How Labour Can Fix the UK’s Tech Industry
One way for Labour to unlock capital is to leverage the power of pensions and allocate more of their funds to venture capital to fill the Series A funding gap, says Edward Prior, head of investor services at early-stage VC fund SFC Capital. “There’s more US pension fund money in UK startups than there is UK pension fund money,” he argues.
“Yes, we need to be the best place to start a business, and we really are on a world-leading footing with that, but we also need to be the best to scale a business, because we are losing too much of our value for our economy in those scale-up stages, where there is not enough money coming into series A and beyond.”
If the new government is looking for inspiration to bridge the funding gap, it could adopt some of the previous government’s initiatives and see them through. There was no mention in Labour’s manifesto of any changes to the Conservatives’ EIS (Enterprise Investment Scheme), SEIS (Seed Enterprise Investment Scheme), and VCT (Venture Capital Trust) tax schemes, but VC funds argue that it is important that these initiatives are maintained to improve the startup economy.
Russ Shaw CBE, founder of Tech London Advocates & Global Tech Advocates, a support community for startups, says the biggest issue is funding for companies seeking unicorn status. He also highlighted issues with the talent pipeline, which Labour could tackle by delving into the thorny issue of immigration.
“We have the Scale-Up Worker visa and the Global Talent visa, which are good, but it’s the process candidates have to follow that is fundamentally broken,” says Shaw.
Alan Chang from Fuse Energy, a clean energy company that launched two years ago, says his company has had to “jump through so many hoops” to bring talent from abroad over to the UK, and this is a problem Labour will have to fix by making high-skilled talent visas easier, quicker, and cheaper to acquire. “In my network, I know a lot of people who are very successful who have either left the UK or who are thinking about leaving,” he explains.
If Labour dropped the immigration health surcharge—a levy of around £1,000 ($1,276) annually for workers—it would make it much more attractive for skilled people to come to the UK, says Zach Meyers, assistant director for the Centre for European Reform. “The immigration surcharge is kind of insane, because it’s basically like a tax on their migrants. And that is a single step that would, I think, go a long way to addressing the skills problem.”
The new government would also do well to pay attention to the £250 billion of new value identified in the Alison Rose Review in 2019 that could be unlocked if women were backed to the same extent as men. Only 2 percent of VC funding is going to female funders, points out Emma Wright, partner at UK law firm Harbottle & Lewis, co-lead of the invest-HER campaign, and director of the Interparliamentary Forum on Emerging Technologies. She argues that there would be “a lot of benefit” from providing transparency on where investment money is going. “It would address both some of the missions around, for instance, social mobility or regional funding, but also the ability to then make an assessment of whether there is more to unlock within the economy.”
