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ENTREPRENEURIAL SPARK CALLS ON ALL PARTIES TO SUPPORT START-UPS

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Politicians challenged to sign entrepreneurship pledge ahead of election that guarantees they ‘walk the walk’ if they win

Leading business accelerator programme Entrepreneurial Spark is challenging candidates across all political parties to support Britain’s entrepreneurs and sign up to a pledge card that will ensure pre-election talk turns into effective action to bolster the building blocks of the economy this summer.

The start-up support specialist – which is already the world’s largest free business accelerator for early stage and growing ventures and is expanding into more UK cities this year – wants all the main parties to commit to five concrete measures that together would provide a huge boost to entrepreneurship and ultimately Britain’s economy.

Entrepreneurial Spark says young businesses across the country want to see:

  • A Minister for Entrepreneurs to represent their views in Cabinet, independently of the department representing big business.
  • A significant rise in the threshold at which businesses must register for VAT, from £82,000 currently to at least £100,000.
  • Further tax and NI breaks for start-ups that take on staff in their first three years.
  • Free business space and support for all start-ups.
  • Tax breaks for larger corporations that support entrepreneurs.

Jim Duffy, CEO, Entrepreneurial Spark

Jim Duffy, CEO, Entrepreneurial Spark

It follows scrutiny of the pre-election promises of the UK’s main political parties which shows that, despite plenty of talk, there are few propositions on offer with the potential to give entrepreneurship in Britain a real boost.

Entrepreneurial Spark chief executive Jim Duffy said: “In the lead up to the General Election politicians from all parties have been keen to talk up their backing for entrepreneurs and small businesses, which they rightly recognise as the growth engine of the economy.

“These are the people creating the wealth and jobs that can pull Britain away from recovery and austerity, into a new phase of sustained growth. But that will only happen if entrepreneurship and ambition is supported, and that is why we are calling on politicians of all parties to embrace our challenge and sign up to our policies for entrepreneurial growth.

“These five measures are relatively cheap and would pay for themselves many times over through the growth they would create. But they would send a message to entrepreneurs throughout the world that Britain means business and is supporting its start-ups by cutting red tape, providing funding options and help to grow, and giving them a voice at the heart of government.”

HOW THE PARTIES CURRENTLY STACK UP ON ENTREPRENEURSHIP

Conservative

Says “the proposal to create a specific minister for entrepreneurs will be considered by the Prime Minister.”

“Conservatives are enthusiastic about lowering the tax and regulatory burden on small businesses. This is why VAT threshold has risen from £68,000 to £82,000 over our last five years in Government.”

 Aims to provide support and advice across the country for business start-ups, as well as finance through the Start-up Loan scheme and targeted support through schemes like UK Trade and Investment’s guidance for small exporters.

Says its 2015 manifesto “will contain measures to build upon the successes of the last five years: 760,000 new businesses, the creation of the Start-up Loan scheme benefiting 27,000 entrepreneurs with over £140 million in loans and the Great Business campaign, publicising the wide range of information and support available from the Government.”

Green

Says Cabinet Minister for Entrepreneurs should not be necessary. “There is more than enough representation for entrepreneurship but the emphasis certainly needs to change to supporting small businesses rather than large corporations.”

Wants to see VAT replaced with “more appropriate taxes” based on how much environmental damage a product causes.

Would bring in free business start-up support. It says: “We would like to see this done at the lowest level possible so probably by Local Authority run Enterprise Centres or something similar. There is more than enough money sloshing around in Local Enterprise Partnership budgets that could be passed down to Local Authorities for this.”

Wants to see preferential rates of corporation tax for smaller businesses, and make it easier for small businesses to employ people and pay a higher Minimum Wage based on the Living Wage by reducing Employers’ NI.

Labour *

Would “tackle rising business costs” by maintaining the corporation tax rate, cutting and then freezing business rates for more than 1.5 million small business properties and freezing their energy bills.

Says it would “make it easier for firms to get the finance they need to grow and create jobs, by establishing a British Investment Bank with a mission to lend money to small- and medium-sized businesses and support a network of regional banks.”

Would increase the National Minimum Wage to more than £8 an hour by October 2019, but would also promote the Living Wage by giving a tax rebate to companies that sign up to become Living Wage employers in the first year of the next Parliament.

*Taken from the Labour Party manifesto as Labour did not respond to questions from Entrepreneurial Spark.

Liberal Democrats

Says Vince Cable’s role as Secretary of State for Business, Innovation and Skills has “ensured that entrepreneurs have a voice at the highest level of government”.

It says: “We recognise that entrepreneurs are integral to driving the economy and so we have made sure that we have reduced the regulatory and tax burden by cutting swathes of red tape and providing billions of pounds of Business Rate Relief for small businesses.”

Would continue to reform business tax “to ensure it stays competitive”, prioritising tax cuts for SME’s.

Would freeze fuel duty for another year and extend the Funding for Lending Scheme, working with the Bank of England, “to reduce the cost of lending across the system to SME’s and continue to give local leaders the freedom and control they need to shape their economic future through our City Deals and Local Growth Deals”.

Plaid Cymru

Would consider introducing a Cabinet Minister for Entrepreneurs, and says it is “fully committed to helping start-up companies”.

It says: “What Plaid Cymru would do is extend the Small Business Rate Relief Scheme in Wales to help all businesses with a Rateable Value of £15,000 or less – 83,000 businesses would benefit and more than 70,000 would be taken out of business rates altogether.”

Would create a Welsh Development Bank whose primary role would be to ensure adequate credit lines for Welsh businesses and support expansion to create additional jobs within Wales.

Would give more Welsh public sector contracts to companies working in Wales.

SNP *

Will seek to ensure small businesses are paid on time by pushing for prompt payment measures to be put into law.

Would Support a Universal Services Obligation for broadband and telecoms providers to ensure equal access to communications for people across the UK, and seek additional investment to support a more rapid roll out of superfast broadband and 4G across Scotland.

Says it will “make the case for a targeted approach to business taxation, with targeted changes in tax allowances.”

Would continue the Small Business Bonus, a graded system of rates relief currently benefitting 96,265 businesses in Scotland.

*Taken from the SNP manifesto as SNP did not respond to questions from Entrepreneurial Spark.

UKIP

Says Government as a whole should be aware of entrepreneurs of all sizes: “talent is individual and we should be encouraging entrepreneurs and small businesses but one person – a Cabinet Minister – is too limited.”

Would definitely not raise the VAT threshold.

“Yes in principle” to free business start-up support, but would want budding businesses to “tick all the boxes to ensure they had a solid business plan.”

Would “cut business rates, extend free parking in town centres, encourage specialist forms of banking to help entrepreneurs, stop scandal of late payments, cut green taxes to help with energy bills, strengthen attack on Brussels to stop over-regulation and red tape, conduct skills review in education and push forward broadband for rural businesses”.

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19

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Deloitte: Middle East organizations need to rethink their workforce in the wake of COVID-19 1

Organizations in the Middle East have had to take immediate actions in reaction to the COVID-19 pandemic, such as shifting to remote and virtual work, implementing new ways of working and redirecting the workforce on critical activities. According to Deloitte’s 10th annual 2020 Middle East Human Capital Trends report, “The social enterprise at work: Paradox as a path forward,” organizations now need to think about how to sustain these actions by embedding them into their organizational culture.

“COVID-19 has created a clarifying moment for work and the workforce. Organizations that expand their focus on worker well-being, from programs adjacent to work to designing well-being into the work itself, will help their workers not only feel their best but perform at their best. Doing so will strengthen the tie between well-being and organizational outcomes, drive meaningful work, and foster a greater sense of belonging overall,” said Ghassan Turqieh, Consulting Partner, Human Capital, Deloitte Middle East.

According to the Deloitte report, many organizations in the Middle East made quick arrangements to engage with employees in the wake of the pandemic through frequent communications, multiple webinars where senior leaders addressed employee concerns, virtual employee events, manager check-ins, periodic calls and other targeted interactions with the workforce.

The report also discussed how UAE and KSA governments have reexamined work policies and practices, amended regulations and introduced COVID-19 initiatives to support companies and the workforce in the public and private sectors. Flexible and remote working, team-building and engagement activities, well-ness programs, recognition awards and modern workspaces are among the many things that are now adding to the employee experience.

Key findings from the Deloitte global report include:

  • Only 17% of respondents are making significant investments in reskilling to support their AI strategy with only 12% using AI primarily to replace workers;
  • 27% of respondents have clear policies and practices to manage the ethical challenges resulting from the future of work despite 85% of respondents saying the future of work raises ethical challenges;
  • Three-quarters of leaders are expecting to source new skills and capabilities through reskilling, but only 45% are rewarding workers for the development of new skills; and
  • Only 45% of respondents are prepared or very prepared to take advantage of the alternative workforce to access key capabilities despite gig workers being likely to comprise 43% of the U.S. workforce this year according to the Bureau of Labor Statistics.

“Worker well-being is a top priority today, and similarly to the rest of the world, companies in the Middle East are focusing their efforts to redesign work around well-being by understanding workforce well-being needs,” said Rania Abu Shukur, Director, Human Capital, Consulting, Deloitte Middle East.

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One in five insurance customers saw an improvement in customer service over lockdown, research shows

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One in five insurance customers saw an improvement in customer service over lockdown, research shows 2

SAS research reveals that insurers improved their customer experience during lockdown

One in five insurance customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics. This far outweighed the 11% of customers who felt it had deteriorated over the same period.

This is positive news for insurers during such challenging times, with 59% of customers also saying that they would pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of insurance customers using a digital service or app has grown by 10%. Three-fifths (60%) of new users plan to continue using these digital services moving forward.

However, while the number of digital users grew over lockdown, half of the insurance customer base has not yet chosen to move to digital insurance apps or services.

Paul Ridge, Head of Insurance at SAS UK & Ireland, said:

“It’s impressive that there was a net improvement in customer experience during lockdown, despite the challenges the industry was facing with a transition to remote working and increased claims for things like cancelled holidays. While many were forced to wait on customer help lines for long periods, part of the improvement may be explained by even a small (10%) increase in the number of digital users.

“However, it’s clear that a huge number of customers are still yet to make the move online. It’s vital that insurers provide the most accurate, timely and relevant offerings to customers, and this is best achieved by having additional insight into online customer journeys so they can understand them better. Using analytics and AI, insurers can seize this opportunity to digitalise their customer experience and offer a more personalised approach.”

Meanwhile, for insurers that fail to offer a consistently satisfactory customer experience, the price could be severe. A third (33%) of customers claimed that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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The power of superstar firms amid the pandemic: should regulators intervene?

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The power of superstar firms amid the pandemic: should regulators intervene? 3

By Professor Anton Korinek, Darden School of Business and Research Associate at the Oxford Future of Humanity Institute. Gosia Glinska, associate director of research impact, Batten Institute for Entrepreneurship and Innovation, Darden School of Business

Recent news that Apple hit a market cap of USD2 trillion highlights an extraordinary success story: A once struggling computer-maker on the verge of bankruptcy innovates its way to becoming the most valuable publicly traded company in the United States.

Apple’s 13-figure valuation is indicative of a larger trend that is not entirely benign — the rise of a handful of superstar firms that dominate the economy. Over the past three decades, advances in information technology, mainly the Internet, have supercharged the superstar phenomenon, allowing a small number of entrepreneurs and firms to serve a large market and reap outsize rewards. And COVID-19 has greatly accelerated the phenomenon by pushing us all into a more virtual world.

Apple — along with Amazon, Facebook, Google, Microsoft and Netflix — is a case in point. The combined market value of those six companies exceeds USD7 trillion, which accounts for more than a quarter of the entire S&P 500 index. Even amid the pandemic’s economic wreckage, these megacompanies continue to prosper. The combined share price for Apple and its five peers was up more than 43 percent this year, while the rest of the companies in the S&P 500 collectively lost about 4 percent.[1]

Superstar firms can be found in almost every sector of the economy, including tech, management, finance, sports and the music industry. They command increasing market power, which has consequences for technological, social and economic progress. It is, therefore, critical to understand how their advantages arose in the first place.

THE FORCES BEHIND THE SUPERSTAR PHENOMENON

The “economics of superstars” was first studied by the late University of Chicago economist Sherwin Rosen. Forty years ago, Rosen argued that certain new technologies would significantly enhance the productivity of talented workers, enabling superstars in any industry to greatly expand the scope of their market, while reducing market opportunities for everyone else.[2] Digital innovations, including advances in the collection, processing and transmission of information, is what Rosen envisioned would lead to the superstar phenomenon.

Digital technologies are information goods, which are different from the traditional, physical goods in the economy. What it means is that fundamentally different economic considerations apply. Unlike physical goods — a loaf of bread or a car — information goods have two key properties: They are non-rival and excludable. Non-rival means that something can be used without being used up. Excludability means that an owner of digital innovation can prevent others from using it, by protecting it with patents, for example. These two fundamental properties of information goods are what give rise to the superstar phenomenon.

In a working paper I co-authored with Professor Ding Xuan Ng at Johns Hopkins University[3], we described superstars as arising from digital innovations that require upfront fixed costs that allow firms to reduce the marginal costs of serving additional customers.[4] For example, once an online travel agency has programmed its website at a fixed cost, it can easily displace thousands of traditional travel agents without much additional effort, scaling at near-zero cost.

Because a firm can exclude others from using its digital innovation, it automatically gains market power. The innovator then uses that power to charge a mark-up and earn a monopoly rent — basically, a price superstars charge in excess of what it costs them to provide the good — which we call the ‘superstar profit share’.

THE POLICYMAKER’S DILEMMA

In a vibrant free market economy, businesses compete for customers by innovating and improving their offerings while keeping prices low; otherwise, they are displaced by more innovative rivals entering the market. Unfortunately, the increasing monopolization of the economy by technology superstars is weakening the competitive environment around the world.

Monopoly power is the main inefficiency from the emergence of superstar firms, because superstars can exclude others from using the innovation that they have developed.

So, what policy measures can be employed to mitigate the inefficiencies arising from the superstar phenomenon?

We do have antitrust policies designed to promote competition and hence economic efficiency. Authorities could take a drastic measure and break up monopolies. Or they could tax all those excess profits megacompanies make.

Another policy to consider involves giving consumers control rights over their data. Right now, only companies have that data, and they are selling it. If you free it up and don’t allow them to sell it anymore, it reduces their monopoly profits. And if you give consumers more freedom over their data, they could, for example, share it with the latest start-up and create a more competitive landscape.

However, such policy remedies can be a double-edged sword. On the one hand, they reduce monopoly rents. On the other hand, they can also reduce innovation.

Innovation requires investments in R&D, which represent a significant sunk cost that only large firms can afford. Government regulations can easily backfire, discouraging large firms from making long-term R&D investments.

What, then, is the best policy intervention? Professor Ding Xuan Ng and I believe that basic research should be public. Digital innovations should be financed by public investments and should be provided as free public goods to all. This would make the superstar phenomenon disappear, and the effects of digital innovation would simply show up as productivity increases.[5]

We live in a brave new world that is increasingly based on information. Because the information economy is different from the traditional economy, antitrust policy should be revamped to reflect that. Instead of worrying about the economy being eaten up by these gigantic monopolies, policymakers need to focus on the question ‘What specific actions can we pursue to make the economy more competitive and efficient?’

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