Young people need far more than this new StartUp scheme

Why the government's small loans are hardly the answer to mass youth unemployment.

On the face of it, today’s launch of the StartUp small business scheme for under-25s looks like a good news story in an otherwise depressing economic landscape. The aim is to increase entrepreneurialism and reduce unemployment among young people (currently standing at a disastrous 22 per cent) by offering £2,500 loans and business mentoring.

Whether you imagine a legion of sharp suited young people pitching in the Dragons Den and fighting it out for Lord Sugar’s approval, or the astronomical wealth of the flip flop wearing Zuckerberg, the Prime Minister's idea of "a whole new wave of entrepreneurs who start small but 'think big" is uplifting and exciting.

But there are a couple of problems with this picture. The first is that while entrepreneurs learn a lot from starting businesses, and that learning might well offer real benefits to young people (particularly when compared to stagnating on the dole), the failure rates for new businesses are very, very high. Take this observation from Carmen Noble, writing for Harvard Business School:

The statistics are disheartening no matter how an entrepreneur defines failure. If failure means liquidating all assets, with investors losing most or all the money they put into the company, then the failure rate for start-ups is 30 to 40 per cent . . . If failure refers to failing to see the projected return on investment, then the failure rate is 70 to 80 per cent. And if failure is defined as declaring a projection and then falling short of meeting it, then the failure rate is a whopping 90 to 95 per cent.

The second is that starting a business doesn’t necessarily mean living above the poverty line. Twenty-five per cent of families with one or more self employed member are living in poverty. And in areas of high unemployment, there is evidence that new startups may just displace existing businesses, rather than increasing the number of businesses and jobs.

So, is StartUp some good news in a bad news week? Yes. Is it the answer to massive youth unemployment and stagnant local economies? Not by a long chalk.

The Prime Minister talks to young entrepreneur Lenique Louis on Monday 28 May. Photo: Getty Images

Nancy Kelley is Deputy Director of Policy and Research for the Joseph Rowntree Foundation

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FTSE 100 plunges after Theresa May signals hard Brexit ahead

The Prime Minister is to lay out her Brexit plan later today. 

The FTSE 100 and the FTSE 250 plummeted this morning after the Prime Minister signalled Brexit will mean leaving the single market.

Theresa May is expected to rule out "partial membership" or any other kind of "half-in, half-out" deal with the EU in a speech later today.

The FTSE 100, the index of the UK's 100 biggest companies, and the FTSE 250 both fell more than 0.3 per cent immediately after opening. 

The worst performers included the housebuilder Barratt Developments, consumer goods tester Intertek and the mining company BHP.

Stock markets have been buoyant since Brexit, in part because many of Britain's biggest companies are international and benefit from a devalued pound. 

However, while markets fell, the pound crept up against the dollar, to $1.21. 

Critics of the Prime Minister say she is sacrificing the economy to prioritise immigration controls.

TUC general secretary Frances O'Grady warned: "If we leave the single market, working people will end up paying the price. It'd be bad for jobs, for work rights & for our living standards."

According to the Office for National Statistics, inflation rose from 1.2 per cent in November to 1.6 per cent in December. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.