As was expected from the rumours that came ahead of the announcement, the Budget sparked a range of reactions from the industry. But as is always the case, the entrepreneurial community and startup ecosystem have continued marching ahead.

In this article, we share the industry’s reactions to the Autumn Budget, and what the Budget means for the UK’s startups and SMEs, as well as the venture capital industry.

Iain Butler, Director and Head of Buzzacott's R&D team

In the Autumn Budget, Labour pledged £20 billion to supporting the UK’s Research and Development (R&D) scheme, offering stability to businesses eager for continuity.

Buzzacott Director Iain Butler comments on whether this commitment alone is enough to drive meaningful growth and productivity improvements, particularly for SMEs: “The commitment to back the R&D scheme is good news. With no consultation or further changes some stability is a welcome sign for businesses relying on R&D incentives. But this hiatus does come on the back of a 50% reduction in support to SMEs, so stability was probably the bare minimum business owners were looking for.

“Without effectively using policy tools to make UK companies more innovative, where will the growth and productivity improvements come from if SMEs are being held back?”

“The government have promised £20 billion of funding to R&D. However, if businesses aren’t incentivised and supported to commercialise these R&D outputs, this spending may not result in growth, raising a crucial question. Despite the substantial investment, UK GDP growth remains sluggish, barely creeping above average levels pre-2008. Is this enough to increase productivity to truly address all the UK’s economic challenges, including an ageing population, or is more required?”  

Dylan Doran Kennett, Partner and Co-Head of Venture and Growth Capital, EMEA & Americas, at Herbert Smith Freehills

Dylan Dorean Kennett, commented: "The venture capital and private equity industry provides an incredible value add to the UK so it is heartening to see that, rather than risk curtailing it and unnecessarily creating a flight of capital, the increases to the carried interest rates are overall modest changes, albeit it puts the UK at the second highest level in Europe, only behind France.

"It's also pleasing to see the government extending the EIS and VCT programmes, as would be expected from a government keen on supporting high-growth industries.  They are the lifeblood of the venture capital industry and provide great incentives to investors to work with high risk/high-growth companies. Less positive, however, is the announcement that the reduced CGT rate afforded by Business Asset Disposal Relief will be increased, firstly to 14% and then to 18% – which will mean that the delta between the "main" rate of CGT (now 24%) and the BADR rate will be smaller than it is currently. It is disappointing that the value of BADR as an incentive to founders is thus being further reduced. This is continuing the erosion of the value of the relief, over subsequent governments, much to the collective sigh of entrepreneurs and investors alike. 

"It was also disappointing that the plug was pulled on the previous government's announcement on investment in supercomputers and AI projects. This was a much needed investment in the sector to put the UK on path with its peers; with £800 million to exascale super computer and £500 million to AI Research Resource.  Therefore, it is hard to square the circle whether the Government is pro-investment in tech and life sciences, when announcements such as this are made quietly over the summer."

Avion Gray, CEO and Co-Founder of UK wealthtech Belong: 

Gray said: “It marked a momentous occasion with the UK’s first female Chancellor delivering a budget of sensible and restrained measures with the core aim of balancing both the economy's finances as well as helping to empower those of its businesses, startups and citizens. 

 “For consumers, worries over grave increases to capital gains tax raises alongside rises in other personal taxes have been met with a pragmatic approach that is hopefully a signal of things to come from this Government. Freezes to inheritance tax will be of huge benefit to those looking to set out on their personal investment and finance journeys as we know that inheritance is often the vehicle that spurs movement on consumer personal finance.

 “As a business, we’re incredibly reassured by the setting up of Skills England which we’re confident will help upskill a growing and ambitious workforce, and with no changes to Business Asset Disposal Relief, founders can breathe a sigh of relief. 

 “In summary, where previously there had been a deep sense of uncertainty and hopelessness surrounding the budget, the Chancellor has delivered a reassuring wave of measures that put the UK on a path to recovery and future growth for all walks of life.”

David Leviseur, Founder and CEO of Fornax Energy, a startup decarbonising domestic heating in the UK

Leviseur reflected: "This Budget was a pretty positive reset from the previous political chaos, although we'd like to have seen more to drive growth and excitement in the economy.

"We desperately need more investment in the institutions and regulators that startups rely on and work with – the wheels of the civil service are not turning fast enough for startups to deliver the growth that the government wants. The Chancellor's announcement of funding to hire hundreds more planning officers to unblock planning backlogs was a great example of what we need more of, but what about, say, investing in the FCA to enhance their capabilities and help them process authorisations more efficiently? Smart civil servants, appropriately resourced, and equipped with specialist knowledge could dismantle more log jams, make business operations vastly easier, and get the economy firing again."

Anne Glover, CEO of Amadeus Capital Partners

Beyond Amadeus, Glover is a Non-Executive Director in the Court of Directors of the Bank of England and a non-aligned member of the Labour Party’s City Advisory Committee.

She had this to say: “While there will be the inevitable disappointment within the private sector regarding CGT and employer’s NI tax rises, the Chancellor’s biggest achievement is managing expectations ahead of what was always going to be a difficult budget. What really matters now is making it easier for entrepreneurs to set up and grow their companies in the UK, particularly deeptech early-stage and growth companies, which will become the backbone of the industries of the future.

“The commitment to investment through the National Wealth Fund and the protection of the research budget aligns with our belief that investment in technology will ultimately lead to long term growth. If the government is serious about driving such investment in the UK, it should also look at encouraging or mandating that pension funds diversity their stakes into riskier assets such as venture and growth capital.

“The Chancellor has clearly listened to some of the concerns of investors and business leaders regarding changes to Capital Gains Tax, Carried Interest and Business Asset Disposal Relief and adapted the plans in a pragmatic way – but there is now a further consultation on carried interest which needs to be equally as productive and engaged.”

Keith Benson, Partner at DSW Ventures

Benson discussed how the Budget could encourage more early-stage investing into technology businesses: “For those of us investing in scaleup technology businesses, the direct impact of the Budget is limited: we’re particularly concerned about the increase in Employer National Insurance impacting cash-pressed startups, and at some point want to see the R&D tax credit scheme revisited.

“No entrepreneur or investor is going to love the increases in the headline rate of Capital Gains Tax, nor the reduction in Business Asset Disposal Relief, but will it slow the rate of startups? Not at all. First-time founders start a business because they want the adventure, not because they’ve factored in a potential tax scenario 10 years down the line. In reality, CGT rates don’t affect the decision to create a startup.

“One really positive outcome from today’s Budget is that the EIS and Seed EIS schemes were left untouched, and the Chancellor identified the critical role the EIS and VCT schemes play in creating a positive environment for UK entrepreneurship. These schemes already offer very generous tax benefits, and with higher tax bills on the horizon, they become even more appealing.

“At the new CGT rates, a £10,000 Seed EIS investment can:

• recover £5,000 of Income Tax
• offset up to £1,600 of other CGT bills payable
• suffer zero CGT on gains, and zero Inheritance Tax on the whole amount
• generate up to a further £2,250 of Income Tax recovery if the investment fails”

Mark Stokes, CEO of spacetech firm Magdrive

Stokes reacted: “While the Government is focused on black holes of the financial variety, it was important it didn’t neglect the UK’s space sector in the Budget. Thankfully, there were positives for the growing industry. For R&D-intensive industries like space, the business tax roadmap allows us to prepare more effectively for the future, and R&D tax credits enable us to execute our long-term plans.

“Balancing fiscal responsibility with support for innovation is key. While the government’s commitment to R&D is essential, it’s equally important to make sure that fiscal policies do not hinder the scalability of the space sector beyond R&D, which is worth over £17 billion a year to the economy. We must hope that in future Budgets the government is more robust in its policies to support UK space advance as a global leader.”

Michelle Ovens CBE, Founder, Small Business Britain

Ovens gave her view of the Budget: “This was a defining first budget for the Chancellor. Small business trepidation at tax and other cost rises was largely unfounded, and a recognition of the smallest businesses being essential to communities and growth was apparent.

 “The employer national insurance rise was offset for small businesses by a significant rise in Employment Allowance. Indeed, only businesses with significant wage bills, over half a million, will see a rise, with many smallest businesses actually getting a tax cut.

  “Although the rise in minimum wage is going to hit some small businesses, with 16% of their staff on the lowest wage, this was offset by a strong nod towards industries most impacted, particularly retail and hospitality which will see both continuation of business rates relief and the move to lower rates for high street businesses longer term. This will be welcome news for these long-struggling sectors, and give hope for a better recognition of the value of small local businesses in the long term.

 “In the big picture, the Small Business Strategy announced by the Treasury will be an opportunity to put small businesses at the very heart of Government decision making and we are particularly looking forward to contributing to major areas of economic opportunity for small businesses, such as AI and sustainability.

 “Although some entrepreneurs may be disheartened by the rise in Business Asset Disposal Relief (previously Entrepreneurs Relief) and Capital Gains Tax, this is lower than anticipated and will not come in overnight.

“Overall, there is reason to be optimistic, and it is encouraging that there is a clear message from this Government that they recognised the hard working smallest businesses that are the heart and soul of the economy."

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