Startups Weekly Round Up – 6 February

Tech Nation closes after transforming UK tech for a decade, a shorter recession, and the value of apprentices

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Welcome to Startups’ Weekly Round Up, where we bring you the latest headlines to keep you in the SME loop.

The highlights this week:

  • Tech Nation’s core grant has been pulled by the government, forcing the startups support network to cease all operations from next month
  • The Bank of England says the impending recession will be shorter and less severe, spelling relief for business leaders and consumers alike
  • SMEs could access 250K+ new apprentices if more government funding is made available
  • Company insolvencies in Q4 2022 were 30% higher than Q4 in 2021

Stats to Start Up Your Week

  • Four in five UK SMEs (83%) are struggling to play beyond 2023 → almost two thirds (59%) believe there is a risk of business closure due to the cost of living crisis.
  • Personal guarantee insurance for SME owners rose 145% for 2022.
  • 125,000+ London companies are in distress due to the worst footfall recovery rate → support services is the industry with the highest number of companies in significant distress
  • 62% of ecommerce organisations said that collecting real-time data would be a priority in 2023

11 Downing Street and the UK Economy – What should startups know?

📉 It’s not all doom and gloom, the recession will be shorter and less severe than expected → it’s no surprise to small business owners that the UK is set to enter a recession this year but, following an announcement by the Bank of England, the economic winter is set to be less gruelling and last just over a year. This forecast comes as interest rates were raised from 4% to 3.5% – the highest level in over 14 years – and after the IMF’s announcement which hinted that the UK would be the only major economy to shrink in 2023.

🌱 But the economy is still nowhere near growing → Q4 2022 company insolvencies were 30% higher than Q1 2021. Ian Hepworth, director of Funding Solutions UK, said, “We are seeing more and more companies struggling as they are enveloped by a perfect storm of rising costs, disrupted supply chains and reduced supplier credit.” What’s more, the credit climate is also unstable. Hepworth explains, “The banks made a point of supporting businesses through Covid and beyond in an attempt to right their wrongs from the financial crisis a decade before. They too are now withdrawing support.”

💵 Demystifying the credit crunch → Venture Capital Trust Association (VCTA) suggests that early-stage company entrepreneurs are hamstrung by a lack of information on how to access external funding to support growth plans. Despite 92% of respondents requiring equity finance over the coming two years, 44% say they lack information on how to access it.

↩️ Serial refunders are poking holes in account books → Paymentsense’s annual Serial Refunder Report shows that UK small businesses lost an average of £144K a year in 2022 due to serial refunders. Astonishingly, this is actually a drop of 22% from 2021, suggesting there is less demand and consumption due to the cost of living crisis. Less sales, less refunds.

What Tech Nation's closure means for startups

Tech Nation, the startup growth network that was at the heart of success stories like Monzo, Depop, and Just Eat, will cease operations on 31 March after the government pulled its funding last September.

Since its inception in 2011, Tech Nation relied on a £12.09m pot from the government’s Digital Growth Grant, which was used to deliver support services to the UK’s digital tech sector. This funding is now being awarded to Barclays Bank instead.

The Tech Nation announcement has left a bittersweet taste across the startups industry. Tech Nation was the accelerator that thrusted the UK tech ecosystem into the number one position in Europe and number three globally, employing five million people across the country.

While 80% of startups fail within their first two to five years, over 95% of startups on Tech Nation’s accelerator programs have gone on to scale. More than a third of all tech unicorns and decacorns created in the UK have graduated from a Tech Nation program, collectively raising over £28BN so far in venture capital and capital markets.

Russ Shaw, Founder of Tech London Advocates and Global Tech Advocates said, “Some of Britain’s most exciting and innovative companies have received vital help and support from Tech Nation. The UK ecosystem has today lost an important member of its community.”

The UK’s talent goldmine– Apprentices

SMEs could unlock a quarter of a million new apprentices, according to research conducted by Multiverse, if more government funding is made available. The survey conducted with 1,000 SMEs found that 35% currently plan to take on an apprentice this year, but that significantly more apprentices could be hired if there was further governmental support. This after government data revealed that the number of apprentices placed at SMEs is down 45% from 2016/17 levels.

Hiring young, bright minds is proven to not only be a breath of creative fresh air for businesses but also incredibly economical. Figures show that for every £1 spent on an apprenticeship, more than £28 are put back into the economy. It therefore comes as no surprise that eight in ten small business leaders have had a positive experience hiring an apprentice. Nearly two-thirds also see apprenticeships as a fast-track lane to hiring talent from more diverse backgrounds.

Jeremy Duggan, President of Multiverse, said, “Apprentices up and down the country are joining the workforce and improving how businesses operate,” but highlights that, “small and medium-sized businesses have struggled to recruit the volume of apprentices they need, and this needs to change.”

As the impending recession continues to bring high levels of employee retention anxiety, apprentices can prove to be a worthy investment. Duggan said, “This research shows in black and white the huge potential out there to grow the number of trainees in the UK’s 5.5M SMEs. From boosting diversity to training young people in the data and digital skills the economy needs for the future, the Government urgently needs to act.”

So what can be done? Duggan advises simple steps – such as simplifying the funding system – can make all the difference. The more apprentices, the more economic growth and the more young talent accessing the platform to a successful career.

Uplift in Shoplifts – protecting your retail business from shoplifters

Shoplifting rose 21% in the 12 months to March 2022 according to the ONS. External theft from supermarkets and other retail stores costs a heart-stopping £1.993M each year, accounting for 34.5% of shrinkage. This means stores end up having significantly less items in stock than the amount recorded in the inventory.

Startups spoke with Joanna Jagiello, Marketing Director at Barcode Warehouse to shed light on the trend. “It’s difficult to say exactly, but economic impacts and pressures on household bills will play their part in the increase in shoplifting especially the case in food retail,” says Jagiello, “I think it’s a no-brainer for businesses to be doing more to protect themselves,looking at preventative measures is the only way to take some control of the issue.”

How can you protect yourself as a business owner? Jagiello recommends stock management solutions and RFID. “One clever example we helped develop with one of our customers was to provide each individual garment of their clothing with its own unique barcode or number,” shares Jagiello, “this allowed them to see if items had been scanned through the tills when shoplifters tried to return goods without receipts and they were able to identify if the garments were ever sold in the first place or in fact stolen.”

Funding Opportunities

The TechMarketView Innovation Partner Programme (TIPP) has teamed up with Capita Scaling Partner (CSP) to find startup and scale up companies who are delivering game-changing solutions. The successful applicant company will join the CSP portfolio in an equity-for-services model, ensuring mutual success and business growth. Companies who have previously become part of the CSP portfolio have seen an average growth per annum of over 200%. You can find out more here.

Written by:
Fernanda is a Mexican-born Startups Writer. Specialising in the Marketing & Finding Customers pillar, she’s always on the lookout for how startups can leverage tools, software, and insights to help solidify their brand, retain clients, and find new areas for growth. Having grown up in Mexico City and Abu Dhabi, Fernanda is passionate about how businesses can adapt to new challenges in different economic environments to grow and find creative ways to engage with new and existing customers. With a background in journalism, politics, and international relations, Fernanda has written for a multitude of online magazines about topics ranging from Latin American politics to how businesses can retain staff during a recession. She is currently strengthening her journalistic muscle by studying for a part-time multimedia journalism degree from the National Council of Training for Journalists (NCTJ).

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