11 July 2019

The vital role of immigrants in start-up Britain

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At a time of rising pessimism about the UK economy, a vibrant startup scene attracting record levels of venture capital investment is a rare bright spot.

A new report from The Entrepreneurs Network reveals how immigrant entrepreneurs are the driving force behind many of the UK’s biggest startup success stories. While the media coverage of immigrants is often negative, the data in this report makes an evidence-based case for immigration.

We analysed SyndicateRoom’s Top 100 list, which uses Beauhurst data to identify the 100 startups, scale-ups and fast-growing companies that have seen the largest increase in value over the last three years.

Though immigrants make up just 14% of the UK population, 49% of the UK’s fastest growing businesses have at least one immigrant founder. The figure is even starker when you shift focus to start-up unicorns (pre-IPO companies with $1bn+ valuations). Of the UK’s 14, nine have immigrant founders.

Immigrant entrepreneurs are breathing new life into tired old sectors, creating jobs and expanding choice. Monzo and Revolut are revolutionising the way we bank by taking on complacent incumbents, while Deliveroo and Just Eat have made our evenings easier, creating thousands of jobs in the process.

Past data has highlighted that immigrants tend to be more entrepreneurial than the general population. For instance, 12.9% of immigrants are involved in early-stage start-up activity compared to 8.2% for the native-born population.

In a way, it shouldn’t surprise us that immigrants are more likely to start companies. After all, grit and a tolerance for risk is a prerequisite for both entrepreneurship and immigration. As Ronald Reagan put it: “It is bold men and women, yearning for freedom and opportunity, who leave their homelands and come to a new country to start their lives over… And often they are entrepreneurs.”

Sukhpal Singh Ahluwalia is a good example. Arriving in the UK as a refugee at the age of just 13 years of age, he built Euro Car Parts from a single site in Willesden to Europe’s largest distributor of car parts, creating 12,000 jobs in the process. In his foreword to the report, he said: “Immigrants have an innate desire to better their lives through business and enterprise, not just for themselves, but for their families, communities and adoptive countries.”

Yet not all startups have the same impact. High-growth small businesses make up less than 1% of UK businesses but create 20% of new jobs. It is here where immigrants excel. Exposure to different environments enables them to bring a new perspective to persistent problems. One compelling study finds that students are better able to spot opportunities for profit after a semester abroad.

It makes sense then that the immigrant founders of Britain’s fastest-growing companies are a diverse group, hailing from 29 different countries across five continents. In theory, we might expect non-EU migrants to be over-represented relative to the rest of the foreign-born population.

After all, unlike free movement, our visa system for non-EEA migrants is designed to select for those who can make the largest contribution to the UK. Yet, 47% of the immigrant founders of the UK’s fastest growing companies come from either the EU or countries within the EU’s free movement treaties.

As Joshua Wohle, the Dutch co-founder of fast-growing SuperAwesome, told me, “My thinking was as simple as ‘where in Europe can I go that has the biggest potential for me’. At the time, this was London, because of freedom of movement. Without that, London wouldn’t have even been part of my decision matrix and I would probably have ended up in Amsterdam, Paris, Berlin or Madrid.”

Similarly, Vincent Fraux, the French co-founder and Head of Design of Oxford Space Systems, warned that “by making this process more complicated, the UK runs the risk of stopping future entrepreneurs making their first step and settling up in the UK”.

Another recurring theme from speaking to the immigrant founders of Britain’s fastest growing companies was the importance of post-study work. Again and again, entrepreneurs told us they moved to the UK to study at one of our world class universities and then opted to stay in the UK post-graduation for work.

The situation is similar in Silicon Valley where over half of all technology and engineering firms had at least one immigrant founder. More than half of the immigrant founders moved to the US to study, starting a company on average after living and working in the US for 13 years.

Yet in 2012, Theresa May removed the right of non-EEA students to live and work in the UK for two years after completing their studies. International students were instead required to immediately meet the strict requirements for another visa route straight after graduation. As a result, many went home.

It is hard to think of a worse act of self-sabotage. Britain’s top universities are magnets for the world’s best and brightest. Other countries would kill to have them. But we’re squandering one of our biggest advantages.

Dr Miguel Martinez, co-founder of Signal AI, puts it bluntly: “We are basically training the best people in the world, paying for part of their PhD with taxpayer’s money and then telling them they have to leave the country the moment they finish.”

The good news is that there’s momentum for reform. Former Universities Minister Jo Johnson MP, who has backed our report, is leading the push alongside an impressive grouping of cross-party MPs. In a recent op-ed, Home Secretary Sajid Javid signalled support for restoring the visa.

Restoring the post-study visa would be a good start, but Javid should go further. Creating new Start Up and Innovator visas, which allow accelerators, incubators, and VCs to sponsor promising entrepreneurs was a positive step, but the implementation has been poor. Confusing guidance and unnecessary bureaucracy have hindered the scheme’s adoption.

In the race to be the next PM, whenever innovation or entrepreneurship are discussed one word keeps popping up. If I never have to hear the word ‘turbocharge’ again, it will be too soon. But it’s hard to think of a better, easier, or cheaper way to boost the UK’s economy than opening up to the innovators and entrepreneurs who will create the jobs of tomorrow.

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Sam Dumitriu is Research Director at The Entrepreneurs Network