With London Tech Week upon us, Sajid Javid today announced the introduction of a new “start-up” visa route for entrepreneurs looking to set up businesses in the UK.

According to one part of the announcement, it will replace the Tier 1 (Graduate Entrepreneur) route from spring 2019, although another part of the press release refers to it as an expansion, rather than a replacement.

Return of the MAC

The exact specifications of the proposed route are not given, although it has apparently been designed “following advice from the Migration Advisory Committee (MAC) and feedback from the tech sector”.

You may recall that the existing graduate entrepreneur route came in for some flak from the MAC in a report three years ago, as did the main Tier 1 (Entrepreneur) visa.

The Tier 1 (Graduate Entrepreneur) route currently enables foreign national graduates to apply for an endorsement from an authorised UK university or the Department for International Trade (DIT) as part of the elite global graduate entrepreneur programme (Sirius).

What’s new?

The first big difference between the new proposal and what currently exists is that applicants will not have to be recent graduates (left university within the last two years, as currently required under the Sirius programme) in order to apply for endorsement.

The second big difference is that the group of entities which can endorse an applicant with a business idea is expanded from approved Higher Education Institutions and the government’s own entrepreneur programme, to “approved business sponsor(s), including accelerators”.

This would mark a further move by the Home Office towards the greater use of third-party endorsements in the immigration system, currently the model used for applications in the Tier 1 (Exceptional Talent) route.

The announcement also refers to making “the visa process faster and smoother for entrepreneurs coming to the UK” although no details are given on this.

But Sirius-ly

The existing graduate entrepreneur route does not require an applicant to show that he or she has funding available to invest in the proposed business idea, or meet any job creation requirements after the visa is granted.

This compares to the fairly weighty investment requirement for the main Tier 1 (Entrepreneur) visa, where £200,000 must be shown as available by the applicant. That falls to £50,000 if the funding is being provided by FCA-regulated venture capital, an approved seed funding competition or accelerator, or the DIT itself.

Tier 1 (Entrepreneurs) in the main category must also show that they have created two full-time jobs lasting 12 months each during the period of their visas.

The proposed new route makes no mention of either of these requirements, and based on this announcement one assumes that there will be no investment requirement, nor a job creation requirement to be met following arrival.

However, the original MAC report suggested that the accelerators – those “approved business sponsors” mentioned in the press release – should have to put a certain amount of cash into the start-up:

Accelerators should be required to provide a minimum investment, perhaps somewhere in the region of £20,000 to £30,000, usually in exchange for equity in the business to ensure that they are suitably incentivised to select only high potential entrepreneurs.

So this may be something which the government insists on down the line when more details are released, when it’s not London Tech Week. (We asked the Home Office about this and were told that further details will be released in due course.)

If this particular MAC recommendation is followed then this “new” route will be very similar to the £50,000 Tier 1 (Entrepreneur) route, where endorsement is (effectively) sought from venture capital, the DIT, or seed funding competitions, but with a slightly lower investment threshold and perhaps without the job creation requirement.

Does the UK need another entrepreneur visa?

The issues with the main entrepreneur route, as set out in our detailed Tier 1 (Entrepreneur) explainer, are that in most applications civil servants are deciding what constitutes a solid business idea, the documents required to prove availability of investment funding are too prescriptive, and a stubbornly high refusal rate of 50% reflects this.

The problem with the graduate entrepreneur route, on the other hand, is that nobody uses it. There have been fewer than 900 applications in the past five years since the route opened. This is some way below the “cap” which the government initially introduced of 2,000 per year. Unlike the main entrepreneur visa, though, the average refusal rate (after endorsement) is about 5%.

Will this new route increase the number of entrepreneurs applying to come to the UK and set up businesses?

If all the government wants from the approved business sponsor or accelerator is endorsement of the idea in the same way that universities currently do for graduate entrepreneurs, then almost certainly.

But if the business sponsor is also required to front-up £20,000-£30,000 and invest in the enterprise, as suggested by the MAC, then one imagines that this will reduce the numbers who might otherwise be endorsed on the basis of a bright idea alone.