September 21, 2012

Bits and Billions: A blueprint for high-impact digital entrepreneurship in the UK


The UK has enormous potential to be a world-leader in the high-tech and digital economy, but it is tough for start-ups to find enough coders, designers and other highly skilled staff. Bits and Billionssays that UK policymakers need to learn lessons from the United States, especially California which is home to nearly half of the top 100 digital start-ups in the world

In the long term, the paper says the education system needs to radically improve the quality and quantity of home-grown science, technology, engineering and maths (STEM) capabilities. Evidence shows that the number of foreign students taking postgraduate taught courses in STEM subjects in the UK nearly doubled between 2002 and 2010 from 10,000 to 18,000 whereas UK student numbers remained flat at 11,500.

As a short-term measure the paper recommends:

  • Relaxing the visa requirements for skilled migrants, to enable start-up businesses in the digital sector to take on highly skilled staff for a two-year probationary period without needing to pay a high up-front salary
  • Reinstating a two-year post study visa for graduates achieving good degrees in STEM subjects, to make it easier for start-ups to find and hire talented staff from UK universities

The report makes a number of other proposals:

Capital gains tax rollover relief for shares should be considered as an extra incentive for investors who have backed successful businesses to reinvest their gains in the next wave of innovative start-ups and growth companies. This will allow start ups to access a greater level of external finance at an early stage.

“Silicon superstar schemes” run by the UK’s biggest companies would pay at least two recruits a year from each company’s graduate intake to work for or co-found a start-up rather than come to work. The employer would take an equity stake in the start-ups involved, and would guarantee a job for the graduate should the start-up fail within two years. Major public sector bodies such as the Civil Service Fast Stream and the BBC should also be encouraged to participate.

Opt-in light-touch employment rules which would make it more straightforward for start-ups to hire and fire highly skilled employees should also be encouraged, but made available only in exchange for an employer forgoing restrictive non-compete clauses and claims over intellectual property developed by employees outside their core work responsibilities.

Interviews with digital entrepreneurs

Video summary


“It is vital that policy makers and the business community work together to make sure the UK is a great home for entrepreneurs wanting to set up a business. This Policy Exchange report highlights the importance of  providing good access to equity finance so that  entrepreneurial businesses can flourish and succeed. Amending the capital gains tax regime and abolishing stamp duty on AIM-quoted companies’ shares are two examples of how we could make the UK even more attractive for innovative businesses. Providing a natural home for talented, ambitious entrepreneurs, will have a direct impact on the health of the UK economy, creating jobs and generating wealth.”

Marcus Stuttard – Head of AIM, London Stock Exchange

“all of the recommendations in report are really important”

Theo Bertram – UK Policy Manager, Google UK


Chris Yiu

Head of Digital Government, 2011-13

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