UK Determined To Improve Start-up Performance

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UK government doubles down on support for start-ups, but challenges remain.

The UK’s tech secretary, Michelle Donelan, has set out plans to make Britain a ‘scaleup powerhouse’. Setting out her plans in a recent speech, Donelan said a big part of her plan focused on increasing the number of tech unicorns in the UK to make up about 50 per cent of tech unicorns in Europe by 2030 – up from about a third today.

The UK’s tech sector is already the largest in Europe – worth over $1 trillion – and is the biggest home to tech venture capital investment. The UK is also home to the largest concentration of tech unicorns in Europe – including the likes of Revolut, Graphcore and Checkout.com.

I believe the UK should account for at least 50 per cent of all new unicorns created by Europe as a whole, a true scale-up powerhouse, where opportunity and high skilled jobs fuel economic growth across the country – including outside cities.

Michelle Donelan, UK Tech Secretary.

“Now my ambition is that the UK should close the gap on the US, matching its current levels of VC investment as a share of GDP, by 2030 – about £5 billion per year extra.”

Donelan also announced the introduction of a scale-up forum, comprising of industry leaders, investors and regulators. It will provide a support service for the ‘20 most promising science and technology businesses wanting to scaleup’ and help overcome issues which are in the way of their growth potential – in areas such as IP, employment and expansion.

Meeting the challenge

However, obstacles remain: One of the biggest pain points which has been addressed by TechUK, an industry lobby group, is there is a lack of data centres in the UK – something the tech secretary is keen to promote.

On the back of that, there is a another challenge: the sluggish performance of HMRC, the UK’s tax authority, which, according to a business group, is holding back entrepreneurs,.

Buy Women Built (BWB) says its members have been left frustrated when trying to access tax incentive schemes designed to support start-ups. The group said trying to contact HMRC was “very difficult” and in some cases delays in receiving the tax credits meant firms could not pay bills. HMRC said “the overwhelming majority” of all valid claims were paid on time.

Urgent review

“In recent months the female founders in our community have increasingly experienced issues accessing key government incentives aimed at boosting new businesses and innovation,”says Sahar Hashemi, co-founder of BWB, a network of some 450 female entrepreneurs.

In particular, she points to R&D (research and development) tax credits and EIS (Enterprise Investment Scheme) tax relief.

R&D tax relief was introduced in 2000 in order to support small and medium-sized businesses (SMEs) when they invest in equipment that will help them to innovate.

EIS was introduced in 1994 and makes start-ups who qualify more attractive to investors. It allows shares to be bought in a more tax-efficient way.

“We would ask that an urgent review take place on the rules around funding, to ensure that all HMRC staff are aware of the legitimacy of these claims,”says Ms Hashemi, who co-founded High Street chain Coffee Republic and is the former co-chair of the government’s Scale Up Taskforce.

She claims the issues with HMRC are hitting female-founded companies particularly hard because they currently receive only 2% of venture capital in the UK.

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