The Home Office’s new innovator visa went live, in terms of being incorporated into the Immigration Rules, on 29 March 2019. Unfortunately, almost a week on and it’s still anything but live for those hoping to make an application.

CJ has been looking into the role of the organisations approved to endorse innovator visa applicants and it’s not comfortable reading. I’ll touch on that later but what I’m primarily focusing on is exactly who this new route is designed to attract, the key weaknesses of it and why an urgent rethink is needed.

Innovator visas now the main immigration option for entrepreneurs

The Immigration Rules describe the scheme in fairly simple terms: a category “for more experienced businesspeople seeking to establish a business in the UK” who have an “an innovative, viable and scalable business idea which is supported by an endorsing body”.

More information on what all that means is contained in the guidance for endorsing bodies.

Having replaced Tier 1 (Entrepreneur), the innovator route is now the primary immigration category for non-EU citizens thinking of relocating to the UK in order to establish a business, and remain here on a long-term basis to grow it.

In its immigration white paper, the government says that the route will also cover EU entrepreneurs from 2021.

There is a new start-up visa route but that’s only available on a temporary two-year basis. The individual has to then either leave the UK or progress to the innovator route. The start-up route is designed for less experienced entrepreneurs who may be keen to benefit from the help that incubators, accelerators and other mentoring programmes offer.

Other than that, the only other potential options for an entrepreneur seeking to bring their business idea to life in the UK are:

• Tier 1 (Investor) — for which the applicant needs to have a spare £2 million
• Tier 1 (Exceptional Talent) — restricted to globally recognised / emerging leaders from very specific fields

Where a business has already been established overseas or in the UK, the representative of an overseas business or Tier 2 routes could potentially assist, in very limited circumstances, but there are no other routes for an entrepreneur seeking to bring their brand new business idea to life in the UK.

What do global entrepreneurs look for?

People who have the skills to establish a successful business — who can meet market needs/creative competitive advantage, who can show evidence of job creation in the UK and the potential for growth into both national and international markets — are pretty serious entrepreneurs.

In its 2015 review of the entrepreneur visa route, the Migration Advisory Committee considered an entrepreneur as being:

an individual introducing a new idea or process into the market, taking a risk in doing so. An entrepreneur also contributes their labour; that is, they are actively involved in the day to day operations of their business.

These are exactly the kind of people the UK needs to be attracting — especially right now.

Lots of countries want to attract the kind of person described above, someone who can demonstrate that they have the ability to create jobs and opportunities for resident workers, suppliers, etc.

Such people generally have their eye on the future. Even if they don’t necessarily need/want to settle in their country of choice themselves, they may very well want that for their children. They look at countries that will provide them and their families, their business(es), their investors and partners, their employees, their suppliers and their customers with security, stability and opportunity.

The UK has generally been seen as a pretty safe pair of hands on these fronts (and will hopefully continue to retain that reputation once the current… situation is resolved).

A talented individual, when comparing the UK to other potential destinations, will also take a very close look at the potential risks. Is there anything obvious that may place them or their business at risk, either immediately or later on down the line?

This is where the cracks in the innovator route start to appear.

Would those who do commit be able to stay in the UK?

The innovator visa is only issued for three years initially. The UK has gained a reputation for robust — and not always fair — immigration enforcement practices over the years. People of the calibre required under this scheme will need to feel pretty confident before committing. They’ll need to be sure that they won’t be forced to leave the UK further down the line, with the knock-on effect on kids’ schooling, customers, staff, investors, reputation, etc.

Extending the visa

In order to extend their visa they’ll need to provide an endorsement letter from an approved endorsing body (more on those below) that confirms all of the following:

(a) The applicant has shown significant achievements, judged against the business plan assessed in their previous endorsement.

(b) The applicant’s business is registered with Companies House and the applicant is listed as a director or member of that business.

(c) The business is active and trading.

(d) The business appears to be sustainable for at least the following 12 months, based on its assets and expected income, weighed against its current and planned expenses.

(e) The applicant has demonstrated an active key role in the day-to-day management and development of the business.

(f) The endorsing body is reasonably satisfied that the applicant will spend their entire working time in the UK on continuing to develop business ventures.

This is if the business is still the same after three years — otherwise they need to start again (by demonstrating that their business is innovative, viable and scalable and securing endorsement).

Staying in the UK permanently

An innovator visa holder can obtain indefinite leave to remain in the UK after three years. To get it, they need an endorsement letter that confirms that they’ve built a business that still meets the above requirements plus at least two of these criteria:

• The number of the business’s customers has at least doubled within the most recent three years and, at the time of the application, is higher than the mean number of customers for other UK businesses offering comparable main products or services.
• The business has generated a minimum annual gross revenue of £1 million in the last full year covered by its accounts.
• The business is generating a minimum annual gross revenue of £500,000 in the last full year covered by its accounts, with at least £100,000 from exporting overseas.
• The business has created the equivalent of at least 10 full-time jobs for resident workers.
• The business has created the equivalent of at least five full-time jobs for resident workers, which have an average salary of at least £25,000 a year (gross pay, excluding any expenses).
• At least £50,000 has been invested into the business and actively spent furthering the business plan.
• The business has engaged in significant research and development activity and has applied for intellectual property protection in the UK.

(There are other criteria for extension and indefinite leave to remain applications but I’ve focused here on those that relate to the business.)

These requirements set the bar extremely high. Only the most innovative entrepreneurs are likely to be able to build a business in the UK that will meet the requirements that will, in turn, allow them to stay to oversee it on a long-term basis. Are these high performers going to want to place themselves and their businesses into the highly restrictive and risky endorsement regime that’s being clumsily rolled out?

Endorsing bodies — a risk too far?

The role of third party endorsing bodies is central to the new route. If the entrepreneur cannot get an endorsement, they cannot get a visa in the first place. If they cannot get another endorsement to remain after three years or apply for indefinite leave to remain, they cannot stay in the UK.

If the endorsing body pulls the endorsement at any point, the innovator risks their leave to remain being curtailed. At the drop of a hat, they may have to leave the UK and wind up/sell their business through no fault of their own.

Making use of business experts to endorse visas was recommended by the Migration Advisory Committee in its 2015 report. It gave some advice to the government on choosing the endorsing bodies:

In selecting partners to provide third party endorsement, there should be an emphasis on reliability and robustness, with adequate scrutiny and monitoring agreed with partners in advance to guard against abuse.

So far, as CJ has explained, it’s proving difficult to find out how applicants can be endorsed by any of the organisations on the Home Office’s list, let alone what safety measures may be in place to prevent the above risks from arising.

Those endorsing bodies that are starting to provide some limited information are, so far, indicating that applicants may, for example, need to apply to join their existing accelerator/investment programmes; that they will operate as an endorsing body on a “selective or invite-only” basis; that they won’t be accepting “open” or “public” applications.

This offering may be attractive to less experienced entrepreneurs applying under the start-up visa route. But so far, there’s no indication that any of the organisations currently on the list will offer the type of endorsement that might be attractive to the high calibre entrepreneurs the innovator route is aimed at. We are hoping that those that have not yet provided/published information will have more favourable criteria.

The guidance the Home Office has issued to endorsing bodies does not place any restrictions on those organisations in terms of any fees they can charge, the share of the business they can require or any other criteria they can set. By contrast, in a letter to the Immigration Law Practitioners’ Association the department insists that “endorsing bodies are not able to charge for services specifically relating to their endorsement. There is no provision for them to do so within the immigration and nationality fees system”. It will be interesting to see what the endorsing bodies make of that.

Once the endorsing body has given the applicant its seal of approval, it must keep in regular contact with the applicant and make reports, where required, to the Home Office. Information about this is set out in the guidance. Running a scheme properly that meets the Home Office’s endorsement criteria is going to require a long-term commitment and incur ongoing costs.

In its letter to ILPA, the Home Office claims that “it would not be acceptable for an endorsing body to withdraw its endorsement solely because of financial issues relating to its investment. This is not a valid reason within the Immigration Rules for withdrawing an endorsement”. But there’s nothing in the guidance that requires an organisation to carry on as an endorsing body if it finds the obligations and administrative burdens are too onerous or the cost too high.

Based on the current information the Home Office has published, there is a risk that to enter the scheme is to place the innovator’s future entirely in the hands of a third party that seemingly has no formal accountability, in its role as an endorsing body, to any regulator or government authority. The only sanction would appear to be removal from “the list”.

Will applicants of the calibre required to even enter this scheme be willing to give up a stake in their business? Will they be willing to run the risk that the third party may decide to pull out of acting as an endorsing body altogether, or may refuse to continue to endorse the innovator if there is a disagreement about the business, meaning an end to their ability to remain in the UK to grow their business? It may very well be possible to create a system of third party endorsement that does not expose innovators to such risks, but the current scheme falls far short of that.

Conclusion

The post was originally intended to be about the practicalities of applying for an innovator visa — a guide on the forms to fill, the documents to gather and the requirements to meet.

But right now, the more pressing issue is that the innovator route in its current state just doesn’t seem to be fit for purpose.

The law firm Macfarlanes had a large number of questions about the scheme upon its initial review. Kingsley Napley has recently gone so far as to say on its blog that the UK is currently ‘closed for new business’.

I’ve certainly not seen anything yet that indicates that the innovator route is a viable proposition for serious entrepreneurs. There’s just too much restriction and risk based on the limited information that’s available right now. I join the growing calls on the Home Office to urgently reconsider the innovator route and to engage in a meaningful way with stakeholders.

Now more than ever, the UK has to be able to attract global entrepreneurial talent.