Fear of failure is holding British entrepreneurs back

Too many aspiring UK entrepreneurs believe they are doomed to fail before even starting a business, a new report finds

It takes great courage to start a business. Often, it means leaving a job with a guaranteed income, holiday allowances and welfare contributions. It is hardly unsurprising then that most people are afraid to make the leap and go out on their own – failure is often part of the job description of an entrepreneur. 

But this aversion to risk is especially bad in the UK. As our latest report from Onward ‘The British Entrepreneur’ reveals, those citing a fear of failure preventing them from starting a business is some 20 per cent higher than the rest of the world. And this problem has been growing over time: the share of people reporting such fears has increased by 60 per cent in the last two decades. 

The foundations of this unique British fear of failure are cultural. In the US, the “American dream” pushes the desire of those with business aspirations to take that first leap. But in the UK, too many aspiring entrepreneurs believe they are doomed to fail even before they begin. The cultural aversion is best seen through the difference between American and British graduates’ career choices. Just five British universities make it to the list of the top 100 universities for producing successful entrepreneurs, compared to twice the number from California. 

The fear is also reputational. In one of the focus groups we conducted of aspiring entrepreneurs, a highly skilled lawyer with ambitions to set up a business said, “I always think about what will happen if I fail. I’ve got a good reputation in what I do now and what I’ve done in the past. But if I go into something and realise this isn’t exactly working out, then what is everyone who knows me going to think of me?” Even those who start their businesses are too happy to keep them small: our polling also found that over a fifth of entrepreneurs said they were not interested in growing their businesses.

Over a fifth of entrepreneurs said they were not interested in growing their businesses

Yet it goes beyond individuals and how they feel about businesses. Britain’s wider economic environment is pulling down potential entrepreneurs. The Covid pandemic and Russia’s invasion of Ukraine created a general air of economic doom-and-gloom, further exacerbated by the impending threat of tax rises in next week’s Budget. The economy is the top reason entrepreneurs say that they’re afraid their businesses might fail.

Rewards for risk-taking

Some economic factors specifically are increasing the risk. Rejected from mainstream banks and faced with the highest new business interest rates in the last decade, aspiring entrepreneurs are digging deeper into their own pockets to finance their plans. Onward’s polling found that losing money ranks among the top three reasons entrepreneurs were scared their businesses would fail, and it seems this is only getting worse. 

Despite public pledges about the importance of small businesses, successive governments of all political hues have not been the most supportive of entrepreneurs. During the pandemic, over a million self-employed individuals were left with no self-employment support because of an HMRC failure to hold the information to determine whether or not they were self-employed. 

Next week’s Budget risks quelling the entrepreneurial spirit further. The government is expected to abolish Business Assets Disposal Relief (BADR) – an incentive that currently rewards risk-taking entrepreneurs on the sale of their business. The government’s own assessment found that the Employment Rights Bill will cost businesses an extra £5bn each year, hitting SMEs particularly hard. 

Few will dispute that risk-taking entrepreneurs drive innovation, create jobs, and unlock new markets. Their bold ventures grow the economy, and any government serious about growth should take some simple, easy steps to empower entrepreneurs and make Britain the entrepreneurial capital of the world.

Shivani H Menon and Andrew Barclay are authors of Onward’s new report The British Entrepreneur, published this week