This Budget saw the Chancellor cite The Entrepreneurs Network’s research into immigrant founders, make long-awaited changes to R&D Tax Reliefs, and commit to consulting on boosting institutional investment into tech.
These are our initial expert reactions.
Responding to the expansion of the R&D Tax Credit to include spending on data and cloud costs, The Entrepreneurs Network’s Research Director Sam Dumitriu, said:
This is a necessary and overdue change. While generous by international standards, the R&D Tax Credit has become outdated and out-of-touch with the way innovation works in tech. Research and development in AI and machine learning is reliant on access to data and cloud computing power. If startups can’t claim these costs as R&D spending, they are put at a disadvantage relative to tech giants who have masses of user data and large servers.
When we first called for reform in our Startup Manifesto written in partnership with startup lobby group Coadec in 2019, over 250 of Britain’s leading entrepreneurs backed our call. I suspect many won’t be waiting till the alcohol duty reforms come in next April to uncork the bubbly.
Responding to the Chancellor quoting The Entrepreneurs Network research into immigrant entrepreneurs, The Entrepreneurs Network’s Founder Philip Salter, said:
The Chancellor said it himself: half of our fastest growing businesses are founded by people born overseas. Attracting the best and brightest entrepreneurial talent from across the globe will be key to our economic success. The new Scale-Up visa, set out in today's budget is a step in the right direction. Coming with the High Potential Individual visa and Global Business Mobility visa, next year could be a stellar year for high-skilled immigration reform.
The salary threshold of £33,000 is reasonable, but failure or success will rest with fees or hidden bureaucracy. Exorbitant visa fees need addressing and any bureaucracy must be reduced to an absolute minimum – after all, that’s why we were able to attract the best and brightest entrepreneurs from the EU.
The new Global Talent Network will also be a boon for innovation. Having liberal immigration rules only get you so far, but we also need promigration policies like this to proactively identify and persuade the world’s most talented people to settle in the UK.
Responding to the Chancellor’s commitment to consult and work to remove barriers to institutional investment in tech, The Entrepreneurs Network’s Research Director Sam Dumitriu, said:
By the end of the decade, DC pension schemes will have £1tn under management. If just 3% more of that funding went to venture capital, it would amount to a £30bn increase in equity investment available for startups. Pension funds contribute 65% of the capital in the US VC market, but just 12% in the UK.
Yet, at the moment, there are major regulatory and cultural barriers preventing pension funds from investing in venture capital. The Pension Charge Cap may protect savers, but it's too rigid and incompatible with VC fee structures. Modest reforms, such as spreading the fee cap over a number of years, and relaxing valuation regulations on illiquid assets, could unlock massive investments in innovative tech businesses.
Image Credit: HM Treasury.