It has been a dramatic two weeks for the UK as we now wait to see what will happen following the vote to leave the European Union. ISBE has been keeping a watchful eye on events and we will continue to share our reflections with our members and wider network as future steps become clearer.
ISBE is delighted to welcome members from across the globe, and as the worldwide impact of such significant events unfolds in Europe, our priority continues to be supporting our membership throughout the world with their small business and entrepreneurship research, policy and practice.
We asked members of the ISBE Executive to share their initial thoughts about the impact of the Brexit vote, and to reflect on how future changes might affect the Institute’s stakeholders, both in the UK and further afield.
Professor Pauric McGowan, President of the Institute for Small Business and Entrepreneurship
Professor Nigel Culkin, Academic Co-Chair, 2016 Conference of the Institute for Small Business and Entrepreneurship and immediate past President of ISBE
As one could have predicted, the referendum result has thrown up a lot more questions than answers, many of which will take years to resolve satisfactorily. There will be many difficult issues to be determined about the economy, immigration, and future security arrangements between a separate UK and the other EU member states and, as matters start to unfold, even regarding the integrity of the UK itself.
For Institute members, additional questions arise about a) the status of research funding opportunities originating from the EU; and, b) the potential impact of the decision on future student and staff exchanges between the UK and colleagues in the EU Higher Education sector. Questions too may arise about the implications of the BREXIT decision and the conceivable turmoil it has created for the introduction of the Teaching Excellence Framework (TEF). ISBE, as a community of educators and researchers of entrepreneurship, with close ties with small business practice and those forming policy in support of greater entrepreneurship, has a particular concern in how this exit will impact on those relationships and research prospects. This interest is sharpened because a significant number of our members comprise of colleagues right across the EU and indeed beyond.
In academic year 2014/15, UK universities received €995 million in subsidies and research contracts. Some universities in the UK are reported to be facing possible losses in funding of up to £36 million; while Scottish universities benefit to the tune of £94m of research income every year from EU resources, income that might now be jeopardy. The stakes for the UK are high. Five per cent of total enrolments in UK universities were European, enjoying the same fee structure as UK students. Fifteen per cent of academic staff in UK universities come from other EU countries, according to Universities UK (UUK). The immediate challenge for HEIs is to make students and staff continue to feel welcome and secure, and to resolve the issue of tuition fees quickly. The UK too must move to renegotiate arrangements under which over 200,000 UK students currently engage with the ERASMUS programme. We echo the view of the UUK in their call for immediate steps to be taken to secure ‘Associated Status’ for the UK in the EUs research-funding programme, thereby protecting access to Horizon 2020 opportunities.
In light of the UK’s decision, the Institute is committed to representing the interests of its members through these turbulent times. This year, our annual conference will take place on the 27th and 28th of October at the Novotel Paris Centre Tour Eiffel, co-chaired by Professor Alain Fayolle from EM Lyon and Professor Nigel Culkin, University of Hertfordshire and immediate past-President of the Institute. It promises to present members with opportunities to review some of the key implications of BREXIT for the UK and for relationships with EU colleagues. The conference is one aspect of your Institute’s calendar. Members are urged to access the ISBE website (www.isbe.org.uk) for details of other important workshops and events around BREXIT and other key topics in this space.
Anthony Wall, ISBE Treasurer
There is a lot of volatility in the various markets at the moment, which is mainly being caused by uncertainty. The major uncertainty being what sort of trade deal the UK is going to get. This was an issue that the Leave campaign deliberately obfuscated and the Remain campaign should have made far more of.
If the UK goes for the much talked about Norway deal, i.e. remains a member of the European Economic Area, it will have to pay 85% of its current contribution and accept EU legislation, including the free movement of people. However, as a non-member of the EU it will have no say in any legislation. Its main other option is to agree separate trade deals under World Trade Organisation arrangements, but this will lead to tariffs and other import duties being levied.
There is no way the EU will give the UK a favourable deal as this would encourage other countries to leave. It will take a really good negotiation team to hammer out some sort of deal, but there is no silver bullet. There is no doubt that the immediate economic prospects are not good, a weak pound means more expensive imports and higher holiday costs for anyone travelling abroad. The only benefit is that the UK’s exports will be cheaper.
Another misleading aspect of the Leave campaign was their statement that £350 million extra a week would go into the NHS if the UK left the EU. No wonder they distanced themselves from it the day after the referendum. Firstly it took no account of the money the UK receives from the EU and secondly it contradicted their promises to make up any grants that various regions of the UK were receiving from the EU. Hopefully, things won’t turn out that badly, but there are some tough negotiations ahead.
Professor Gideon Maas, Vice President Policy & Practice
We find ourselves in new unchartered waters after BREXIT – what should be done regarding policy and practice matters? We know that policy makers need to work through a number of documents over the coming years determining how and if they should be changed. But against what criteria should it be measured before any changes are made? What should we focus on as an overarching objective? That made me think – what do I want? Well, I want to live in a safe environment in which the rule of law is respected, have a prosperous life and retire maintaining a decent living standard. Granted, the way we want to achieve that may differ from person to person which does not make the one person right and the other wrong – but how many of you are trying to achieve the same? If that is the case, what do we need to achieve that? Certainly we need an environment where sustainable socio-economic development can be achieved. Therefore, we need a business world that is dynamic, we need an education environment that can provide the necessary skills to exploit opportunities, we need rule of law, and we need global partners who can assist us amongst other things. We are in a complex and networked society and know that we cannot achieve higher order goals on our own – we need a total eco-system that can assist us with that.
Let’s relate the above discussion back to policy and practice matters, especially from ISBE’s view. We want to engage from a positive basis with policy and practice officials and therefore would really like to have your views on two issues namely:
What do you as an individual want to achieve in life? What is your higher order goal? Why not write a short sentence or three to me in this regard.
What policy and practice matters should be addressed to create a sustainable socio-economic environment? Again, why not write a sentence or five to me in this regard.
I have lived in two countries where we went through major changes and the one thing that always worked is a decent and honest conversation around critical topics. Why don’t you help me to create such a positive narrative for the UK please?
Looking forward to your input and together, as ISBE members, we have the opportunity to provide collective input in creating a positive policy and practice environment.
Dr Kelly Smith, Vice President Education
As with many other areas, the potential impact of Brexit on small business and entrepreneurship education is largely unknown.
For over a decade, entrepreneurship skills training and start-up, growth and innovation support have been substantially funded through the structural funds such as the European Social Fund (ESF) and the European Regional Development Fund (ERDF). The amount of aid from EU structural funds earmarked for the support of SMEs during the last two programming periods (2000-2006 and 2007-2013) amounted to 23 billion Euro and 15 billion Euro respectively across all member states (10.1% and 4.3% of the total amount of structural funds available).¹
In March 2013, the Government estimated that the 2007-13 EU Structural Funds had helped create more than 50,000 jobs in the UK, assisted the start-up of more than 20,000 businesses and supported more than 1,300 research and technical development projects.² These figures will have increased by the end of the funding period. Examples of ERDF funded projects particularly relevant to entrepreneurship education include Rotherham Ready and Kirklees Youth Enterprise Centre for school and college-based entrepreneurship, and B-SEEN, North West Enterprise Champions, and the Graduate Entrepreneurship Project for higher education students and graduates.
Although there have been delays in distribution, England’s allocation of ERDF, ESF, and European Agricultural Fund for Rural Development (EAFRD) for 2014-2020 is 6.2 billion Euro. Northern Ireland has been allocated 0.45 billion Euro, Scotland 0.8 billion Euro and Wales with 2.145 billion Euro². The funds for England are allocated to Local Enterprise Partnerships (LEPs) who work closely with the Department of Communities and Local Government (DCLG). Calls for funding are linked to LEP economic priorities and have included support for SME growth, innovation support, and promoting enterprise and innovation in young people.
Structural funds are intended to strengthen economic and social cohesion in the EU by correcting imbalances between its regions (ERDF), and to improving employment and education opportunities and the situation of the most vulnerable people at risk of poverty (ESF). They are therefore channelled towards regions of most need. Paradoxically, areas with the most dependence on EU structural funds and who will be hit hardest by their loss were those most likely to have voted to leave the EU. Several regions have publically requested that loss of EU funds be compensated for after Brexit, however, the ability of DCLG or the Department of Business, Innovation and Skills (BIS) to ensure this is unclear given that they are not ‘protected’ departments under current UK spending review period and there will no doubt be similar calls to and across all areas of Government activity.
At the time of writing, no statement can be found on the DCLG website regarding the impact of the leave vote and the future of EU structural funds. Although very light on detail, there are some statements available with the following from the Business Secretary at BIS, Sajid Javid:
“…this government is still 100% committed to making the UK the best place in Europe to start and grow a business”.³
A new business engagement inter-ministerial group, chaired by Sajid Javid was also announced on 30th June. The group will bring together ministers from across government to coordinate engagement with the business community.4
Graduate entrepreneurship has long been cited by policy makers as a key driver in economic development. Currently, EU students and graduates are able to start up a business in the UK and receive support provided by their university in the same way as Home students. The Tier 4 Student visa required by the vast majority of International students studying in the UK explicitly excludes self-employment or business start-up; students wishing to start-up must wait until graduation to apply for a limited number of Tier 1 Graduate Entrepreneur visas sponsored by participating universities. Will EU students be required to apply for a Tier 4 student visa after Brexit? In addition to the potential reduction in EU students that this might cause, it is likely to impact on EU student business start-up in the UK.
A statement from Jo Johnson, Minister of State for Universities and Science includes the following: 5
“For students, visitors, businesses and entrepreneurs who are already in the UK or who wish to come here, there will be no immediate change to our visa policies.”
What happens beyond the ‘immediate’, or how and when we move from the ‘immediate’, is currently unknown.
The EU has been a great supporter and promoter of entrepreneurship education through policy development, case study collection and dissemination, and specific funding initiatives such as TEMPUS and ERAMUS for Young Entrepreneurs. Recent examples of relevant case study collections include Supporting the Entrepreneurial Potential of Higher Education 6 (SEP-HE) and ECO-System App, a ‘one stop resource centre for entrepreneurship educators’7; an ‘Entrepreneurship Competence’ framework has also recently been developed with input from experts from member states including the UK. 8 The UK is currently a key player in the development of EU-wide entrepreneurship education activity, both adding into the knowledge base, and actively learning from the experiences of other member states. Will our opportunities to engage and drive the agenda continue after Brexit?
On a personal note, I’ve been proud to watch and support many EU students and graduates as they explore self-employment and business start-up. I’ve also had the privilege to work with EU staff in UK higher education establishments who have added great value to the entrepreneurship education community. Long may this last, and rather than concentrate on potential losses at this moment in time, I will choose to hope that we can continue and potentially expand mutually supportive relationships with our EU and International colleagues.
2. https://www.gov.uk/government/news/allocation-of-eu-structural-funding-across-the-uk ￼
3. https://www.gov.uk/government/speeches/eu-referendum-result-update-on-support-for-business ￼
5. ￼ https://www.gov.uk/government/news/statement-on-higher-education-and-research-following-the-eu-referendum ￼
6. http://sephe.eu/home.html ￼
Professor Paul Jones, Vice President Research
We have to accept the result of the vote and make the best of things going forward. Considering the impact in terms of research there has been a gradual emergence of articles considering the likely impact of Brexit on research which includes concerns regarding research funding shortfalls and a brain drain of talent away from the UK.
Certain academic disciplines are particularly reliant on funding from the European Union. According to the Times Higher Education a number of UK universities are heavily reliant on European Union funding with over 70% plus of their funding derived from only this source.
ISBE itself faces challenges as the RAKE fund is part funded by the ESRC. These concerns are all valid and must be addressed in the long term. A key concern in the short term is the air of uncertainty although as I understand it, all European funding is protected up to the 2020 window. Thereafter, the UK government must look to inform the academic community regarding the funding alternatives that will be made available post-Brexit. Until these reassurances are received, significant concerns will remain, uncertainty will grow and academic staff will make their own decisions.