importance of STEM skills
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Mark Brownridge, Director General of the Enterprise Investment Scheme Association (EISA) highlights the importance of STEM skills for the future of the private sector and how to close the current gap, here

We are entering a time of significant technological, economic and societal change and as we enter the ‘Fourth Industrial Revolution’, STEM skills are going to be more important than ever in driving the UK’s private sector forward. Science, Technology, Engineering and Maths skills are key to the advancement of the world of business in future and are likely to be the foundation of some of the highest growth businesses.

The UK is positioning itself as a hotspot for start-ups and unicorns, with a growing amount of support both from the Government and private investors. This is reflected in support for schemes such as the Seed Enterprise Investment Scheme which acts as a tax efficient way of supporting business at the very start of their journey.

Unicorns are the popular name for startups that have eclipsed a valuation of $1 billion (around £720 million). They’re companies making the impossible seem possible, acting as disruptors in their fields. They are often based upon technology that solves problems existent in sectors that require innovation to set businesses apart from the competition.

London is the home to 36 tech unicorns, but cities outside the capital are also competing with some of Europe’s biggest metropolises. Oxford and Cambridge combined have produced more unicorns than either Berlin or Paris, while the five that can be found in Manchester matches the number of them in Amsterdam.

Securing funding as a start-up is often one of the biggest challenges that new businesses face in the primary stages of set-up. Not only is it often difficult to secure the funding itself, but it is also even more so when trying to get the right kind of funding for what the specific needs of the business are. Having structures in place to make it as easy as possible for innovative ideas to flourish and become fully-fledged, is not only to the advantage of entrepreneurs and innovators. It is also key to the Government’s plans for strengthening the UK economy. SMEs makeup 98% of private sector businesses and contribute £1.9 trillion to the UK economy and so allowing this sector to grow and bolster its numbers is absolutely key to the future.

One of the routes that allow this to happen in the UK is through the Seed Enterprise Investment Scheme, which offers investors tax reliefs in order to offset the higher risks involved in investing capital into start-ups. SEIS represents an alternative to start-ups from traditional finance routes such as banks that may not be willing to lend. This is especially useful for those of the small businesses that base their proposition on intellectual property as opposed to physical assets or products. These IP rich companies often have trouble finding support without physical collateral to offer as security.

Individuals looking to invest through SEIS can then make decisions based upon individual cases and potential rather than being held back by regulation or corporate policy. Of course, the risk still exists but with tax and loss reliefs, it is much more likely that the risk will be seen to be worth it in the eyes of an investor. Getting ideas off the ground is arguably the most important part of encouraging new businesses and creating new jobs as they grow and expand.

Another way that the Government supports STEM businesses is through the new Enterprise Investment Scheme fund structure. The fund focuses on knowledge-intensive small businesses and is to be introduced in 2020. The new fund structure will require 80% of funds raised by the scheme to be invested into knowledge-intensive businesses. This new fund structure will serve as a huge boost to innovative businesses nationwide. It will help to strengthen a sector that is already setting the global standard for creativity and new ideas, of which many may have an effect on the future of the global economy.

A skills gap in STEM subjects puts at risk the ability for those businesses with fantastic ideas to grow to their potential, the shortage is costing businesses £1.5 billion a year in recruitment, temporary staffing, inflated salaries and additional training costs. These extra costs and lack of specialist skills are likely to stifle the growth of start-ups as well as more established businesses.

For investors looking into a business looking for investment, it is clear that the proposition of the company along with their finances will make up a large portion of the research. However, it may be that in future, for businesses based on science, tech or engineering there is a greater emphasis on the skills needed to grow the business in future.

One of the ways in which this skills gap can be bridged is by businesses themselves. Companies can help by engaging with kids at a younger age. Increasing the number of visible role models in senior roles in science, technology and engineering companies will make these sectors more attractive. Further to this the amount of funding for these subjects in terms of education and training needs to be increased, with education at grassroots level being key to encouraging more people to study STEM at university and carry this on into their careers.

The next step in solving the problem is to encourage more women to have careers in technology-based sectors. It has long been known that there is a significant gender gap in this field and fostering greater equality in this respect will make a huge difference in the skills gap. This is something we have been working on at EISA in the investment sector with a focus on encouraging female founders and investors.


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