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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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.