The Legatum Institute marked the launch of its 2014 Prosperity Index report this week with a panel discussion. The well attended event discussed the report’s findings and “the British entrepreneurial spirit”.
Nathan Gamester, Legatum Institute’s Programme Director, kicked off the discussion with a review of the notable findings in this year’s Prosperity Index, announcing “over the last 6 years global prosperity has increased.”
Explaining that the report measured more than GDP, Gamester said the Prosperity Index gives the “bigger picture” in terms of global wellbeing. He used the US as an example, a country with an impressive GDP but ranking low on personal freedoms.
The big news of the night was the performance by the United Kingdom. Ranked as 13 overall, the UK has continued to flourish.
Gamester said that the report found the UK to be extremely entrepreneur friendly, holding 8th place in their entrepreneurship category.
“Business start-up costs are particularly low…it costs 66£ to start a business in the UK in comparison to the US that’s 800$ and in Germany about 1500 euros,” he said.
James Barty, chair of the panel and special advisor to the Legatum Institute, agreed that the news was indeed positive for UK business, but suggested there was still work to do. He mentioned that a recent Gallup poll had scored the UK at 67.3% for best place to start a business, while the average in the developed world was 70%.
As the first panellist to speak, Ed Conway of Sky News welcomed the Prosperity Index’s different view on prosperity saying, “we are not particularly good at measuring overall wealth” and it is good to be reminded that the “flow of money” was not an infallible measure of how well off citizens are.
Commenting on the UK's popularity with entrepreneurs, Conway attributed a part of the reason businesses like being in the UK was due to its open boarder policy.
“It is difficult to find economic analysis that don’t say this is a good thing,” he said.
Luke Johnson, Chairman of Risk Capital Partners, agreed that immigrants were an important element in the UK economy, mentioning that 1 in 7 SME companies having been formed by an immigrant.
“I feel incredibly positive about the future of Britain,” Johnson asserted.
Johnson cited the ease with which businesses could be created, the number of top ten universities, and lack of corruption, as reasons “UK is one of the most attractive nations in the world.”
Baroness Wheatcroft welcomed the news that the UK was going in the right direction, but she warned that there was a major problem in terms of SME businesses expansion, saying “I don’t believe it is a shortage of money…the real problem is that too many people think they want debt when in fact they need equity.”
“[Businesses owners] would rather sell their grandmother than sell a part of their business,” joked the baroness.
She also thought it was important to get medium size companies to focus on exporting and thought TTIP was an answer to the problem. However, she recognised TTIP was unlikely to be realised, blaming the trade unions, Greens, animal rights activists and “NHS-worshippers”.
Senior editor at The Economist, Edward Lucas, turned the focus towards the specifics of the UK’s success and remarked that the UK was particularly “good at a bit of disruptive finance.”
He said evidence of this was how peer-to-peer business lending is supporting the growth of the UK economy by providing a competitive alternative to traditional financial institutions for lending and debt products.
Lucas was inspired by this style of low interest lending as he saw it as a response to the “cartel of unmovable banks.”
“There is something in the air of this country where you can do something like that, and make a huge difference,” said Lucas.
The panel was then opened to questions by the audience, the first of which was asked by a board member of the Circle Housing Group. She said that 75% of the housing group’s working-age-tenants were claiming benefits while employed. She demanded if the government could support this dynamic.
The baroness said that businesses had a responsibility to pay a wage that their employees could live off of, saying “I feel very uncomfortable with companies paying dividends to shareholders when their employees are making very little.”
However she added it was up to the customers, not the government to put the pressure on businesses to pay a better living wage.
A question was posed by a member of the audience on to what extent UK prosperity is linked with the EU.
Lucas accused the EU debate to be so far “fact-free”, saying the benefits of immigrant businesses and the single market system were evident.
The baroness countered Conway’s enthusiasm for the EU saying they did not understand the meaning of austerity. She felt their spending priorities were all wrong, remarking on their use of tax payers dollars to hold book competitions.
In response to the baroness’s remarks, Lucas asked, “British businesses are blighted by the literature party?”
“It’s typical of their enthusiasm for spending,” replied the baroness.
Conway took the question in a different direction saying that there were some fundamental problems. He said the problems were reflexed in the fact that the EU was created to check the Nazi party’s power but now, due to the euro, there was a Nazi party in Greece with a sizable number of parliamentary seats.
The discussion concluded with a question on the distribution of the prosperity in the UK being that the northern regions are still struggling economically.
“I think it is wrong to say that the north is not prosperous enough,” said Johnson. He did admitted that London is a “mountain that attracts talent and investment” but government subsidies for the north were not the solution.
Conway affirmed it was important to think about which part of London could be safely redistributed without major economic impact and suggested, “I would move all MPs and the House of Commons to Leeds."
James Barty's interview
to read more about the 2014 Prosperity Index.