As Shadow Chancellor, Reeves acknowledged the vital role of innovation: "Innovation is a great British strength. It defines our history, and it endures today in our entrepreneurs and businesses, in our world-leading universities, and in our people."

But will the upcoming Autumn Budget reflect these words, translating them into concrete action to support the very entrepreneurs and businesses she lauded? For those of us who've poured our hearts and souls into building businesses, the tax changes on the horizon are a source of both anticipation and apprehension.

Preserving Lifelines for Early-Stage Companies

The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) have been instrumental in fostering a vibrant start-up culture since their introduction in 1994 and 2012, respectively. In the 2022-2023 tax year alone, EIS and SEIS facilitated a combined £2.1 billion in funding for thousands of UK businesses.

The recent extension of the EIS and VCT sunset clause to 2035 is a welcome step, providing much-needed certainty to entrepreneurs and investors. However, maintaining these schemes is just the first step. To truly unleash the power of innovation, the government must go beyond preserving the status quo and actively strengthen these programmes, making them even more accessible and attractive to both entrepreneurs and investors.

Balancing Revenue and Incentives

A potential increase in Capital Gains Tax (CGT) looms large over the entrepreneurial landscape. While the Treasury's projected £22 billion overspend necessitates increased revenue, it's crucial to strike a balance that doesn't stifle entrepreneurial ambition.

Business Asset Disposal Relief (formerly Entrepreneurs' Relief) offers a reduced CGT rate for entrepreneurs selling their businesses, recognising the inherent risks and sacrifices they make. Any changes to this relief, or a general increase in CGT, could have a chilling effect on the entrepreneurial spirit.

Instead of penalising success, the Autumn Budget should focus on creating a tax environment that rewards risk-taking and innovation. This could involve expanding Business Asset Disposal Relief, introducing new tax incentives for entrepreneurs, or seeking alternative revenue streams that actively support and encourage business expansion.

The Broader Impact: Investors, Behavioural Economics, and the Economy

The implications of the Autumn Budget extend far beyond entrepreneurs themselves. Investors, who provide crucial capital for startups, are also keenly observing the developments. While maintaining Business Asset Disposal Relief and preserving EIS/SEIS could make start-up investment more attractive relative to other asset classes, the broader impact of a CGT increase cannot be ignored.

Investors are not always driven solely by rational economic calculations. A general increase in CGT, even with targeted reliefs, could create a perception of a less favourable investment climate in the UK, potentially leading to a shift in investor sentiment and hesitancy to invest.

Moreover, a less favourable tax environment could make the UK less attractive to international talent and investment. In a globalised world, the UK must remain competitive. A tax system perceived as discouraging risk-taking and penalising success could drive away the very individuals who are essential for driving our economy forward.

Bridging the Venture Capital Gap

Chancellor Reeves has highlighted the transformative potential of venture capital, estimating an additional £16 billion could flow into the UK economy if investment matched US levels (as a percentage of GDP). This injection of capital would fuel innovation, create jobs, and drive economic growth.

The Autumn Budget presents an opportunity to close this investment gap through a series of targeted measures. Further reductions in capital gains tax for long-term startup investments, alongside an expansion of the EIS and SEIS schemes, would encourage greater investment in early-stage businesses. Introducing tax credits for investments in high-growth sectors like clean energy, artificial intelligence, and biotechnology could also direct capital towards areas with significant potential for innovation and job creation.

On the regulatory front, streamlining the visa process for entrepreneurs and skilled workers would attract global talent to the UK. Simplifying regulations for raising capital and listing on public markets would make it easier for businesses to access the funding they need to grow. Notably, the creation of a regulatory sandbox for innovative technologies, like the successful FCA Sandbox, would allow new ideas to be tested and developed in a controlled environment, fostering an environment where groundbreaking solutions can thrive.

The government could also play a more active role by establishing public-private partnerships, creating dedicated funds for strategic sectors, or expanding the British Business Bank's mandate. These actions would send a strong signal to the market that the UK is committed to supporting innovation and entrepreneurship.

By incentivising venture capital investment and creating a supportive environment for high-growth companies, the government can lay the groundwork for a more dynamic and prosperous future for the UK. This approach will empower entrepreneurs across all sectors to scale their businesses and foster a culture of risk-taking and innovation, ultimately driving economic growth and creating high-value jobs for the future.

A Plea for Long-Term Vision

The Autumn Budget is a pivotal moment for the UK economy. It's time to move beyond rhetoric and implement policies that genuinely support entrepreneurship and innovation. Labour’s General Election message was about “Change” – and we must hope that this change recognises the vital role of entrepreneurship and embraces a more entrepreneurial approach to policymaking.

Small and Medium-sized Enterprises (SMEs) make up 99.9% of the UK business population, forming the backbone of the economy. A tax system that discourages entrepreneurship or limits SME growth will ultimately hinder national progress.

While the extension of the EIS and VCT schemes is a positive step, it’s only part of a larger picture. The Autumn Budget offers a chance to build on this momentum, crafting a comprehensive tax policy that fosters entrepreneurship, encourages investment, and fuels long-term economic growth.

Balancing fiscal challenges and sectoral needs – from healthcare to pensions – is complex. Yet, it’s critical to remember that startups are the engines of future growth. They create jobs, spur innovation, and generate the wealth that sustains broader societal needs. The Government must prioritise investment in emerging industries and technologies, even if immediate returns are not visible.

The decisions made in the Autumn Budget will reverberate far beyond the next five years. The hope is that these choices reflect a balanced, forward-thinking vision, recognising the indispensable role of entrepreneurship in securing a sustainable and prosperous future for the UK.