APPG for Entrepreneurship Digest: March 2021

In this month’s APPG for Entrepreneurship Digest, we are focusing on the key policy changes announced at Wednesday’s Budget that affect entrepreneurs. We are also going to highlight some of the consultations announced on topics that will be of interest to most entrepreneurs.

To help break down the key news for entrepreneurs in the budget, we are relying on the many business organisation representatives that sit on our Advisory Board.

One issue raised at the Budget which the APPG has discussed before is the importance of management. A couple of years back we hosted the launch of my report Management Matters. It was interesting then to see the announcement of Help to Grow, a new scheme to help SMEs access better management training from business schools and acquire new digital tools.

Advisory Board member Emma Jones of Enterprise Nation commented: "We welcome Help to Grow and look forward to working with government to ensure this scheme is relevant for businesses and delivered in an environment in which they already operate, i.e. through existing small business networks and private sector advisers.”

While broadly welcoming the move The Entrepreneurs Network cautioned: “It is vital that startups are involved in the design of the scheme and that software vouchers do not only go to tech giants.”

For high-growth tech entrepreneurs, there was a lot of interest in the Budget. Dom Hallas who runs Coadec, the lobby group for tech startups, and also sits on our advisory board picked out a few changes of note.

He welcomed the announcement of the Future Fund: Breakthrough, the sequel to the Future Fund, a policy which provided matched convertible loans to venture-capital and angel backed businesses. He said: “It’s great to have more capital available for growth companies but we want to make sure that it’s the right kind of support going into the companies that need it not propping up ones that don’t”. Jenny Tooth of the UK Business Angels Association said: “It was especially heartening to see the Chancellor’s commitment to addressing the funding gap for innovative scaling businesses”. However, she also noted that if the scheme copied its predecessor then it would exclude EIS and SEIS investors.

Entrepreneurs deterred from listing on public markets due to fears around loss of control will have welcomed the announcement that the Chancellor provided backing to the Hill Review’s recommendations on dual-class share structures. Dom Hallas backed the move saying: “If we miss this opportunity, the UK’s pipeline of high-growth companies will continue to go to the US or be sold to private equity or competitors.”

Our friends at Tech Nation described the news that a proposed UK Infrastructure Bank is set to be located in Leeds as “a promising recognition of the need to channel more support into the regions and should help local tech ecosystems to build sustainably.”

Arguably, the most important aspect of the Budget was the continuation of business support throughout the covid period. The CBI welcomed the news, stating: “Thousands of firms will be relieved to receive support to finish the job and get through the coming months.”

However, issues were raised around competitiveness with the announcement of 25% Corporate Tax Rate, with the CBI arguing "The government must now have a laser-like focus on the UK’s competitive position in the round, including fundamental reform of the unfair Business Rates system.” The inclusion of a 130% super-deduction for investment will act as a powerful incentive. But some groups, including Coadec have raised concerns that intangible investments may not be covered. It’s important now for the Treasury to clarify this as intangible investment is increasingly important to businesses.

The Capital Gains Tax changes we discussed last month were not featured in the Budget, which will have been a relief to many of the entrepreneurs we have spoken to.

Many of the entrepreneurs I’ve spoken to tell me that access to talent is the number one issue for them. As such, Philip Salter of The Entrepreneurs Network welcomed the new changes to the visa system: “Allowing holders of international prizes and winners of scholarships and programmes to automatically qualify for the Global Talent visa will offer the necessary assurance to the very best and brightest that they are welcome in the UK”.

He also mentioned the importance of immigrant entrepreneurs, who research shows were involved in the founding of half of the fastest growing businesses in the UK, welcoming a review of the Innovator visa, stating “the Innovator visa is currently unfit for purpose, needing fundamental reforms to align incentives so the pricing is clear and more high-quality organisations become endorsing bodies”.

The Budget is also a time when entrepreneurs can gain some clarity on future policy with reviews and consultations announced. There are a few relevant to entrepreneurs.

First, the Treasury will consult within the next month on the pension charge cap, in order to crowd in more institutional capital into startups and scaleups. This is an issue many business groups have campaigned for.

Second, the Chancellor also announced a review of the EMI scheme and the Government will look at allowing more businesses to access it. Other countries in Europe, Finland the latest, are upgrading their equivalent schemes so it’ll be interesting to see where we end up.

Finally, the Chancellor also announced that the Government will look at bringing data and cloud computing costs into the scope of the R&D Tax Credit. This is an issue that Coadec in particular has campaigned on for years.

There’s a lot to take-in and I’m sure more information will come on the specifics of scheme such as the Future Fund and Super Deduction over the next few weeks. As the Secretariat for the APPG for Entrepreneurship we’ll make sure we pass on any information how the policies actually function to Parliamentarians from entrepreneurs on the ground.

In Parliament

In the run-up to the budget, Lord German (Liberal Democrats) argued for fundamental business rates reform in a debate on Non-Domestic Rating (Designated Area) Regulations 2021 he said: “The crisis facing our high streets and the burden business rates place on companies compound the problems that we have with this tax. Business rates, by taxing the value of a business’s machinery and premises, are a tax on investment itself. The result is a higher bill for the ambitious entrepreneur who decides to expand factory space or add solar panels to the roof and a lower bill for the speculative landowner who chooses to leave their commercial plot derelict or unused.”

Echoing the recommendation in the APPG for Entrepreneurship’s Tax Reform paper he said: “The replacement of business rates with a new tax based solely on land value and paid by landowners, would remove the existing disincentive to invest. It would also spare millions of small businesses which rent their premises the unhelpful administrative burden of business rates.”

In a debate on High Growth Global Markets, Dr James Davies (Conservative) asked Trade Minister Graham Stuart MP: “Can he assure me that the Department for International Trade regularly engages with businesses of all sizes across the UK, including in north Wales, to ensure that the objectives of the Department are closely aligned with the needs of industry?”

In the same debate Bill Esterton MP (Labour) said: “His Department telling exporters to open an office in the EU is not good practice when it is its answer to delays at the border that it was warned about. When are Ministers going to sort out the problems at the border that mean businesses are drowning in red tape?”

Dr Rupa Huq MP (Labour) highlighted the issue for freelancers and SMEs in the creative sectors: “Mounting costs are killing one of our biggest exports—culture—with additional duties on physical product and performers. My constituent Andy Smart has regularly performed at two comedy/ski festivals, but now one of them no longer accepts Brits, preferring the Irish, and the other has been cancelled as unviable because of Brexit obstacles. Can we work cross-departmentally to abolish these levies, because, as one of those festivals is called, it is literally taking the piste?”

At Prime Minister’s Questions, Danny Kruger MP (Conservative) asked: “The last time the UK hosted the G7 in 2013, the then Prime Minister launched the social impact investment taskforce to catalyse a market for private capital seeking social outcomes as well as financial returns, and this country now leads the world in the development of financial innovations for public good. Will my right hon. Friend therefore confirm that the social investment tax relief, which was launched after that summit, will continue beyond April? Will he use this year’s G7 to trumpet to the world the benefit of social investment, social enterprise and the social economy in general?”