'Scotland must do more for start-ups'

Sir Tom Farmer wants to see Scotland produce more pioneers in the mould of John Logie Baird, left, and James Watt

But time passes and reputations change. Now Scotland is widely regarded as an entrepreneurial slow coach with start-up rates trailing the rest of the UK.

Some blame the "cautious" nature of the Scottish character, with the nation's heavy dependence on public sector employment being another contributory factor.

So the argument goes that Scots just don't have enough experience of private business either individually or through their families.

Attempts to rectify this well established problem have come and gone without great success.

So does a new government determined to "rebalance" the UK economy from public to private following 13 years of Labour rule hold the answer?

We may learn more on 6 September, the date outlined in June's Emergency Budget for the launch of a National Insurance holiday scheme for new businesses setting up in areas of the UK "most reliant on public sector employment", such as Scotland.

Within a three-year qualifying period new businesses, set up from 22 June this year, will be free from paying 5,000 in National Insurance contributions for each of the first ten employees they hire in the first year of business.

The scheme is not open to new businesses set up in London, the south-east and east of England or existing businesses throughout the UK.

Chancellor George Osborne hopes the result will be a stronger Scottish private sector led by enterprise.

Reading between the lines, a re-fired new wave of Scottish entrepreneurs would be handy to hoover up the estimated 50,000 public sector jobs likely to fall to austerity cuts in Scotland and help keep the economic recovery on track.

But will it succeed? There are fears that economic rebalancing may hinder rather than help. Maciek Nowakowski, founder of Edinburgh start-up business Recommo, is unconvinced. "The scheme won't stimulate more entrepreneurial activity in Scotland," he says. "It's not particularly targeted and its effectiveness will be very hard to measure. I believe that implementing it will cost more than the actual benefits it will bring to the economy."

Perhaps Nowakowski has reason to be disgruntled. Recommo was formed as part of Epis, the Edinburgh Pre-Incubator Scheme, now facing closure after Scottish Enterprise withdrew its funding.

"Start-up incubators stimulate entrepreneurial activity because their support and assistance dramatically increases the chances of companies surviving. More should be funded," he says.

Thomas Drapier of startupcafe.co.uk, a community website for Scottish start-ups, describes the tax break as "completely useless". He argues that start-ups just don't have the money to employ new staff. "To employ ten people you need at least 250,000 in revenues. A brand new start-up doesn't make that overnight," he states.

Serial entrepreneur Duncan Johnston-Watt, currently chief executive of computing firm Cloudsoft, sees merit in the scheme but wants it extended to all new businesses formed since the credit crunch.

"We would reinvest any NIC relief in the business and use this to fund two new permanent employees," he says. "It is easier to envisage the tax relief being used to grow a start-up rather than being the determining factor for launching a start-up."

Both Johnston-Watt and Drapier disagree with the notion that Scotland lags behind in entrepreneurial spirit.

"The UK as a whole has a schizophrenic relationship with entrepreneurship. I don't think Scotland is any worse," Johnston-Watt says.

Earlier this year Dr Jonathan Levie of the Hunter Centre for Entrepreneurship described Scotland's knowledge of business and entrepreneurs as "low". What does he make of the scheme?

"It's good news for start-ups as NIC is dead money when you begin a business and it may mean they need less money to get started," he says. "But I see this making a marginal rather than a huge difference to the number of start-ups. It's more a signal from government that now is a good time to start. It could tempt those who are currently humming and hawing about launching."

Levie is also hopeful that the Scottish Government will make entrepreneurial training support available to public sector workers immediately after they lose their jobs.

"It's something that could be done between all enterprise training agencies. No discussions have taken place at this stage but it wouldn't surprise me if this came up in conversation over the next month or so," he states.

The Federation of Small Businesses in Scotland, which calls for the NIC tax break to be extended to existing businesses, also expects some form of enterprise training for ex-public sector workers to emerge.

Replicating the recent Scottish Government support package for school leavers, which included enterprise training, could be one option.

However, a Scottish Government spokesman said there was "nothing to say at this point".

Levie argues that training and education remain the best long-term answer to revive Scottish entrepreneurialism but he raises fears that school enterprise courses may suffer from the public sector squeeze.

"We need to ensure that entrepreneurial training in our schools, the world-leading Enterprise Education programme, does not slip away," Levie says. "The funding is ring-fenced but not for much longer. Then it is up to the local authorities to decide how much enterprise education they want to have. There is always the danger it might slip away and we need to watch it very carefully."

Also being watched are the tie-ups between new businesses and the education authorities providing these enterprise courses. Concerns have been raised from other bodies suggesting that such links are "insufficient".

The main concern for David Grahame, director of business angels association LINC Scotland, remains bank lending. "The NIC holiday is positive as early stagers need every penny, especially with the banks staying far away from the risky stuff. The government needs to continue to press," he says.

Entrepreneur Sir Tom Farmer, provider of the Churchill quote, believes government and agencies can always do more but he is eager to stress the positives of Scottish enterprise.

"We shouldn't make out that there is nothing happening. New businesses start every day in Scotland," he says. "However, we do need to give people more courage to start a business and the NIC scheme is one such encouragement."

He calls on Scotland's entrepreneurial spirit to be displayed not just in "running your own business but as part of a team and in the public sector. There are opportunities out there: people just need to reach out and grasp them."