Westminster Stifles Start-ups Before They Can Hire Anyone

Britain’s most politically neglected businesses employ nobody, pay no tax and cannot belong to any trade association. They do not attend Downing Street summits, hire lobbyists or bend a minister’s ear. In fact, they can’t, because they don’t exist, smothered at the inspiration stage by various regulations that either prevent entry or make it too costly.

When governments “listen to business,” they naturally call on big banks, supermarkets, retailers, energy companies, housebuilders, and manufacturers. They meet with associations such as the CBI, the Federation of Small Businesses, or the Institute of Directors. All fine and legitimate as stakeholders with interests. Yet what’s pro-business is not always pro-market. Incumbents may want protection from competition, whereas competitive markets depend on exposing them to it.

A recent working paper from the United States suggests legislators’ backgrounds can support the interests of unborn firms. The researchers linked financial disclosures from elected politicians in 26 states with the legislation they championed between 2009 and 2023. Remarkably, more than two fifths of these lawmakers were entrepreneurs owning and actively managing businesses.

The paper found that entrepreneur politicians did not initiate more legislation and were no more likely to endorse “pro-business” legislation than others. They were, however, likelier to sponsor “pro-entry” proposals such as reducing licensing, registration and regulatory barriers. Having confronted the obstacles to starting firms, in other words, they were alert to how government makes start-ups’ lives more difficult.

The Commons, sadly, has scant founders’ experience to push that agenda here. Kemi Badenoch recently complained that 90 per cent of new Labour MPs came from trade unions, charities or the public sector, with barely a fifth of the Cabinet holding any private-sector experience. Her new shadow chancellor, Andrew Griffith, spent over 25 years in business, as Sky’s chief financial and operating officer and chairing Just Eat. One post-reshuffle jibe estimates he has about the same years of private sector experience as the entire current Cabinet.

Separately, the Great British Think Tank calculates that less than a third of MPs come from business, finance, consulting, science and technology, trades or farming backgrounds — what it calls the “private economy” — in contrast to politics, lobbying, charities, journalism and the public sector. The party divide is stark. Just 16 per cent of Labour MPs come from those private sectors, compared with about half of Conservative and Reform MPs and 45 per cent of Liberal Democrats.

Counting those with specifically entrepreneurial backgrounds, however, is more subjective. My trawling of MPs’ biographies and interests to find those who founded, owned and managed a commercial venture, rather than working as an employee, or setting up a company to manage speech, book, consultancy, and property earnings, suggests very low numbers.

Around 60 of 650 elected MPs (roughly 9 per cent), including Sir Jeremy Hunt, Richard Tice, Steff Aquarone and Angus McDonald, would meet that tight entrepreneur criterion. Broaden it to include legal practices, sole traders, social enterprises, or running a family-owned business, and you’re probably talking around 100 MPs (15 per cent). One can quibble on specific categorisations. What’s clear, however, is that Westminster has nothing resembling the entrepreneurial representation found in American state legislatures.

Which is perhaps unsurprising, given parliament is more of a full-time gig and a relatively low paid one. Yet the fact that so few in parliament have entrepreneurial backgrounds is bound to affect economic policy in subtle ways. A would-be housebuilder benefits more from planning reform than investment summits. A first-time employer would prefer simpler taxes to a government grant portal. A founder would probably prefer a regulatory sandbox to test a product before bearing full compliance costs, whereas established manufacturers may prefer industrial policy and protectionism.

Parliament teems with champions for workers, regions, constituencies and established industries. Entrepreneurs might not be better legislators overall, but having more of them might force Westminster to reckon with the rules that make markets less contestable.