The United States stands head and shoulders above of all other countries when it comes to entrepreneurship. While the United States ranks 1st on the Global Entrepreneurship Index (GEI) the United Kingdom ranks 4th. However, the United Kingdom has made important progress over the past decade moving from number 13 to number four. Moreover, it ranks number one in Europe and London ranks number 2 in European cities just behind Copenhagen. What would it take for the United Kingdom to take over the next three spots: Australia, Canada and the United States on the GEI in the next five years?
The United Kingdom would have to move up almost 12 points on the GEI to overtake the United States and five to overtake Australia. However, if it continues its ascent of the last five years it might to able to become the most innovative and entrepreneurial country in the world.
What is the unique strength of the United Kingdom that has allowed it to move into the first ranks of entrepreneurship? It is in our opinion the unique position of London as the ‘capital’ of Europe and one of the two most successful cities in the world. London’s leadership comes from at least three advantages: education, immigration and density. First, London is a magnet for entrepreneurial talent from all over the European Union. Almost half of Londoners were born outside the city. Second, the density of the city makes it an ideal ecosystem for high growth entrepreneurial startups to assemble resources. The more dense a region the easier it is to assemble resources for startups. Third, greater London boasts some of the finest knowledge institutions in the world with four of the top twenty in the world: Imperial College, University College London, Oxford University, and Cambridge. Neither Australia nor Canada has a London, though Toronto is an important global city.
So what will it take for the United Kingdom to become number one over the next five years? Looking at the United Kingdom we see that its institutions are much stronger then the individual indicators. So the focus of improving the entrepreneurial ecosystem has to focus more on people then on institutions. When we look at society’s attitudes towards entrepreneurship, individual abilities to start firms and the aspirations of entrepreneurs to create something of great value what we find is that the United Kingdom compared to the United States, Canada and Australia ranks on par with these countries in entrepreneurial abilities. So it is not a lack of abilities that will decide its future.
However, when we look at societies attitudes towards entrepreneurship the gap with the leaders widens. And when we look at the aspirations of U. K. entrepreneurs their aspirations are a full 20 points below the United States. Moreover, it ranks number 17 in aspirations globally well behind countries like Singapore, United Arab Emirates, Israel, France and Germany!
The aspirational deficit in the United Kingdom is unacceptable for a country that wants to be a global leader. The problem is that in a country where a billion pounds is viewed as a birth right by many the aspiration to create a billion dollar company does not resonate for the best and the brightest. The aspirational deficit is pervasive and tightly structures not random. The country has a deficit in product innovation, process innovation, high growth companies, internationalization and risk capital. While other countries in this neighborhood will have some strong and some week pillars in their aspirations the United Kingdom’s pillars are all bunched together as if policy is in fact stacked against scaling and creating billion dollar companies. If the United Kingdom and London can reform capital markets, increase innovation and become more global it can climb into the very top ranks in the GEI.