The Autumn Statement yesterday saw a number of overhauls for the UK start-up ecosystem, from Chancellor Phillip Hammond’s pledge for the British Business Bank to step in when European scale-up capital dries up, to attractive tweaks to the enterprise investment scheme (EIS) for investors backing knowledge-intensive businesses.
One London-based adviser however, says that Budget 2017 was a disappointing day for SMEs and scale-ups as Hammond effectively sidelined them. Sancho Simmonds is a scale-up lead at Smith & Williamson, the accountancy, investment management and tax group. According to him, Patient Capital review expectations failed to materialise, and a lot was left unaddressed by the Chancellor.
“It’s vital that scale-ups remain front and centre despite Philip Hammond barely mentioning them,” says Simmonds. “The Chancellor mentioned scale-ups just once in his speech despite pointing out how those businesses generate over 50 per cent of the jobs for the entire UK.”
While his speech mentioned many positive changes underway for small businesses, such as the freezing of the VAT threshold or further analysis of business rates, Simmonds stresses that there was very little to actually explain just how the UK was going to help scale-up businesses grow.
Research shows that by closing the scale-up gap there is potential to deliver up to 150,000 new jobs across the UK and as much as £225 billion toward UK GDP, both by 2034. Importantly, this growth is across the country and not just confined to London and the big cities.
The EIS limit was raised to £2 million as well as increasing amounts to knowledge-intensive firms, which Simmonds acknowledges is critical to helping the UK’s high potential young businesses succeed. “While many were worried about a cut, a raising of the investment limit for EIS is a big boost for scaling businesses,” he says. “However, we need the government not to focus just on the creation of entrepreneurial tech businesses, but on their ability to scale and longevity. It is successful scaleable businesses the UK needs, not volume.”
There are five key areas that almost every business struggles with as they scale up, Simmonds adds.
- Access to finance;
- Professionalising core business functions and developing leadership capabilities;
- Growth through acquisitions;
- Hiring and retaining top talent; and
- Having access to the right external markets to trade.
“The Chancellor has missed an opportunity to look at these areas as focal points for opportunity. A lot of good work has been done by government already, such as from Scale-Up Minister Margot James, as well as private sector bodies such as the ScaleUp Institute but without a central organising force it’s a little haphazard,” he says. “More joined-up thinking would be most welcome.”