Jenny Tooth shares her thoughts on the budget and what it means for angels
Can the Chancellor beat the virus and rebalance the UK economy? This was the challenge that Rishi Sunak, our new Chancellor, had to address today when delivering his first post-Brexit budget.
The Chancellor’s approach reflected the need to ensure stability and security for our communities and businesses, whilst paving the way for prosperity tomorrow. In addressing the emergency, the Chancellor announced the Bank of England’s decision to cut 50 base points off the interest rate, complemented by a 3-point plan to offer businesses and employees support to address the disruption and hardships likely to be faced, including measures to address sick pay and access to benefits for employees and refunding costs of sick-pay for employers, whilst abolishing business rates for 20-21. Notably small businesses will have access to a new Coronavirus Business Interruption scheme being administered by the British Business Bank on top of a further £1bn working capital being made available through the banks. It’s too early to know whether these measures will be sufficient and companies with significant levels of employees and capital costs will be hardest hit, many of these likely to be in the regions outside the Golden triangle. Underpinning this is a strong focus on providing a significant boost of funding to the public services and NHS to ensure resilience to the impact on the health services offering a new £5bn Emergency Response Fund alongside the already agreed £6bn new NHS funding available.
Whist planning a review of fiscal rules, the Chancellor has announced a daring plan of public spending with an eye-watering £175bn being made available for roads, rail, housing and broadband to boost growth over the next 5 years. This reflects the government’s agenda to level up the regional economies and boost productivity in the underserved regions especially the north. Further specific measures to support devolved governments including additional funding of over £1bn and adding West Yorkshire to the existing 7 metro regions, whilst also announcing that several government departments will be transferring some of their main services into new regional locations.
The government’s spending in boosting productivity is also focused on increasing spending on technology and innovation. This includes a new £1.4bn Science Institute at Weybridge to tackle drug development and vaccines for the coronavirus, together with £900m additional spending on nuclear, space and electric vehicles. Perhaps most notable is the allotted £800m to develop a new “Blue Skies Funding Agency” to boost scientific research and innovation (reflecting Cumming’s interest in the US DARPA). At the same time, Sunak’s agenda will refocus R&D spending to regional Universities and Research Centres to address the monopoly on spending in the Golden triangle, whilst R&D tax credits for small businesses have received a small increase from 12% to 13%.
With a view to increasing small business access to investment, the Chancellor has announced further funding to the British Business Bank to support investment in businesses growth and innovation, including a further £200m additional funding for the venture capital and growth finance schemes and a further £200m to support investment in Life Sciences and Healthcare innovation with a view to unlocking further private sector investment. We look forward to seeing these new funds being launched to support successful scaling.
However, alongside this expenditure on VC funds, we need to ensure that we can continue to build an effective environment for the growth of angel and early stage investment especially in these underserved regions. Whilst there are no planned changes to the EIS or SEIS scheme, the Chancellor’s decision to reduce the cap on Entrepreneurs Relief from £10m to £1m (with immediate effect!) was disappointing. The ER scheme has helped to both stimulate entrepreneurship and risk-taking and encourages many exited entrepreneurs to recycle their savings in capital gains to launch new ventures or back the next generation of entrepreneurs. Perhaps we should take comfort that the scheme was not abolished and so potentially we can prove the case that this limit should be reviewed. At the same time a review of the EMI scheme has also been announced.
It was a bold budget and clearly Rishi Sunak has had one of the hardest challenges as a new Chancellor to balance spending priorities for future productivity and levelling up our regions whilst addressing a public health emergency. However, whilst we grapple with the immediate challenges, we hope that the measures announced for the longterm prosperity of this country will enable UKBAA and those we work with to establish an effective environment across all regions for investment and growth of small businesses, as the engine of the UK’s economic success.