Jeremy Hunt, UK chancellor of the exchequer. Photographer: Jason Alden/Bloomberg
To his credit, the UK Chancellor Jeremy Hunt put the long-term interests of British businesses front and centre of the Autumn Statement.
Most critically, the Government announced it would make full expensing permanent. In 2017, full expensing was the best idea in politics you’ve never heard of; today, the idea that you should let businesses deduct the cost of any investment they do from their corporation tax bills is orthodoxy. As my colleague Derin Kocer explains: “Full expensing gives businesses what they need: incentives to make long-term investments. Making this policy permanent will offer certainty to invest and drive businesses to upgrade the nation’s capital stock, boosting our productivity and unlocking new opportunities for entrepreneurs and innovators across the country.”
Another crucial bit of tax tinkering came through the extension of the sunset clause to 2035 for the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs), which encourage individuals to invest indirectly in a range of unquoted smaller, higher risk trading companies. This follows calls from the EISA, the VCTA and most recently through the All-Party Parliamentary Group (APPG) for Entrepreneurship’s Funding to Flourish report.
Also of note, the Government announced it would be accepting all of the recommendations of the Independent Review of Spin-out Companies. Among these recommendations are calls for: academics and their institutions to agree spin-out deals on market terms which avoid unnecessary negotiations; greater disclosure of deals to increase transparency; and the ability for universities to use funding to cover the costs of university technology transfer offices.
Responding to the announcement, co-author of our most recent paper on spin-outs, Academic to Entrepreneur, Eamonn Ives, said: “Ensuring that as much of the research as possible which takes place in Britain’s universities can be turned into dynamic companies will be essential for growing the economy and tackling problems such as climate change or our ageing population. In theory, the recommendations made in the Independent Review of Spin-outs represent a good first step for enabling academic entrepreneurs to build investable startups of their own, but it remains to be seen how they work in practice. If problems continue to persist, the Government should not be afraid to go further when it comes to boosting Britain’s spinout landscape.”
The Government also announced it will progress the National Infrastructure Commission’s (NIC) April recommendations on planning by delivering reforms to return the Nationally Significant Infrastructure Project regime, which aim to strengthen the capacity of the planning system to deliver a better service for businesses. It will also bring forward plans for authorities to offer guaranteed accelerated decision dates for major developments in England in exchange for a fee, ensuring refunds are given where deadlines are not met and limiting use of extension of time agreements.
As we have argued in Strong Foundations, the UK’s rigid planning system drives up the cost of housing, office space, and lab space, and is severely holding back our startup hotspots around the country. Britain’s sclerotic planning system makes new infrastructure and housing more expensive to build and longer to develop. This hurts businesses who can’t otherwise make use of it, and denies opportunities for those who want to build it. Meanwhile, agglomeration is curtailed as people are prevented from moving to more productive areas to fulfil their potential. We therefore welcome the incentives for local councils and other reforms to speed up development.
With the Office for Budget Responsibility’s growth forecasts down, Hunt was right to focus on Britain’s businesses as the key driver of future prosperity. It’s just a shame that this long-term thinking has not always been present in other fiscal announcements made in the last 13 years. With Brexit, the pandemic and crippling energy prices, the last few years have been incredibly tough for entrepreneurs. As our recent Risk Readiness Report with Mishcon de Reya showed, a significant proportion of entrepreneurs (39%) believe the overall level of risk in the business environment is higher now than it was 12 months ago, and the same proportion (39%) think the level of risk will only increase in the coming year.
A spot of good news is long overdue.
