THE CHANCELLOR has unveiled a £20bn ‘action plan’ to help innovative firms scale up, in order to achieve the goal of helping a new tech business launch every half hour.
Philip Hammond (pictured) used Wednesday’s speech to detail new measures to support the UK’s digital and tech industries, unlocking over £20bn of new investment over the next 10 years.
“We have some of the world’s best companies,” he said.
“And a commanding position in a raft of tech and digital industries that will form the backbone of the global economy of the future.
“A new tech business is founded in Britain every hour.
“And I want that to be every half hour.”
Among the measures is a new £2.5bn investment fund incubated in the British Business Bank (BBB). By co-investing with the private sector, a total of £7.5bn of investment will be unlocked, the Treasury said in the Budget document.
The government also vowed to extend the BBB’s enterprise finance guarantee scheme to March 2022 and expand the programme to support up to £500m of loans per year. The initiative helps smaller businesses that would struggle to obtain finance, by providing a government-backed guarantee to accredited lenders.
“The government will also work with businesses, lenders, insurers, the BBB and the Intellectual Property Office to overcome the barriers to high growth, intellectual property-rich firms, such as those in the creative and digital sector, using their intellectual property to access growth funding,” it said.
Keith Morgan, chief executive of the British Business Bank, said the move increased its funding by two-thirds.
“The additional finance announced today will allow the British Business Bank to support up to £13bn of long term patient capital, enabling more smaller businesses to scale up and fully realise their growth ambitions,” he said.
“The expansion of our flagship Enterprise Finance Guarantee programme will also enable us to support up to £2bn of new lending over the next four years.
“This Budget presents an exciting opportunity for us to strengthen finance markets for ambitious, growing firms across the UK.”
There was also a boost for enterprise investment schemes with the annual allowance for people investing in knowledge-intensive companies doubling to £2m.
Hammond also pledged to replace any funding withdrawn from the European Investment Fund and boosted funding for the National Productivity Investment Fund from £23bn to £31bn.
In another measure to boost tech firms of the future, Hammond unveiled a £40m fund to train maths teachers.
“Knowledge of maths is key to the high-tech, cutting edge jobs in our digital economy,” he said.
The extra funding for technology and innovative firms was welcomed, but there are warnings that the government must maintain its commitment over the long term.
“A long-term vision and strategy to put the UK at the forefront of global digital innovation is absolutely critical for the long term welfare of the country,” Mark Abbs, head of global mobility tax services at Blick Rothenberg, said.
“It is even more critical however that we continue to properly invest and support the digital sector and innovation is not treated by the government as short term attention grabbing headlines.”
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Angus Dent, chief executive of business peer-to-peer lender ArchOver says the Budget could have gone further to help small- and medium-sized enterprises (SMEs), which will be the key drivers of growth.
“The UK’s productivity growth continues to decrease and we’re looking in the wrong place for answers,” he said.
“It’s not just a case of everyone working a bit harder. Investment in public infrastructure and fiscal policy will be the defining factors that help the UK catch up, while real growth will come from our SME sector.
He said the expansion of the National Investment Fund was a good start but more was needed to help them access finance and be aware of the alternatives.
“Britain is known as a nation of entrepreneurs,” Dent added.
“Yet we’re in real danger of not giving our SMEs the support they need to thrive. We need a bottom-up approach where small businesses with bright ideas have access to the finance and advice they need to grow. Only then will we have the firm economic foundation we need to build our productivity post-Brexit.”
This view was echoed by P2P platform MarketInvoice chief executive Anil Stocker.
“Doubling the EIS limits for innovative companies will encourage even more private investment, the government now needs to simplify the EIS rules,” he said.
“As ever, the devil will be in the detail but properly targeted, this could encourage private investment in innovation.
““The Patient Capital Review, which was completed earlier this year, revealed that UK startups were experiencing a lack of scale-up funding after they became ineligible for smaller venture capital investments.
“In a constrained bank lending environment, fast-growth UK businesses need the right support and finance to help them as they scale up. The £2.5bn seeded to the British Business Bank will help get timely liquidity to these high-growth businesses enabling them to grow and achieve their ambitions.”