What Does The UK Autumn Statement Mean For Startups?

UK Finance Minister Jeremy Hunt has unveiled the Autumn Statement, a policy update designed to stimulate growth across various sectors.

This statement comes at a crucial time for the UK, as Prime Minister Rishi Sunak’s government seeks to establish the nation as a leading tech and innovation hub. Amongst expectations from the tech community, the Autumn Statement promises increased funding and initiatives targeting key areas of the economy. These measures are expected to impact startups significantly, particularly in technology-driven and green sectors.

Let’s take a look…

Major Funding for Key Sectors

In an effort to boost the UK’s economy, Finance Minister Jeremy Hunt yesterday announced significant funding in various sectors.

Most notably, the manufacturing sector will receive £4.5 billion to stimulate growth across eight key areas, with a strong emphasis on green technologies. This includes £960 million specifically for a “green industries growth accelerator,” focusing on renewable energy and carbon capture. Additionally, life sciences will see an injection of £500 million, while the automotive sector will benefit from a £2 billion investment.
 

Pension Fund Amends

The Autumn Statement included amends to pension funds. Hunt proposed the creation of new investment vehicles for these funds, including a growth fund managed by the British Business Bank. This move is expected to unlock around £75 billion by 2030.

James Clough, CTO and Co-founder of Robin AI commented on this

“We are pleased to see the Chancellor’s Mansion House reforms. UK pensions are a source of untapped wealth which will both enable more investment into fast-growing tech startups and help the UK cement itself as a global leader in the sector. With increased funding, we would not only see more startups harnessing rapidly evolving technologies but also more skilled individuals being attracted to the UK and world-leading companies staying and listing here. This is a welcome step because the government is promoting a regulatory and investment environment which fosters innovation and funding for new and developing technologies. This decision will slow down startups that are looking to enter or are already in the global race.” 

Focus on Hardware and AI

Hunt emphasised the UK’s status as a leading tech nation and announced a £500 million investment over the next two years in supercomputer centres for the AI sector. This investment shows the government’s commitment to making AI a pillar of economic growth.

David Strong, Partner at Marriott Harrison commented on this

“Many of our VC clients are backing the UK’s best AI-driven companies, so will be optimistic about the UK’s commitment to the sector following today’s announcements of investing £500m and the recent Bletchley Park summit. This will only increase the weighting towards investment in AI companies which we have seen throughout 2023.”

Encouraging Foreign Investment

A new “concierge service” aimed at large international investors was introduced to make their investment process in the UK much easier. This seeks to attract and facilitate overseas capital flow into the country, modelled after successful examples from other nations. Not only does this help investors, it also makes fundraising easier for startups in the UK.

R&D and Loss-making Business Support

The UK’s Autumn Statement announced two key changes for small and research-focused businesses.

First, it will merge the R&D tax credit, which refunds companies for research & development costs, with SME schemes, streamlining support for small to medium-sized businesses engaged in research and innovation. Second, the tax rate for businesses not currently making a profit will be reduced from 25% to 19%. This move aims to ease the financial burden on these companies, allowing them to invest more in growth and development, particularly those heavily involved in creating new technologies or improving existing ones.

James Clough, CTO and Co-Founder at Robin AI commented on this

“More funding is pivotal to innovation. A simplified R&D tax credit will be beneficial to both early-stage companies and those that are looking to scale. This decision particularly affects AI startups as high computing costs can make research within this sector a very capital-intensive exercise. Simplifying tax credits for deeptech and AI will be transformative for the sector and boost confidence for investors and founders alike.”

New Investment Zones and Payment Reforms

Hunt plans to establish 12 new investment zones across the UK, aimed at stimulating £3 billion in private investment and creating 65,000 jobs. The government also introduced measures to ensure timely payments to small businesses, requiring companies bidding for government contracts to demonstrate an average invoice payment time of 55 days.
 

Funding for Medical Innovations and Apprenticeships

Imperial College, in collaboration with the NHS, will receive £5 million to support new medical innovations. Additionally, £50 million will be allocated for apprenticeships in engineering and other sectors facing talent shortages, potentially aiding tech companies in hiring junior talent at reduced costs.

New Investment Zones and Payment Reforms

Hunt plans to establish 12 new investment zones across the UK, aimed at stimulating £3 billion in private investment and creating 65,000 jobs. The government also introduced measures to ensure timely payments to small businesses, requiring companies bidding for government contracts to demonstrate an average invoice payment time of 55 days.

Missed Opportunity in Corporate Tax Policy

Despite these supportive measures, the decision to maintain the corporation tax at 25% (previously raised from 19%) is seen as a missed opportunity. Lowering the corporation tax could have made the UK more competitive in attracting and retaining businesses, especially startups seeking a favourable tax environment.

The Wider Impact

Claire Trachet, CEO and Founder at Trachet, highlights the implications following the chancellor’s Autumn Statement for businesses and how this will affect startups, the tech sector and investors alike:

“Today’s Autumn Statement provided welcome news for what has been a turbulent economic period for the UK’s investment ecosystem. The government are doubling down on their backing for business growth in the UK, with the extension of the tax break as well as introducing measures to boost foreign investment, relief is on the horizon for companies that have been facing major economic challenges.

“The chancellor’s announcement comes hot on the heels of the lowest levels of inflation since June of last year and a second consecutive interest rate hold, showing strong signs of the UK economy rebounding, which can only spell positive news for businesses across the country.

“The government’s continued commitment to strengthening the country’s position in artificial intelligence through through a further £500m in funding for UK AI will enable tech firms to bring cutting-edge products to market faster and ensure that Britain doesn’t lose its spot as a leader in Europe for this sector. Following on from the success of supercomputing centres in Edinburgh and Bristol, the government are doubling down on their ambition to make the UK an AI powerhouse”. 

Conclusion

The Autumn Statement by Finance Minister Jeremy Hunt marks a pivotal moment for the UK’s startup ecosystem.

With substantial investments in manufacturing, green energy, and the AI sector, along with reforms in pension funds and a focus on foreign investment, the government has laid out a strong framework for fostering innovation and growth. However, the decision to maintain a higher corporation tax rate poses challenges, potentially affecting the UK’s competitive edge in attracting global businesses.

As the UK navigates post-Brexit economic scenarios and global market dynamics, the impact of these measures in bolstering startups and driving tech advancements will be keenly watched by those both within and outside of the UK.