In the Budget, chancellor Philip Hammond announced that he supports Britain to be ‘at the forefront of technological revolution’ and pledged to ‘unlock’ £20 billion of patient capital, over the next 10 years, to help innovative high-growth companies.
He pledged to boost research and development (R&D), as he wants the UK to lead the world in ‘developing standards and ethics for the use of data and artificial intelligence (AI), and creating the most advanced regulatory framework for driverless cars in the world’.
Russ Mould, investment director at AJ Bell, comments: ‘The increases to R&D tax credits, a doubling of the enterprise investment scheme (EIS) annual allowance, funding for areas such as artificial intelligence, 5G mobile networks and charging stations for electric vehicles are all designed to incentivise investment in start-up companies and cutting-edge technology, as is the commitment to keep corporate taxes low so as to attract investment.’
Mould argues that the government’s plans to encourage apprenticeships, digital retraining, and the teaching and learning of maths must not be underappreciated. However, he points out that the actual sums of money involved are relatively small and the initiatives are relatively long-term in their nature.
Looking at the stock market, he adds: ‘The FTSE TechMark index (which focuses on innovative and technology companies) is up by 0.5 per cent, but then the so is the FTSE All-Share index; and some of the individual stocks which could benefit are playing it pretty cool as well – telecom networks testing specialist Spirent is up 1 per cent and intellectual property incubator IP Group is flat.’
Jason Hollands, managing director at Tilney, points out that the UK listed technology sector is, ‘sadly, tiny, and these various measures – which include a new government-backed venture capital fund to replicate the European Investment Fund - are really aimed at creating a favourable funding environment of young, unquoted companies to get access to scale-up capital.’ He adds: ‘From an investor perspective, the bigger impacts are to the EIS and VCT rules.’
Rebecca O’Keeffe, head of investing at Interactive Investor, agrees with this sentiment. She says: ‘The budget has proposed tightening the rules for EIS and VCT investments to support innovation and start-up companies. For those VCT and EIS providers who are already investing in early stage high-risk companies, this won’t be a major change.’
‘Overall, this is another attempt to ensure that the tax advantages of investing in these vehicles remain in the entrepreneurial spirit of the original framework, rather than simply a means to avoid tax. These changes should continue to provide support to innovative high-growth firms.’
‘I’m not sure there will be an immediate impact for investors,’ says Ben Yearsley, director at Shore Financial Planning. ‘It is designed to get companies investing more in R&D, I suppose in order to start building some world-beating companies. I'm not sure we have the patience here in the UK though.’
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