How UK entrepreneurs would encourage start-ups in Europe

#CriticalThinking

Digital & Data Governance

Picture of Tony Clayton
Tony Clayton

Chief Economist of the UK Intellectual Property Office. Former chair of OECD ICT measurement working group

Last summer, a group of digital entrepreneurs met at “Campus”, close to Silicon Roundabout, about a kilometre north of the City of London. It’s where entrepreneurs in the UK’s leading digital cluster get together to share ideas.

This particular group was convened by Sara Kelly, then the Director of the UK’s Coalition for a Digital Economy and now lead tech policy adviser to London’s mayor Boris Johnson. They were there to assist the European Commission’s DG-Connect efforts to help digital enterprises grow and contribute to the European economy.

Europe has plenty of “big old” companies in established sectors, but the world’s “big new” players in digital markets come from the U.S., China or India and lead the drive to develop new digital services, new applications and e-commerce businesses. They work on global platforms, or in digital publication and advanced technologies like ICT security, tackling user needs that big companies find hard to target. Digital entrepreneurs make a mark creating new markets and competing against less innovative rivals. “If this doesn’t happen Europe’s lunch will be eaten by Chinese or other overseas innovators,” said a publisher attending the Campus group.

New digital businesses in Europe face hurdles that limit their ability to grow fast enough and large enough to build a sustainable competitive advantage. Finance ranked No. 1 among the barriers to growth identified by the group, some of whose members had even been urged by backers to cross the Atlantic for better venture capital support and a bigger marketplace.

Regulatory certainty also matters. Changes to regulation are particularly hard for SMEs as dealing with them eats up development budgets, while new regulations that increase the time needed to get a product to market jeopardise key competitive advantages. Differences in employment or business registration rules are just as important, with the result that growth often stops at national borders.

A common complaint is that EU directives in areas like privacy or competition policy are drafted by legislators who don’t understand innovation, and anyway are implemented differently in the member states. Varying definitions of personal data, for example, limit digital service providers’ ability to innovate. And although the EU legislative process works for larger companies, it hampers small innovators. Industry lobbying, of course, is dominated by large corporations able to invest heavily in influencing EU decision makers.

Skills for digital enterprise are not just a technical issue. “Too much theory, and not enough contact with real business” was the group’s most common complaint about universities. The U.S., where degrees usually cover maths and language, and students normally combine work and study, does best. Germany, with its stronger emphasis on vocational skills and closer industry contact is close behind. On the whole, however, becoming an entrepreneur is not seen as a good career choice in Europe. The focus on employment and careers in established companies creates a culture in which safe jobs are preferred over risky start-ups.

The priorities are clear: much remains to be done to develop a real single market that works for newcomers. Better finance for innovation and enterprise, and more business-relevant skills as part of an education that encourages entrepreneurship. All are key.

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