James Caan has the ear of government and intends to use it. The entrepreneur and investor talks new enterprise initiatives, re-engineering companies, and why he loves his workaholic existence
James Caan’s meeting with Growing Business was sandwiched by the end of Dragons’ Den series eight filming and the emergency Budget on one side and his scheduled meeting with the country’s new business secretary Vince Cable on the other. It’s late on a balmy Saturday afternoon and the widescreen TV is showing the World Cup in his office. He’s on good form and eager to share his thinking on the economy, if not the details of his much-publicised non-dom spat with Duncan Bannatyne. It couldn’t have been stage-managed better if they’d tried though, he admits. But this is a mere footnote to our discussion. Given Caan’s profile there’s little point recycling his career potted history here. You’ve probably read it all before and can visit Wikipedia or his own site for the life and times of Alexander Mann, Humana International and Hamilton Bradshaw Private Equity, his Dragons’ investments and countless philanthropic and governmental roles. Instead, we want his take on the here and now, solutions and the prospects for entrepreneurial businesses amid continued economic turmoil. On with the interview:
Did the Emergency Budget go far enough for entrepreneurs?
The context is UK Plc has borrowed £925bn and it has a £155bn deficit. But there is a lot more the government could do to support entrepreneurs, such as releasing more capital to businesses, and more in terms of tax breaks.
Where’s economic growth going to come from?
Over the last 40 or 50 years, there are three sectors we’ve relied upon for growth. The corporate sector: they’ve all got too much debt; their cost base is too high. I don’t see a lot of growth there. The public sector: 750,000 jobs are going to go, so I clearly don’t see any growth there. That leaves us with SMEs. It’s a sector that’s innovative, creative, and creates jobs. That’s the focus I think the new coalition should have.
In which area do you feel Osborne missed a trick?
The only area I would have liked to have seen a contribution was where the entrepreneurial market typically goes in this country when it wants to start a business and needs funding: friends and family.
What do you suggest as a solution then?
We have no venture capital community. The banks won’t lend to start-ups because they won’t take the risk. There should be an opportunity here where we should provide something like we do for charity. If you and I give money to a charity, we can reclaim tax relief and the charity receiving it would reclaim tax. My question is: why wouldn’t we do that for entrepreneurs, especially in a high-rate tax environment?
So how would your proposal work?
If you’re earning £150,000 to £200,000 a year and someone you know comes up with an idea, generally speaking you’re in a better position to invest in that person than I am. To create an environment where angel investing becomes vibrant, attractive and worthwhile could do a lot. What’s the downside?
You’re talking about another form of Gift Aid?
Yes, but you’d call it Investors’ Relief. It’s not giving money away; it’s not charity. It’s not a gift. An angel investor wants something in return. You could create a structure that says: ‘To the extent I invest in you and I claim back tax, that is a recorded transaction.’ At the point of reclaiming the tax relief, the government gets you to sign an indemnity to say that when you get the first dividend a repayment mechanism is triggered.