Strategy games
Why immigration must be a core part of Britain’s Industrial Strategy
Welcome to the first of our three-part deep dive into our latest report, Job Creators 2024 – in which we revealed that 39% of Britain’s 100 fastest-growing companies have a foreign-born founder.
What links the artificial intelligence pioneer DeepMind, fintech trailblazer Monzo and dining game-changer Deliveroo? Well, quite a few things as it happens. First and foremost, they’re all highly lucrative and innovative businesses. Second, they’re all headquartered in the United Kingdom. Third, they were all founded by someone born overseas.
At The Entrepreneurs Network, we’ve long championed policies to make Britain more open to international talent. Over the past ten years, we’ve engaged with more than our fair share of immigrant founders and startups dependent on bringing in gifted individuals with globally scarce skills. Our research findings have been echoed repeatedly through the halls of power – including Numbers 10 and 11 Downing Street – and, while we’re not usually ones to pat ourselves on the back, we’re quietly confident that we’ve nudged the dial in a more positive direction for Britain’s entrepreneurial ecosystem.
With all that being said, we’re not oblivious to the current state of debate. Immigration has shot back to prominence in recent months and years, and not always in a welcome way. July’s general election made it clear that a large proportion of the electorate are unhappy with how immigration is being handled – and before that, the previous Conservative Government had begun to erect higher barriers to reduce the number of people coming to Britain to start a new life.
Against this backdrop, we believe it’s hardly ever been more important to make the case for high-skilled immigrants – highlighting the expertise, investment and entrepreneurial drive they so often bring with them. For our long-term economic and strategic success, it’s essential that Britain has an immigration architecture that enables talented individuals to put their skills to best use within our shores, rather than outside them.
It’s in this context that we are publishing the latest instalment of our annual Job Creators report, in which we reveal the proportion of Britain’s fastest-growing companies that have a foreign-born founder or co-founder. This year, the rate stands at 39 of the top 100 businesses – exactly the same as it was last year, but fully ten percentage points lower than when we first ran the analysis back in 2019. (Once you’re done reading and sharing this post, you can view the report in full by clicking here.)
Regardless of the direction of travel, what’s abundantly clear is the disproportionate positive impact immigrants have at the pinnacle of Britain’s entrepreneurial pyramid. Though foreigners comprise around 15% of the population, they account for more than twice that amount when it comes to founding our fastest-growing companies.
As with previous years, in this latest report we also make proposals that the Government could adopt to make Britain an even more attractive destination for talented immigrants. In this short Substack series, we will explore those ideas in more detail.
Before jumping into the first of those, all that remains is to express our gratitude to Fragomen for partnering with us on this year’s report, and for Beauhurst for once again supplying us with the underlying data. Without their generous support, this research would not have been possible – thank you.
Sir Keir Starmer became Prime Minister with unenviable timing. No sooner had he got his feet under his desk than the summer recess began, with newly sworn in Members of Parliament scurrying off on their holidays. But with business returning to the Commons next week, at long last the Labour Party can properly get to grips with governing after a period of more than 14 years out in the cold.
One idea that is set to return with prominence is a tight embrace of industrial strategy. Whether or not the previous governments had industrial strategies is up for debate. Some would argue yes, others no, and others still that the question rather misses the mark. Perhaps the best way to conceptualise ‘industrial strategy’ is to think about it like the weather – it’s never not there, but it can be good or bad, intense or gentle, and the answers to each of those will very much depend on who you’re asking. But what is clear is that this Labour Party firmly believes in using the weight of government to actively pursue specified ends – or ‘national missions’ as they would say.
To a large extent, this pivot simply brings the UK more into line with the likes of the European Union and the United States, each of which have had a decidedly more interventionist approach to stewarding their economies since the end of the pandemic. President Biden’s two signature pieces of legislation – the CHIPS and Science Act and the Inflation Reduction Act – have catalysed domestic manufacturing, while the EU’s Net-Zero Industry Act aims to bolster resilience in critical climate technologies.
Yet whether the UK can simply copy and paste the approaches taken by their European or American allies is questionable. Starmer and the Chancellor Rachel Reeves have themselves done their level best to roll the pitch for a less than munificent approach to near-term spending. Any carrots that the British state will dangle in front of firms to encourage them to do more within the UK promise to be few and far between, at least until growth meaningfully picks up.
This needn’t render the industrial strategy renaissance as all talk no trousers, however. The fiscal constraints the Government finds itself in mean it should pursue other avenues to growing strategically important sectors, and one which could prove to be particularly fruitful is immigration reform. Many of the levers that could be pulled on here are essentially cost-free, but could nonetheless prove decisive in enabling the UK to get ahead in the global race to corner key, emerging sectors like AI or life sciences. At the end of the day, you can offer all the subsidies in the world but if you don’t have the people in place to make use of them, little else will be accomplished.
To that end, where best should efforts be focused in crafting an immigration system more attuned to the goals and ambitions that Labour have set out?
They can start to build the future by looking to the past. Following the Second World War, the US initiated Operation Paperclip – a secret intelligence programme in which thousands of scientists and engineers were recruited from Nazi Germany in a bid to tap their understanding of various fields, most famously aeronautics. The dividends this paid are now abundantly obvious – Werner von Braun, perhaps the most famous Operation Paperclip recruit of all, played a pivotal role in the design of the Saturn V rocket which would take mankind to the Moon. (Admittedly, Operation Paperclip wasn’t without controversy, given the backgrounds of the sorts of people the US was recruiting under it. Fortunately, that needn’t be the case for a revamped scheme this time around.)
There’s also precedent for talent poaching closer to home and even further back in history. As we noted in our essay collection The Way of the Future: “A similar approach [to Operation Paperclip] in the 19th century ensured that Isambard Kingdom Brunel was a British engineer, rather than a French, Russian or American one, because of the government’s active steps to recruit and retain the engineering talent of his father.”
We argue that the UK should replicate this tactic for today’s foremost scientists and other technically gifted individuals. A task force could be established – potentially sitting within an existing body such as the Advanced Research and Invention Agency (ARIA) – which endeavours to first identify extraordinary talent working on groundbreaking research, and then assist them to navigate the on-the-ground process of relocating to the UK.
A British Operation Paperclip could go a long way to boosting the likelihood that future technological breakthroughs take place on home soil. But there are other things we can do to ensure gifted foreigners don’t need to be actively sought out in the first place. Each year, thousands come to Britain on their own accord to study in our universities – but we don’t do the best job of retaining them once they graduate. Though the visa system does allow them to remain in the UK for two or three years, it could be made more generous for the most in demand graduates – such as those with STEM PhDs.
Currently, the points-based system fails to offer any practical benefit for the skills they bring. There are a couple of possible fixes here. One option is to set a point threshold which, once reached – often thanks to an advanced STEM degree – reduces visa costs for applicants. Another option is to offer STEM PhD holders Indefinite Leave to Remain upon completion of their studies. This would not only let us keep hold of more leading talent, it would also incentivise future geniuses to study in the UK as well.
Recent global events have cast a sobering shadow on our collective optimism. Geopolitical conflicts have flared up, scars of a global pandemic are still visible, and the impacts of climate change continue to mount. In response, governments around the world are investing in resilience by placing hopes in more active industrial strategies than we have seen for decades. How successful these will prove to be remains to be seen, but there are a smattering of ‘low-regret’ options that we can be confident will be positive. Chief among these is immigration reform.
Let’s face it, Britain’s allure on the world stage is nothing short of a superpower. We should recognise this fact as a blessing, not a curse, and pull out all the stops to enable top international talent to build the future here rather than elsewhere.
Thanks for reading! If you’d like to check out the research in full, you can find it on our website here, and stay tuned for the next post in this series, which will look at how we can fine-tune the immigration system specifically to work better for our country’s startups.