How the Chancellor’s Autumn Budget will help startups
The post-mortem on Rishi Sunak’s Autumn Budget has focused on the politics of tax and spend, but I have heard very little discussion about an equally important question – where was the support for entrepreneurs?
In previous budgets, we’ve seen Chancellors from both sides of the political divide step up to the dispatch box and deliver a long-term vision for the UK economy that harnesses the entrepreneurial spirit which is part of our national identity.
George Osborne, for example, famously introduced a further cut in corporation tax to 17%, an extension of small business tax breaks on business rates and cuts to capital gains tax in his 2016 budget. Back in 2008, Labour’s Alistair Darling introduced Entrepreneurs' tax relief as an incentive for people to go it alone by reducing the rate of Capital Gains Tax on business disposal.
Whilst Rishi Sunak’s business rates tax cut of almost £1.7bn was welcome news, I can’t help feeling that the limited support specifically aimed at start-ups was a missed opportunity.
We know that there is a surge of interest in entrepreneurialism with more than 835,000 businesses started in the UK in 2020, making it a record year. Alongside my other business ventures, I run Entrepreneur Seminar, a mentorship programme for entrepreneurs, and have seen first-hand the massive pent-up demand from people across the UK who are in jobs but want to set up their own business.
We recently surveyed 8,000 people employed in SMEs and found that 68% are considering starting a business. The pandemic has made many people re-assess their priorities, but it has clearly not dented their confidence in striking out alone - 72% of those we surveyed said they wanted to start a business to increase their financial wealth.
The Chancellor did, to his credit, introduce some measures to help new businesses. The Government will continue to support the Kickstart scheme; the Help to Grow management is being extended to 2022; and more funding is being put into the digital scheme.
This was welcome news, but our research found that funding remains the biggest headache for entrepreneurs, with nearly a third (32%) saying that a lack of funding and finances was their number one concern when it came to starting a business.
While the Chancellor did announce a raft of funding measures, many of these are out of reach for most small businesses. For example, the Government will spend £20bn a year on R&D investment in the 2024-25 tax year and will hit £22bn by 2026-27. The Chancellor also promised increases for existing researching funding bodies, including a £400m boost in the budget of Innovate UK, which gives grants to promising technologies, by 2024-25. Similarly, the Aerospace Technology Institute will receive funding for research including lower-emissions planes until 2031.
The Chancellor’s business rates, and R&D tax credit reforms will help to stimulate growth, but with hefty hikes in other taxation on the horizon, what has been given with one hand is being taken away with the other.
Small business owners – and the investors who will help support future businesses – remain concerned about both rising inflation and the future fiscal drag on growth as spending from the pandemic era rolls off.
They will not have been comforted to hear the Chancellor pointing to a level of inflation far above the Bank of England’s target over the next year and his new fiscal rules are a concern for those worried about the impact of a likely contraction in government spending post-pandemic.
Not every business that started during the pandemic will survive. However, those that do will have an opportunity to profit as the markets open up again in 2022.
What they needed to hear from the Chancellor was a compelling vision for their future growth and how they will be protected from the triple whammy of higher national insurance contributions, higher inflation and increases to the living wage.
This is an unprecedented era of opportunity for entrepreneurs because, along with rapid economic growth, comes a desire for innovation and startups are perfectly placed to provide it. But without innovative thinking at the heart of government to support and empower them that opportunity could be squandered.