Do Business Angels prefer Labour, Conservative, or LibDem?

When Gordon Brown announced the General Election will be on the 6th May, who did you decide to vote for? What is important to the country? What is important to Business Angels and Entrepreneurs? Who can you trust to take the country forward from today?

As a Business Angel I believe in the Free Market. The Free Market is one where individuals and companies are allowed to do anything as long as they pay for the commons (e.g. pollution, electromagnetic spectrum, commodities, etc.) and don’t impinge on the rights of others. Ideally the laws regulate the commons, prevent collusion and provide a framework to manage disputes between two or more parties about the exchange of rights and/or commons in the most equitable way.

So that’s the ideal position. Where are we now? Over the last ten years we’ve had huge government intervention in order to correct “market failure” in almost every aspect of life. There is a vast amount of legislation and regulation; the UK has the most complex tax rules in the world; there’s been an education bill nearly every year (each takes over three to implement). We have complexity instead of simplicity in order to solve the hypothetical market failures.

An example of market failure erroneously being corrected is demonstrated by BusLink. BusLink provides free help to small business because politicians believe that small companies need the help and can’t afford the market rates for that support. However, their intervention values advice at £0 (that’s how much they charge) meaning that professional organisations, Business Angels and Mentor find it difficult to compete. That would be fine if BusLink provided excellent advice; however being a government organisation they don’t pay enough to get consistent excellent quality advisors.  (As a caveat, I should say that there are some excellent advisors in BusLink because some are not solely motivated by money).  Ironically the government has caused market failure.

The tax law demonstrates another erroneous complication driven by the apparent need to “correct market failures”. Take a look at Entrepreneur’s Relief giving a lifetime’s 10% relief to entrepreneurs for the first million capital gain their enterprise makes (about to go up to two million) instead of 18%. The management time and reporting requirements over the working life of anyone who starts a company is yet another reason they need to pay accountants to manage their complex tax affairs.

All this regulation and “nit picking” legal requirements leads to an increase in the cost of business. Once an expensive way through the mire has been established, it may change in the next year’s budget making the planning irrelevant.  Worse, retrospective legislation means a company can’t be sure that what’s legal today will not break the law in a year’s time changing the owner’s (and therefore Business Angel’s) liability. Again, massive and incalculable risk to business and its owners.

If things are this bad in the UK, what about elsewhere? I suspect this is a symptom of the West’s fear and worry about the world at large: just look at the unjustified “war on Terror” that has been announced since the 9/11 event. (Don Gardner has written an excellent book on this subject which I’ll review in another blog).

So where now?

Since the 1980’s we’ve effectively had four government regimes in the UK. Two conservative and two labour. If you’d asked me what sort of government I wanted before the crash, I would answer “the second conservative one”. Why? John Major spent seven years with a very slim majority running the country. As a result of the slim majority he could do very little. What ensued was a time of relative calm and little legislation/regulation driven change. Business learnt about the risks and could predict the future with some reliability. In 1997 when the colour of the government changed, The Economist reported that the economy was in the best state it had ever been for a transfer of power.

So where now?

My gut feeling is that it doesn’t really matter which colour rosette is running the country – I suspect we will have a “hung parliament”. They will have their first “emergency budget”. They will not announce cut backs large enough to persuade the international community to carry on investing in the UK. Sterling will depreciate considerably (parity or less with the Euro and Dollar a certainty) making imports expensive. The interest rates will increase to encourage more money to support our debits. More mortgages will default for companies and houses putting people out of work and out on the street.

What really matters is that a leader with the ability to tackle the poor financial position of the country is elected. Gordon Brown has demonstrated he can’t do it. Nick Clegg is unlikely to get enough support. David Cameron might be the only, untested, untried chance.  I seem to remember the Economist saying pretty much the same about Tony Blair in 1997…

This Post Has 2 Comments

  1. An excellent point about business link and the negative effect it’s had on the value of business advice. Sadly I have yet to meet any of their advisors that I would be prepared to either take advice from or suggest to others that they do. I’m sure there are some but they must be in the minority.

  2. In the most recent, final debate, David Cameron was by far the most upbeat and optimistic, followed closely by Clegg and finally Brown not looking very positive at all.

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