Some say that a change is as good as feast, but London start-ups could be forgiven for wishing time had stood still from around the time of last year’s Autumn statement. George Osborne may have been austere, but he cannot have imagined a situation as bleak as this. Over to you, Philip Hammond, who, to his credit, has been less afraid to splash the cash as his hard hat, hi-vis jacket sporting predecessor was.
Back then, the Conservative government that had launched Tech City way back in 2010 were still firmly in place and celebrating a resounding, if surprising election victory.
Brexit was merely a glint in some bloke called Nigel’s eye, London topped nearly every chart relating to start-up ecosystems and performance, and the funding was pouring into companies embracing the multi-cultural and multi-national nature of successful, venture capital fuelled fast growth disruptive companies.
We all know what happened next; Britain shocked itself by deciding to leave the EU, imperilling London’s ability to attract the best tech talent. Other European hubs; Berlin, Lisbon, the Nordic regions, began to catch up with and even surpass London for start-up success stories and funding raised, the search for a bona-fide British Unicorn (are FarFetch and Just Eat “tech giants”? No.) continued in vain, and a much vaunted “scale-up” campaign has failed to turn up any companies of note.
You can almost feel the disappointment – who knows if Tech City will even be a thing by the time the next Autumn statement is delivered – by whom, is anyone’s guess. Ed Balls?
But there are still significant pockets of stand-out start-up success in London – the Fin-Tech sector is booming, with challenger banks leading the charge, although it is common knowledge that at least a few of the Tandems, Starlings, Monzos, and Revoluts will have to fail if the others are to succeed.
Deep Tech is also being championed by the likes of Deep Mind, and Darktrace, and the Health-tech sector, think Babylon Health or Zesty, looks well set – but for apps, platforms, and the trendier end of the start-up spectrum – things are looking a little bleak.
So, could Philip Hammond throw the start-up sector a bone from his inaugural Autumn statement?
You bet he could – doubtless the Chancellor was aiming to please as many people as he could and in true post-Brexit style Hammond pledged, according to the Times, an extra £400 million to the British Business Bank to “stop fast-growing, home-grown technology companies being bought up by foreign rivals.”
Those bloody Johnny Foreigners eh’, coming over here, poaching our finest talent and buying our companies. Still if “start-ups” keep going at the kind of prices (£24bn for ARM, Glasgow’s Skyscanner for £1.4bn) they have been, you won’t be able to move for “For Sale” signs around the Old Street roundabout, and we’ll be as multi-cultural as ever – or well, mostly Chinese and Japanese.
Hammond says that the money will “unlock” £1 billion in new finance, since the BBB likes to co-invest alongside others – the corollary to that, of course, is that nobody invests alongside the BBB and the money never gets spent.
The BBB’s chief exec described the new funding as an “important boost”, adding, “it underlines our commitment to backing scale-up businesses whose growth can have a significant impact on employment and productivity”.
And the bank has already supported 51,000 UK companies, providing £3.2bn of financial help to start-ups, and £4.6bn to small and mid-cap firms. All in all, then, this news can be greeted warmly.
The figure wasn’t quite enough for some, however – whilst Charlotte Holloway, Policy Director for TechUK, praised the funding, saying “Government has rightly taken action to mediate uncertainty arising on the European Investment Fund for start-ups and venture capital”, the Institute of Directors were less impressed.
“There wasn’t a great deal here to offset the twin current concerns for start-ups of stuttering investment — particularly from UK investors — and uncertainty over the pool of skills available to early stage companies”, said Jamie Kerr, Head of Entrepreneurship and Tech Policy, before adding in reference to “Brexit uncertainty and lack of clarity on future migration policy”, that “more certainty on the road ahead and further incentives for individuals to invest would have been welcome.”
Meanwhile, over at accountants turned start-up supporting consultants Smith & Williamson Sancho Simmonds, Head of the firm’s Scale-Up Programme praised the BBB’s investment, as well as the launch of the Patient Capital Review as a “significant step forward”, adding “we can only applaud the government in recognising the importance of scale-up businesses to the UK economy.
The Patient Capital Review has been launched by the government to “address a stubborn dearth of long-term capital investment in British Firms”, according to the Daily Telegraph, quoting Theresa May at the CBI conference earlier this week.
“I want us to turn our bright start-ups into successful scale-ups by backing them for the long-term.”
Besides the review, Simmonds was effusive in his praise of the Statement, claiming that; “Action to support ambitious scale-up businesses needs to be taken now and some of the key initiatives announced today are very encouraging, as British businesses are currently losing out to their US and European counterparts who already have the environment to succeed.”
Simmonds also praised the Chancellor’s support for UK Export Finance and concluded: ““In our recent survey of business owners, over 80% of respondents said the Autumn Statement needed to focus on small and scale-up businesses. Hopefully we can look back at this Statement as the beginning of a Great British scale-up boom.”
Another satisfied customer.
It Takes More Than tax Cuts To Incentivise Tech Start-ups!
One man who had more questions than answers after hearing the Autumn Statement however was Martin Leuw, the renowned digital entrepreneur and investor, CEO of IRIS Software, which he sold twice to Private Equity firms and the founder of Growth 4 Good, an accelerator focused on high growth social businesses.
Welcoming the reduction in Corporation tax, Leuw comments, “I can see how a reduction in Corporation Tax make the UK an attractive place for inward investment”, but suggests that incentivising firms rather than cutting tax is a better way forward.
“I can see how a reduction in Corporation Tax makes the UK an attractive place for inward investment. However if we want to boost productivity through technological innovation, why cut tax as far as 17%?”
“Strategically it makes more sense to target incentives to firms investing in technology through increases in R&D tax credits and capital allowances.”
On the subject of increased Government funding for start-ups, he is more scathing:
“Great tech startups can attract capital anyway, so I struggle to see how Government funding will stop early exits by our best businesses. What we need is really need is more talent not finance.”
A shame, then, that we seem hell-bent on kicking out talented European entrepreneurs and dragging our feet around providing a better VISA system?
Leuw also expressed his disappointment that “I saw nothing to tackle business rates – an issue that’s a constant problem for SMEs.”
Hear, hear, and especially within “Tech City“.
Autumn Statement – The Best of the Rest
On a more mundane-yet-slightly-serious level the government have decided to abolish tax relief on employee perks such as gym membership and mobile phone deals, from April next year.
The national living wage has also been increased to £7.50 per hour – likely to be £9.75 in the capital thanks to London weighting, and the personal Tax Allowance has increased to £11,500 from £11,000 and could be as much as £12,500 by the end of this parliament – all good news for bootstrapping entrepreneurs.
On a more macro level, there is plenty of encouragement for British tech infrastructure as a whole, with a £23 billion fund being announced that will help to build a railway between Oxford and Cambridge, superfast 5G wireless technology “to enable widespread use of smart fridges” according to The Times, who devoted an entire supplement to the Autumn statement.
Apparently, £7 of the £23 billion has not yet been allocated. Time to get writing that business plan.
Quite honestly, perhaps the most important thing we learned about the Autumn Statement is that we won’t miss it when it’s gone. It is slated to be abandoned next year for good so that we can have one major budget event each year only.
Bad news for headline writers, but good news for just about everybody else.
Certainly the current onus seems to be on building out infrastructure – we are, after all, still in the “makers and doers” Osborne era it seems; it’s a plan not a million miles away from one being hatched by a flame haired individual who just received the keys to White House. Build, build, build, and give the people their jobs back. But Britain will never be an industrial superpower again – services are our best bet, and that is what more and better broadband will provide. We are nation that is more comfortable than any other online.
This being 2016, however it probably won’t be long before May declares an early election and Sir Alan Sugar launches a Prime Miniterial Campaign on a “make Great Britain Great again!” ticket.
Post-autumn statement, here’s hoping we do not endure such a Winter of Discontent. We can’t have another year like this one, can we?
Another Ferrero Rocher, ambassador?
Come, let’s mix where Rockefeller’s
Walk with sticks or “umbrellas”
In their mitts
Puttin’ on the Ritz