The Branson effect: Will the billionaire solve Liverpool’s deprivation?

The ‘Global Entrepreneurship Congress’ is in in Liverpool this week. Five thousand entrepreneurs, nascent and incumbent, striving and successful, will gather for a multi-day programme of evangelising and eulogising the process of creating, shaping and sustaining ‘the firm’. I’m finding it hard to get excited by it.

The right to host the congress no doubt cost a small fortune and Liverpool has also allegedly paid a sum in excess of £200,000 to have Richard Branson attend as entrepreneur-in-chief. In return he paid the city a compliment by calling it the ‘global capital for enterprise’. For several weeks Branson’s perma-smile has beamed from banners on lamp-posts across parts of the city encouraging Liverpool to choose the path of the entrepreneur. He did and he’s ‘loving it!’ I bet he is!

In hosting the Global Entrepreneurship Congress Liverpool will benefit from the visitor spend and it may receive a temporary boost to its ‘city brand’ – an attempt at ‘guilt by association’. City leaders would probably dismiss my charge, arguing that I’m missing the point – the reality is ‘guilt by aspiration’. But that doesn’t change the facts.

The back story to Liverpool’s ambition to increase entrepreneurship is that the economy has a long-run failure to create sufficient jobs for its population. Official figures show more than 30% of Liverpool households are without work. Young people without work is at an all time high, and in some neighbourhoods youth unemployment is greater than 50%.

Entrepreneurship is seen as a way of creating jobs from additional economic activity but also as a substitute for employment. However, as a publication from the New Economics Foundation ‘Filling the Jobs Gap’ demonstrated, increasing the start-up rate of firms simply increases the exit rates – there is a very small gain from a high-birth rate strategy.

Liverpool has fewer than half the number of enterprises per capita than cities in the south such as Brighton or Reading. The Centre for Cities found in its 2012 Cities Outlook report that out of 64 cities in the UK, Liverpool came 59th for enterprise density. The average firm in Liverpool has less than 5 employees, as far from the Branson model as you could imagine. In the latest official data available for the year to April 2010, Liverpool lost 2.75 firms for every one lost in the UK. The prospects for start-up are not attractive.

Professor David Storey, one of the UK’s most influential academics in the field of entrepreneurship, put the proverbial cat among the pigeons last year when he introduced his thoughts on the randomness of entrepreneurial success in a paper entitled ‘Optimism and Chance: The elephants in the entrepreneurship room‘. Storey suggests starting a business is like the ‘gambler’s ruin’ – the nascent entrepreneur starts out full of optimism and bets carefully, but as time at the table increases so does the chance of losing the shirt.

The paper is critical of entrepreneurship experts for focusing narrowly on firms that grow when the reality for most new firms is a short life of struggle followed by closure. Most firms don’t survive for very long; the majority close between 12 and 18 months after start-up. Then, by the fourth year of trading, more than half of all firms have closed. For those firms that do continue, contraction is more likely to be on the agenda than growth as the firm grapples with survival.

I don’t want to pretend there are easy answers to this conundrum, as there are not. But viewing enterprise development through the prism of the successful growth firms will not lead to growth in deprived areas. It’s a gamble, one that is not stacked in the city’s favour.

New firm growth cannot be delivered by aspiration alone. New firms are sprung to seize opportunity, which appears where demand is in existence. The entrepreneur must be connected to the network of opportunity to know it exists. This is why we have an enterprise gap – growth, demand and opportunity are out of balance in the UK. Adding more firms will not create demand or opportunity, but it might make things worse by encouraging uncreative destruction.

I’ve nothing against entrepreneurship. I’m a serial entrepreneur with a long record of failure at the start-up game interspersed with the occasional success. What I worry about is that policymakers continue to believe the hype and expect that aspirational entrepreneurs will solve economic problems and inequality with it. The current winner-takes-all model of enterprise leaves much to be desired in this regard. Branson is not a role model for solving the accumulated problems of Liverpool’s deprivation, he is the epitome of the culture that created it. So this week, as one of Britain’s wealthiest entrepreneurs gives us his self-help message – a peculiarly ironic statement in England’s most deprived city -, I’ll be taking it with a large pinch of salt.

Garry Haywood
Garry Haywood is a partner at So-Mo, a network development company, and a researcher on local economies combining an evolutionary and complexity based approach.


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Mike Southon
Mike Southon
12 years ago

First, a factual correction: Branson cost considerably less than the £200,000 you ‘allege’ – who told you that, or did you make it up?

Also, you fail to mention his fee goes not to him, but to Virgin Unite, his not for profit foundation, responsible for The Branson Centres in South Africa and Jamaica, amongst other things.

Were you there at the GEC, or just happy to make uninformed comments from afar?

Of course, I may have a different outlook, given that I’m Entrepreneur in Residence for The City of Liverpool and was Branson’s on-stage interviewer.

But if 3,000 people, the largest event *ever* for entrepreneurs, as well as the 60+ fringe events going on all over the City as I write this don’t get you excited, then nothing will.

I know it’s only my opinion, but I wouldn’t advocate you try entrepreneurship as a life option – you seem a ‘glass half-empty’ kind of person

Garry Haywood (@_garrilla)
Garry Haywood (@_garrilla)
12 years ago

Hi Mike,

thanks for your comment.

On the £200k fee. I heard that ‘rumoured’ a few of times, but I must admit the sources were pretty weak, including a bit of chatter on twitter and down the pub. It was a cheap shot, so I’m more than happy to be corrected and apologise for the tawdry nature of my introduction. In retrospect it weakened my argument.

I wrote the blog before the event – mostly on Sunday. But I can tell you then when I first heard about GEC I thought it looked redolent with possibilities. Then as time went by and I saw the programme emerge, I became less excited. On the day of the summit, I watched it live on the internet stream. And by the end of the day I still didn’t feel excited.
I have been to some fringe events though, including one early this morning that was really interesting. And I’m off to one in while too. And maybe some tomorrow and Friday. But mostly they didn’t excite me.

I’m a resident of the city too Mike. I live in Wavertree but I previously lived all over the south-end. I’ve been here for 25 years. For about 16 of those years I’ve either been freelance or running a firm. So I know the entrepreneur’s life all too well.

I’ve started 8 firms in my time, some with no success at all and the other with varying levels of success depending on your definition. Until last year I was a joint owner of company that had traded really well for 9 years, but you know what it’s like: market conditions change and the company ceased trading last February. But I’m quite resilient, I’ve bounced back.

In the intervening year I’ve set up a new firm and after a struggling start we got order books that will keep us going to about December of this year. As an entrepreneur you’ll know that’s a tough ask for any start-up so I’m made-up with our progress so far. And obviously, that’s just a start there’s plenty of room for us to bring in more orders between now and then to sustain the company and hopefully grow it a little.

I don’t know if the ‘glass’ metaphor is useful here, its crass dichotomy for such a difficult subject of making Liverpool a place that nourish all of its residents. But I’m resolute that positivity alone is not a sufficient antidote to the malaise that besets Liverpool. But I’ll work with the material I’ve got…

I remember seeing something on TV when I was kid. One person wrung out a sponge until they could wring nothing more out it. The sponge was passed on to the next person who would seemingly be able to wring a tiny bit more out. And the next person would so the same. And although they eeked out every last drop out of that sponge, it wouldn’t have filled a glass to halfway.

The Business community and Liverpool Vision have done a great job in challenging circumstances works its socks off to wring that sponge dry. I know this. But Liverpool’s problems are deep and structural and sometimes the ambition and the reality seem so misaligned.

The ‘excitement’ about GEC2012 was one of those moments. On the whole its felt very ‘tickle-down’ and, like or not, I’m very ‘bottom-up’.

I’d love to discuss this more with. Here or over a beer sometime?

Again, thanks for your comment and my sincerest apologies for the cheap shot.

Best wishes


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