Government promises £100m to UK start-ups but business strategy is “in chaos”
The government has announced a £100million package of measures aimed at unlocking private investment for British entrepreneurs, start-ups and scale-ups, but business leaders have slammed the plans, warning that small established firms are being forgotten while the wider business strategy remains “in chaos.”
Effective at the start of the new tax year, these changes expand eligibility for the Enterprise Management Incentives program, which allows eligible companies to offer tax-advantaged stock options to employees. The package doubles the amount of money a company can raise through the Enterprise Investment Scheme and Venture Capital Trusts, both of which offer tax breaks designed to channel money into high-risk, early-stage businesses struggling to find growth funding.
Rachel Reeves, the Chancellor, said she was “supporting business in a very proactive manner” and was making “big commitments to the industry,” adding that the measures would help wealth creators get the capital that is essential to their success.
The reception of the entrepreneurs, however, was very positive. Critics have pointed out the huge difference between the sum involved and the £25billion a year the Treasury is now raising from employers following its increase in National Insurance contributions.
Katrina Young, digital transformation strategist at KYC Digital, said statistics don’t drive policy. The increased EIS, VCT and EMI services are aimed at companies with gross assets of up to £120million and up to 500 employees, he noted, excluding dental practices, family catering firms and small bakery chains that employ large numbers of workers but face an extra £900 a year from £900 from NI to 9 a year. £5,000. He cited data from the British Chambers of Commerce showing that 82% of firms expect an increase in NI to have an impact on their business, with 58% expecting a reduction in employment.
The hospitality sector gave a bleak assessment. Jess Magill, founder of Devon-based Powderkeg Brewery, said there was no need to throw money at new companies once they were taxed. He pointed out that what is needed is support for established businesses to survive, warning that popular places are closing every week and the domino effect on suppliers is getting worse.
Colette Mason, author and AI consultant at London-based Clever Clogs AI, echoed those concerns, describing £100million as “bad” compared to the NI increase. He noted that the expansion of EMI targeted around 1,800 companies in five years, firms that are already attracting investors, and businesses that employ many people are reducing hours, freezing wages and rethinking whether to hire.
Samuel Mather-Holgate, managing director of Swindon-based Mather and Murray Financial, said the government was sending mixed signals at the wrong time, increasing the number of companies they could raise while at the same time reducing benefits for investors in those same businesses. The UK, he said, needs to encourage companies to start and stay on British soil.
The announcement is likely to fuel a debate over whether the government’s growth agenda is reaching the businesses that need it most, or whether it is just using a fraction of what has already been taken.
