Why the government is failing the North’s start-ups

Posted on May 4, 2021

The North

Credit: Peter Hall, Unsplash

Marcus Gibson

By Marcus Gibson, Gibson Index and ex-FT tech correspondent

Are Northerners the ‘British Uighurs’?

For decades the South of England has enjoyed plentiful spending, the rise of huge and profitable services industries, and generous spending on transport and infrastructure.

By contrast, English people living in the North can be compared – in terms of low economic support – to the isolated ethnic group in the far west of China that is permanently cut off ‘in detention’.

While the Government has spent billions in the South on the £100bn+ HS2, Crossrail, the Southern mainline commuter lines and soon, Heathrow airport’s expansion – the North’s train network, especially its vital west-east links, has scarcely progressed in three decades.

The gulf in spending extends to investments in SMEs. After four years in operation the Northern Powerhouse Fund had invested just £273m in 1,068 Northern-based SMEs. This is a modest start – but it is not nearly enough.

An example of what can be achieved can be seen at the Powerhouse-backed utilities software company Everflow. By April 2021 the well-managed Wynyard-based firm had grown its workforce from four to 85 in only three years, said its CFO James Cleave.

Most finance schemes, both state and private, involves learned managers or academics making their choice of which SME should receive the grant or finance. Invariably this self-regarding elite makes safe choices.

What the UK, and especially the North, really needs is the reverse: an Applied Research Fund that allows SMEs themselves to set out their own priorities for new product development, and for them to select the academics they want to assist them. Such a fund would break new ground in putting UK SME requirements first and foremost, unlike the often obscure funding calls imposed on small businesses by Innovate UK and UKRI.

The grants’ handout by Innovate UK, the government’s innovation agency, are concentrated funding heavily to the South East – in recent years the North West has received only 5% of total funding, and Yorkshire-Humberside only 6%. Only in 2015 was a single Catapult centre sited in the North after 13 had been built in the South.

In total, it is likely the North has been robbed of around £1 billion in funding if its fair share of funds had been allocated by Innovate UK, and its predecessor the Technology Strategy Board, which was started back in 2007. Headquartered in Swindon, Wiltshire, Innovate UK should move to a Northern base, best of all, to Merseyside, the region most likely to benefit from Brexit.

While no industry in the South is hampered or discouraged by the UK Government – the naturally successful sectors in the North – heavy engineering, manufacturing and traditional-based energy – attracts nothing but scorn, restrictions and killer regulation. Government plans to impose a ‘green energy’ economy on to the North will be disastrous – though the Tories seem blind to this outcome.

Fracking has not just transformed the US economy through fuel self-sufficiency, a gain of some $1.5 trillion, it has dramatically boosted the fortunes of the once declining US chemicals industry by enabling it to defeat competition from low-cost manufacturers in Asia. Its fuel costs were more than halved by fracked sources of energy. For the UK North, such benefits are both identical and undeniable. Many thousands of US family-owned, innovative start-ups have succeeded in getting their products into the fracking supply chain. Many have played a key role in creating third generation fracking – which is far more environmentally friendly, and popular – than wind or solar farms, which can’t be recycled, and supply tiny amounts of energy.

One drilling company has offered a gift of £65,000 for all households within a 10km range of a fracking site. While fracking is all but banned up North – the Wytch Farm oil field in Dorset has been safely and unobtrusively been producing without a single incident since 1979.

No wonder there is growing anger about the continuing favouritism by London government agencies to those in the South. One day, the North’s Uighurs may start to rebel – and I for one hope they do.

Marcus Gibson, an ex-FT tech correspondent and columnist, believes the UK’s SMEs are utterly essential to any future revival of the economy, especially outside the South East of England. His index of UK SMEs profiles thousands of the best companies.

www.gibson-index.com

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