CGT controversy continues to mar business start-ups sector

12 November 2007
Fears that Government proposals for the controversial capital gains tax reform will damage an already flagging start-ups sector continue to grow after the latest analysis shows a marginal increase for 2007.

Barclays’ business research has shown that there has only been a slight increase in the number of start-ups by people under 35 years old, from 33 to 36 percent of the total since 2003.

The construction sector has seen the only increase in start-up rates over the past year, indicating a slowing down of entrepreneurial drive in England and Wales with the first quarter of 2007 reporting an 11.7% drop in the number of new businesses compared with the same period last year. The figure for start-ups in the wholesale industry dropped by nearly 25%, and businesses in the hotel and catering sector saw a decrease of 18.7%.

What’s more, according to a survey by The National Council for Graduate Entrepreneurship, only 11% of students in UK universities are making the move to start up their own businesses, a stark contrast to the US figure of 50%.

Google, Facebook and MySpace are just three of the smash start-ups that have been started at colleges in America suggesting that the UK is lagging behind when it comes to creating world class businesses.

The results of the study revealed that fewer than half of universities across the UK do enough to encourage enterprise and only a small minority offer such facilities as enterprise workshops or young business mentoring schemes.

Ian Robertson, the NCGE’s Chief Executive, comments: “We are heading towards 50 percent of young people going through higher education, so universities can no longer afford to view themselves as elitist. The Government has spent a lot of money on this over the past ten years, but universities are still not enterprise-friendly, by and large.”

Minister for Enterprise Stephen Timms, has also said that he believes much more has to be done to help young people realise their dreams, “particularly in improving the interface between universities and small companies”.

The report comes as Enterprise Week, the UK festival promoting youth enterprise, kicks off. However the proposed reforms for Capital Gains Tax may put many fledgling entrepreneurs off taking the plunge and starting their own companies.

The Chancellor’s decision to subject all businesses to the same 18 per cent level of tax has been met with severe criticism from a number of prominent UK business groups. Jerome Touze, the French co-founder of Where Are You Now, a fast-growing London-based internet company, has openly criticised the Government’s proposals and feels that CGT is one of the main obstacles stopping young businesses from flourishing: “Paying an extra CGT contribution of this scale is not going to encourage entrepreneurs to start more businesses in this country” he said.

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