Did the Budget Deliver for Startups?
We take a look at the highly anticipated 2021 budget and how our campaign to #raiseSEIS is affected.
The dust has now settled on one of the most highly anticipated Budgets in recent times, and following the usual strategic leaks, there were few surprises left in the Chancellor’s infamous Red Book come Budget day.
Undoubtedly, there was some good news hidden amongst the dire portrayal of the current economic situation, and I think we all felt a collective sigh of relief, with confirmation that the furlough scheme is to be extended until September. With 700,000 people already out of work since the start of the pandemic, protecting more vulnerable jobs and businesses is the priority.
There was also the sweeping relief that capital gains tax was not increased, following rumours it was on Rishi’s ‘hit list’ this year. Although a review on the tax has been commissioned, meaning changes may, unfortunately, be on the horizon. Higher rates of corporation tax were announced to a mixed response, but the sliding scale should offer some comfort to SME’s.
While the Chancellor only announced a new scheme for scale-up companies (raising +£20m) he did allude to an upcoming review on investment tax relief schemes such as SEIS and EIS. An area we have been campaigning on to be reviewed. We along with others believe raising the caps on these schemes will give seed-stage startups a much-needed leg-up during these difficult times.
Dr Keith Arundale, Senior Visiting Fellow at Henley Business School who specialises in private equity and venture capital, said:
“What we also need is more financial support for start-up businesses, not just government matching funding for companies that have already received third party investment. Whilst the Future Fund has invested £1 billion in 1,000 start-ups this had to be made on the back of third party investment already received. SME businesses raising money for the first time have seen a 44% decrease in finance in the period since March 2020 compared to the prior year and 20% fewer deals*. VCs and business angels are avoiding this space.
“Going forward, if and when the Chancellor does eventually raise capital gains tax rates, this could result in entrepreneurs moving overseas and PE firms also relocating to avoid their carried interest being taxed as income. A recent report from Beauhurst revealed that 85% of founders would consider moving their companies abroad and 72% of business angels would be less likely to continue investing in UK companies if capital gains tax reform came in — scary figures!”
Without any concrete news about when these reviews will take place, our work continues to promote an increase in SEIS and ensure seed-stage startups and angel investors have a voice in the future of these schemes. You can show your support for our campaign here.
Before we leave it at that, we wanted to take the opportunity to point out one area of stark unfairness in the Budget; the pitiful 1% pay rise for NHS workers. Front-line NHS staff have carried our country through the pandemic, with many falling victim to the virus themselves as a result of their work. They should not be rewarded with claps and insincere gratitude, they deserve meaningful pay increases and support to deal with the impact the virus has had on their lives.
Professor Kailash Chand, a former deputy chairman of the British Medical Association (BMA), said: “The NHS family will have to do with ‘clapping and badges’. The Chancellor is not the NHS’s friend.”
We very much hope that the government rethink their decision in this regard and work towards policies that promote a fairer society for all.
