mr Haward’s charitable trek to Chile,
employees at the County Homesearch Company
are also offered a four-week sabbatical after
they have worked there for five years, provided
they use the time to go on a fund-raising
adventure trip.

do not have the tax incentives that are in place in
the US.
Smaller-scale charitable giving is widespread
among entrepreneurs, however. Only 14% of
respondents donate nothing to charitable causes
(compared with 45% of the population at large
in 2011/12), although most (69%) give less than
5% of their annual income. Women are more
likely to give a higher proportion, with onequarter of female respondents donating between
5% and 30% of their income to charity, compared
with 15% of males.
In contrast, charitable bequests are much less
commonplace—overall, 44% of respondents
have made no charitable provision in their will,
although a further 40% plan to leave up to 10%
of their estate to charity.

© The Economist Intelligence Unit Limited 2013

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Wealth creators Assessing the impact of UK entrepreneurs on society

3

The role of government

Is there a mismatch between the positive
perceptions of the role of wealth creators in
society and the extent of formal support provided
by the government for entrepreneurs starting out
and existing businesses?

minister Michael Fallon in October 2012. To
that end, he cites “the additional tax relief for
angel investment, reforms to employment law,
investment in business mentoring and further
cuts in red tape”.

The present government has talked a lot
about its commitment to an entrepreneurfriendly environment, not least because of the
importance of grassroots growth in kick-starting
the sluggish economy. “We know that our
entrepreneurs drive growth, so we will continue
to do everything we can to help unleash and
unlock entrepreneurs’ potential,” said business

But survey respondents remain unconvinced.

Less than half (45%) agree that the government
recognises the contribution that entrepreneurs
make to society and one-quarter actively
disagree. Younger business owners (aged under
40) are more positive in their perceptions of
government support, perhaps because they have
had more exposure to recent state initiatives,
whereas older entrepreneurs rely more on the
private-sector contacts they have built up.

Chart 9
Do you agree or disagree with the
following statement? Government
recognises entrepreneurs’ contribution
to society
(% respondents)

Female

Strongly agree

14%
17%
29%

Somewhat agree

29%
27%

Neither agree
nor disagree
Somewhat disagree

Strongly disagree

Male

31%
25%
17%
6%
6%

Source: The Economist Intelligence Unit.

14

© The Economist Intelligence Unit Limited 2013

There is even less conviction that the government
actually encourages businesses to contribute
to society, with over one-third (36%) of
respondents sitting on the fence and only 10%
agreeing wholeheartedly.
However, Mr Deakin makes the point that
legislation is not the way forward in this respect.
“The government shouldn’t stop taxing or
regulating, but it does need to persuade firms
to embed good practice within their business

strategy,” he says. “That’s not easy though—it
requires a long view.”
The BIS spokesperson notes that in December
2010 the Prime Minister set out his vision for
corporate responsibility under the banner of
Every Business Commits. This framework focused
on five areas in which businesses could make a
difference:
 Creating jobs and developing their workforce
skills


Wealth creators Assessing the impact of UK entrepreneurs on society

 Supporting local communities
 Mentoring of SMEs by larger businesses
 Improving employee well-being
 Protecting the environment and carbon reduction.
At present “it is up to individual businesses to determine for
themselves if and how they might respond” to these ideas;
however, BIS plans to publish a framework for action on
corporate responsibility, setting out the government’s plans in
that respect.
What about assistance for start-ups? The survey reveals a
strong sense that the government needs to provide more
support for potential entrepreneurs, with 87% of respondents
in agreement that not enough is done to help them.

Yet BIS insists it has been proactive. “We have changed
the way we help people access the information, advice and

guidance they need to start and grow their business,” says
the spokesperson. “Businesses tell us that they most value
support and advice from other businesses, so we’ve built
features into our new services to enable them to do this
quickly and effectively.” The focus is on small business growth,
increasingly provided by the private sector.
However, there is still scope for further government-led
initiatives. There clearly is a significant gap between the view
of BIS and the less-rosy perception held by the SMEs surveyed
of the government support they are receiving, which in part
may be down to shortcomings in communication of what is
available.

Chart 10
Do you agree or disagree with the following statement? Governments encourage businesses to contribute to society
(% respondents)

Strongly agree

Overall

Somewhat disagree

36

25

40-49

8

50-59

8
11
9

Strongly disagree

22 4

50

14

30-39

70+

Neither agree nor disagree

29

10

18-29

60-69

Somewhat agree

29
22

25

29
38

31

36

28

7

26

6

22 3

37
36

21

20 4
36

18

Source: The Economist Intelligence Unit.

© The Economist Intelligence Unit Limited 2013

15


Wealth creators Assessing the impact of UK entrepreneurs on society

Government initiatives to support SMEs
 Business in You, launched in January 2012, is
designed to inspire would-be entrepreneurs and
highlight the range of support available (www.
businessinyou.bis.gov.uk).

 Young people aged 18-30 can now apply for
a start-up loan; an additional £3m has been
added to the fund, taking the total available to
£110m (www.startuploans.co.uk).

 The mentoring portal, www.mentorsme.
co.uk, provides a single access point to bring
together mentoring organisations and those
looking for guidance. Services may be free or
paid-for. There are now 27,000 mentors across
the UK listed on the portal.

There are also several finance schemes in place,
including the Enterprise Finance Guarantee
scheme for businesses without the collateral or
track record to access bank lending; Enterprise
Capital Funds, in the shape of venture capital for
new businesses with high growth potential; the
Business Finance Partnership, which provides
alternative sources of lending; and the Funding
for Lending scheme, which is encouraging
banks to lend more freely.

 SMEs with potential for rapid growth could
apply to www.growthaccelerator.com for
additional help from a qualified coach.

16

© The Economist Intelligence Unit Limited 2013


Wealth creators Assessing the impact of UK entrepreneurs on society

Conclusion

Wealth creators have faced major challenges over the past
few difficult years, yet there is no sign of the taste for
entrepreneurship dwindling in the UK—indeed, it’s quite the
reverse, as SME and start-up numbers continue to rise.
As they probably always have been, wealth creators are
determined and patient players, prepared to invest and

reinvest to realise their business vision. However, they are
driven less by the dream of wealth for its own sake than by the
independence, flexibility and job satisfaction they associate
with running their own business.
At the same time, they are also increasingly aware of their
potential to make broader social contributions in a variety of
ways and of the fact that such social and environmental efforts
can pay dividends over time in terms of making their business
more sustainable and strengthening its public image.
But while such efforts are seen as feasible for thriving, growing
businesses, the perception is that they are beyond the means
of the smallest enterprises, which simply do not have either
the time or means to invest in socially orientated initiatives.
It is evident that this government’s initiatives to nurture
enterprise and improve business conditions have not
percolated through effectively to SME owners who might
benefit from them. Business owners are still inclined to see
much of what the government does in terms of regulation
and tax as restrictive and designed to make their lives more
difficult, suggesting that part of the issue is to do with building

better direct, effective channels of communication between
the powers that be and small business communities around the
country.
Similarly, the government has work to do in promoting the
various ways in which businesses can make valuable and
rewarding social contributions beyond providing employment
and paying tax. BIS’s forthcoming framework for corporate
responsibility should help to clarify best practice, but it will
need to think laterally about how best to get the message

to companies, and how to help them embed these ideas
sustainably in their business over the long term.
The bottom line is that wealth creators remain the bedrock of
the UK’s economy, with a crucial role to play both in driving the
economic growth that has proved so elusive in recent years,
and also in shaping and embedding good business practices in
this country; their importance to wider prosperity cannot be
overstated.
Crucially, they are running their own businesses because
they are happy to embrace the vulnerabilities as well as the
opportunities of being their own boss. Indeed, they have
pride in their entrepreneurial status and in many cases are
keen to share their knowledge and experience with others. If
they receive the targeted, innovative support they need from
government- and community-based sources, their ranks are
likely to swell.

© The Economist Intelligence Unit Limited 2013

17


Wealth creators Assessing the impact of UK entrepreneurs on society

How can entrepreneurs be better supported?
 The bottom line is that the government
needs to promote its various support channels
more effectively, perhaps not so much to new
businesses, which are likely to be actively
exploring such opportunities, but to more

established enterprises that could nonetheless
benefit.

spillover, has opened up lots of opportunities
for small businesses in Cambridge. “With the
right government-investment programme,
similar high-tech clusters could be nurtured in
large cities too,” he says. “Firms can grow their
capabilities, but they require an environment
that’s resource-rich, which Cambridge is.”

 Mr Haward would like to see a committee of
small business owners set up to report back
to government on the real practical problems
facing the sector. “The government needs a
reality check and this would be fantastic,” he
says.

 To make technology start-ups easier, Mr
Deakin believes that the government should
relax the rules regarding employee mobility.
“Highly skilled employees cannot move easily
between firms as things stand,” he says.
“They have to take gardening leave, but new
businesses really need to be able to recruit
industry knowledge and skill.”

 He also suggests a government-backed
programme of seminars “where successful
people can pass on precisely what’s involved

in running a business, talk to budding
entrepreneurs and assess their business plans.
It would help nurture those with potential and
caution those that are likely to bomb—a sort of
kindly Dragons’ Den.”
 Mr Deakin points out that government
investment in high-quality transport and
healthcare infrastructure, as well as university

18

© The Economist Intelligence Unit Limited 2013

 Mr Unwin believes that incentives
and regulations are in place to support
entrepreneurs, but that they need to be
encouraged towards a less-negative outlook.
He has been asked by a bank to talk to local
business owners to help them develop a more
positive, entrepreneurial mindset focused on
growing their business and learning new skills
rather than merely surviving.


Wealth creators Assessing the impact of UK entrepreneurs on society

Appendix:
Survey results

What is the approximate value of your personal investible assets?

(% respondents)
£250,000 - £500,000
31

£500,000 - £1m
28

£1m - £2m
25

£2m - £5m
11

£5m - £10m
2

More than £10m
3

In which region of the UK are you primarily located?
(% respondents)
South East England
28

Greater London
26

South West England
12

Scotland
7

East of England
6

North West England
5

West Midlands
5

East Midlands
4

Yorkshire and the Humber
3

Wales
2

Northern Ireland
2

North East England
0
© The Economist Intelligence Unit Limited 2013

19

Wealth creators Assessing the impact of UK entrepreneurs on society
What is your gender?
(% respondents)
Male
84

Female
16

What is your age?
(% respondents)
18 to 29
1

30 to 39
5

40 to 49
17

50 to 59
36

60 to 69
38

70+
4

How many businesses have you started?
(% respondents)
1
45

2-3
42

4-5
8

More than 5
4

What is the annual turnover of your primary business?
(% respondents)
Less than £150,000
38

Between £150k and £500k
20

Between £500k and £3m
23

Between £3m and £15m
10

Between £15m and £100m
6

Between £100m and £500m
1

More than £500m
2

20

© The Economist Intelligence Unit Limited 2013


Wealth creators Assessing the impact of UK entrepreneurs on society
In which industry sector is your primary business?
(% respondents)
Professional services
31

Construction and real estate
10

Financial services
10

Transportation, travel and tourism
8

IT, telecoms and technology
7

Entertainment, media and publishing
4

Retail
4

Healthcare (hospitals, health insurance and health services)
4

Industrial goods (steel, equipment, components, etc)
4

Education
3

Life sciences (including pharmaceuticals, biotechnology, medical devices)
3

Energy and utilities
3

Aerospace & defence
2

Automotive
2

Consumer goods
2

Government/Public sector
2

Agriculture and agribusiness
1

Chemicals
1

Logistics and distribution
0

Other, please specify
0

© The Economist Intelligence Unit Limited 2013

21


Wealth creators Assessing the impact of UK entrepreneurs on society
Which of the following has been the most significant source of your personal wealth? Select up to three.
(% respondents)
Income from job
58

Income from investments
38

Income from my business

38

Income from sale of property
17

Income from property rental
15

Sale of my business
11

Inheritance
10

Pension
8

Marriage
2

Gambling/lottery win
1

Rich benefactor
0

Divorce settlement
0

Other, please specify

1

22

© The Economist Intelligence Unit Limited 2013


Wealth creators Assessing the impact of UK entrepreneurs on society
What were the main motivations for you when you were starting your business? and what are they now? Select up to three.
(% respondents)

What were the main motivations

What are the main motivations now

Ability to be my own boss
55
43

Personal satisfaction in my work
38
45

Financial independence
31
30

A better personal lifestyle
25
29

Seizing opportunity
18
6

Being able to create something new/innovative
17
12

Financial security in retirement
14
22

Enjoyment of making money
12
12

Ability to retire early
11
15

Personal development
10
7

Financial security for children
7
13

Being able to contribute to the economy/society (eg, through employment, etc)

7
7

Being able to help others (eg, through philanthropy, etc)
4
9

Status
3
4

Other, please specify
2
3

© The Economist Intelligence Unit Limited 2013

23


Wealth creators Assessing the impact of UK entrepreneurs on society
Which of the following factors do you believe have been the most influential in helping you achieve your business success?
Select up to three.
(% respondents)
Determination
62

An understanding of money from an early age
38

University education
33

Independence from an early age
22

Modest family background
18

School education
17

Peer group
15

High appetite for risk
12

Innate talent for wealth generation
8

Support from individual family member
7

Strong family ties
7

Financial advice (from banks, accountants, advisers, etc)
4

Wealthy family background
1

Local business networks
1

Other, please specify
5

Do you agree or disagree with the following statements?
Rate on a scale of 1 to 5 where 1 is strongly agree and 5 is strongly disagree.
(% respondents)

1 Strongly agree

2 Somewhat agree

3 Neither agree nor disagree

4 Somewhat disagree

5 Strongly disagree

Entrepreneurs should be regarded as contributors to society
71

22

5 11

36

61

Social entrepreneurism is on the rise
13

44

I actively consider the social impact of my business
12

34

39

12

4

16

4

I actively consider the environmental impact of my business
11

35

35

I actively consider the financial impact of my business on the economy
14

24

36

© The Economist Intelligence Unit Limited 2013

35

10

6