Anne Morris | Managing Director of DavidsonMorris
The recent government announcement that a new U.K. Start Up Visa is to be introduced next spring comes as welcome news for the U.K. economy.
With the aim of stimulating growth and innovation in U.K. PLC, the new visa is designed to entice more non-European individuals to come and set up enterprises in the U.K. through relaxed eligibility criteria.
Global Britain — the place to be for startups
As a destination for entrepreneurs, the U.K. remains an attractive proposition — political stability, language advantage, generous entrepreneurial tax breaks and all the trappings of an established, robust economy. We are an incredible hub of activity and extremely well positioned for access to global markets.
Despite the appeal, under current immigration options, securing a visa to start up in the U.K. is harder than it needs to be.
The main entry route for entrepreneurs, the Tier 1 Entrepreneur visa, has a 48 percentapplication refusal rate, largely because of the visa’s strict criteria, which can be difficult for startups to satisfy. The financial requirement to invest a minimum of £200,000 can be particularly prohibitive for applicants at the startup phase. It can also be difficult for business owners to give the application their full attention, applying in haste and omitting mandatory documents or information.
As an alternative route to the U.K. market for entrepreneurs, the new Start Up Visa signals a more pragmatic approach to immigration policy by the government, allowing the U.K. to benefit from the valuable contribution of foreign startups through job creation and tax revenues, and countering concerns about increases in outbound investment leaving the U.K. economy.
The new visa will be open to a greater pool of talent than is presently eligible (including those without university degrees), and should address concerns about arbitrary eligibility criteria and how the applications should be assessed.
From my own experience of helping foreign entrepreneurs come to the U.K., I know firsthand the challenges and frustrations of applying for a U.K. visa to set up a business here. This new route offers an opportunity to address many of the criticisms of current U.K. entrepreneur visas, making the U.K. more accessible to foreign startups.
Improving on the current entrepreneur visa
Currently, foreign nationals looking to start a business here apply under the Tier 1 Entrepreneur Visa, or the Tier 1 Graduate Entrepreneur Visa if they hold a university degree.
In 2015, the Migration Advisory Committee (MAC) carried out a review of the Tier 1 Entrepreneur visa, concluding, among other things, that the decision-making process for the visa was in need of reform.
When assessing entrepreneur applications, Home Office caseworkers must, among other eligibility criteria, assess the viability of each applicant’s business plans using the “genuine entrepreneur test.” If the caseworker considers the business is unlikely to be successful, the application will be rejected.
The applicant has to convince the caseworker through her application documents and the visa interview that the business is going to work and that she has the relevant qualifications and experience to make it a success. This makes it extremely difficult for individuals who want to pursue an opportunity in an area that’s unproven or completely new to market.
The question here is whether Home Office caseworkers are best placed to predict the future success, or failure, of a business. Which caseworker would have, or would reasonably be expected to have, the foresight to see the potential for an online bookstore that would revolutionize retail? Or for charging people to sleep on your sofa?
Caseworkers are relying on scripts when interviewing applicants to apply the genuine entrepreneur test. It’s an approach that has come under court scrutiny for being too rigid and arbitrary, preventing interviewees from fully expressing themselves and explaining their circumstances in more detail, again contributing to high application refusal rates.
The MAC’s 2015 report called for reform of the current entrepreneur visa application process by exploring “alternative delivery options for the genuine entrepreneur test.” The point was clear: Business viability and entrepreneurship are better assessed by industry, not public servants.
The Start Up Visa picks up on this exact recommendation.
As with the Graduate Entrepreneur visa, Start Up Visa applicants will first have to be endorsed by an approved body before they can apply to the Home Office for their visa. The list of approved endorsers will include business sponsors and accelerators, as well as universities. It’s a more pragmatic approach to ensuring applications and business plans are being considered by qualified parties, and based on the credibility of the individual applicants and their business ideas, rather than arbitrary requirements.
It is of course only right that the Home Office exercises full scrutiny when assessing visa applications and eligibility. We get that the Home Office will want and need to police the new route. It’s a matter of changing dogma: granting businesses the opportunity, supporting them as they embark on their enterprise and checking in on them at appropriate junctures.
The Home Office has it within its discretion to put such safety nets in place. If this visa is looking at startup entrepreneurs as high risk, why not grant the visa for only two years, which is less than other Tier 1 visas? Extensions at the two-year stage will allow the Home Office to monitor the businesses and take action if it’s not satisfied that they remain eligible.
Implications of the new startup visa
The new visa undoubtedly creates a huge opportunity in the U.K. to welcome more foreign entrepreneurs. More than this, taking a long-term view, it will also be an ideal platform to stimulate economic growth and build a sustainable ecosystem of U.K.-based, high-performing enterprises for wider economic benefit.
I expect the visa to come with additional support for startups, with access to mentoring and established business networks. The vision should be to create a real community built on collaboration and innovation.
Singled out as a key beneficiary of the new visa is the U.K. tech sector, with more startups adding to current momentum under the government’s Digital Strategy.
Having already benefited from the relaxed immigration rules under the Exceptional Talent Visa, London has become a global tech hub, housing large, global tech companies — Microsoft, Facebook, Google. Britain enjoys a thriving startup and VC scene, attracting significant levels of foreign investment.
By making it easier for foreign businesses to set up here, the government is enabling post-Brexit U.K., distinct from the EU, to remain attractive to global startups.
Amazing ideas know no boundaries and are no longer country-specific. Anyone with an idea and passion to spend time and effort can build something and our immigration rules’ only objective should be to initially attract and then fully support future Elons, Sheryls, Jeffs and Marks. The Start Up Visa has the potential to do just that.