Dedicating contracts for UK-based start-ups in key sectors would help create a supportive environment, fostering innovation, attracting investment, and promoting sustainable, long-term economic growth.” James Disney-May
CHANCELLOR Rachel Reeves’ pre Budget preparations have been dealt a blow by news that hundreds of tech entrepreneurs could be set to quit the UK.
Details of exodus were laid bare by the Startup Coalition Lobby Group and come amid concerns over planned tax-changes ahead of the October 30 statement in the House Of Commons.
The Startup Coalition said founders’ confidence in Britain will be “shaken” further if Ms Reeves targets entrepreneurs with an expected increase in capital gains tax.
In a survey of more than 500 company founders, 72% said they had “already investigated moving themselves or their business abroad”.
The founders represent businesses employing more than 22,000 people, and have combined revenues totalling £2.6bn.
James Disney-May, a businessman and investor, said there is a growing sense of concern across the sector ahead of the Budget.
But he added the Chancellor could still rescue the situation by focusing on unlocking policies which would help to change the narrative – and encourage and drive investment in UK start ups.
James said: “The UK’s entrepreneurial ecosystem is a powerhouse of innovation, job creation, and economic growth, yet it faces mounting challenges that could hinder its trajectory.
The incoming government has an opportunity to implement strategic budgetary measures to bolster this ecosystem and solidify the UK’s position as a global leader in technology, renewable energy, and advanced sectors. By prioritising targeted support through tax incentives, venture capital encouragement, and regulatory flexibility, policymakers can create a fertile environment for start-ups, especially in high-growth areas.”
Here are five budgetary measures James believes could help drive investments, attract top talent, and enable UK start-ups to scale both domestically and internationally.
- Expanding SEIS and EIS for Early-Stage Companies
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) can act as lifelines for early-stage companies and provide much-needed funding by attracting investors through tax incentives. Currently, SEIS and EIS allow investors to benefit from significant tax reliefs, making start-up investment more attractive by mitigating associated risks. Expanding these schemes could be a game-changer.
Furthermore, by increasing the investment limits or providing additional incentives for high-growth sectors such as technology, clean energy, and biotechnology, the UK could pull in more capital for new ventures. Maintaining accessibility and ensuring these schemes remain competitive internationally is essential to cement the UK’s leadership in innovation. - Preserving Capital Gains Tax (CGT) Reliefs
With concerns rising over a potential Capital Gains Tax (CGT) increase ahead of the Autumn Budget, it is essential that the Government looks to find a balanced approach that supports Treasury funding needs without discouraging investment in start-ups. CGT often plays a crucial role in either promoting or stifling investment and aligning CGT with income tax rates would likely deter both investment and entrepreneurship in the UK.
To maintain a favourable environment for start-ups, the government could protect the Business Asset Disposal Relief (BADR), currently set at 10%, which provides entrepreneurs with a reduced CGT rate when selling their businesses. Additionally, the Shadow Chancellor could consider reducing CGT rates on long-term start-up investments, thereby rewarding investors who commit to building businesses over time and supporting sustainable growth in the start-up sector. - Creating a Supportive Environment for Venture Capital and Innovation
Encouraging UK-based venture capital and angel investment could foster a high-risk, high-reward culture similar to that of the US, where I am currently based, driving both innovation and economic growth. Expanding initiatives like British Patient Capital, a government-backed programme, could provide crucial later-stage funding, making it easier for UK businesses to scale domestically rather than seek funding abroad. This expansion would signal the UK’s strong commitment to entrepreneurship and innovation, helping to attract substantial investment into its start-up ecosystem.
Moreover, government-backed co-investment funds and enhanced tax incentives for individual investors could create a more interconnected, growth-oriented environment that supports companies beyond the initial funding stages.
On the regulatory front, introducing a ‘regulatory sandbox’ for emerging technologies could allow start-ups to test solutions in controlled environments without immediate regulatory consequences, thereby boosting innovation. - Reforming Business Rates for Start-Ups
The burden of business rates on start-ups with physical premises can often be daunting, especially for those in technology and R&D sectors that require labs or manufacturing facilities. Reforms to the Small Business Rate Relief (SBRR) could provide much-needed support to these companies, reducing operational costs and promoting growth.
Creating property tax breaks for spaces dedicated to innovation could encourage the development of technology hubs and collaborative spaces, fostering an environment conducive to new ventures and ideas. Together, these measures would benefit high-growth companies reinvesting in innovation while also helping to rejuvenate areas with declining business occupancy rates. - Increasing Access to Government Contracts for Start-Ups
Allocating more government contracts to UK-based start-ups, particularly in strategic sectors like AI, renewable energy, and biotechnology, could significantly boost revenue for early-stage companies. By simplifying the procurement process and dedicating a portion of annual funding to SMEs, the government could drive substantial growth among UK start-ups and scale-ups.
This approach mirrors a successful model used here in America, by the US Department of Defense, which prioritises domestic contracts to support local innovation and industry. By adopting a similar strategy, the UK government would signal a strong commitment to homegrown innovation. Dedicating contracts for UK-based start-ups in key sectors would help create a supportive environment, fostering innovation, attracting investment, and promoting sustainable, long-term economic growth.