What would work do? ‘Startup Review’: Future UK venture capital policy, tax incentives and access to capital | Jobs Recent

‘Start-up review’ though not official policy hints at Labour’s thinking on venture capital’s role in stimulating growth

With Labor leading strongly in the polls and the next general election due to take place by 11 January 2025, this is the first in an occasional series examining Labour’s evolving business and law policies.

“Startup, Scaling”

Labor released the results of its “Startup Review” – discussing venture capital funding, tax breaks for entrepreneurs and investors and changes to the operation of British Business Bank (BBB) ​​- 8 December 2022.

The review is not official labor policy (“the ideas contained in this document will be the basis for the development of our next manifesto“), but Shadow Chancellor Rachel Reeves is keen, welcoming it as”a radical plan to make the UK a fast-growing global start-up hubso it has some weight as an indication of how Labor thinks about the venture capital industry.

Policy Recommendations

The review groups recommendations around a variety of topics, three of which are of particular interest to the venture capital industry.

1. Unlocking institutional investments: copying the “Tibi” scheme.

By “the power to summon the government”, the involvement of institutional investors such as pension funds and VC investors should be improved – mainly by copying the French “Tibi” scheme.

This would bring together participating institutional investors with an accredited list of VC firms, with investors being “he asked“(what this means is not clear, although the requirement implies) to”allocate a small portion of your funds to the program“. The apparent obligation on participating investors to commit capital would be mitigated if they had”full freedom to choose VC funds from the list in which to invest“.

The review suggests British Patient Capital, a subsidiary of British Business Bank, could be required to compile a list of accredited VC firms.

Other recommendations for unlocking investments include requiring DC pension funds below a certain size to consider whether they are large enough to act fully in the interests of their members, and whether they should consolidate to gain more negotiating power over fees and developing improved management and expertise; and whether long-term asset fund products should be available to certain Individual Savings Account (ISA) investors.

2. British Business Bank: independence and co-investment

The review recommends giving the BBB more operational independence to allow it to “plan for a longer time horizon and make it more ambitious“so giving”greater certainty for the entire funding ecosystem around start-ups“.

Another recommendation, among several on the BBB, is to establish a framework that allows DB pension schemes and insurers to co-invest with the BBB on comparable terms, enabling them to “to effectively use BBB’s due diligence“.

3. Incentives: Tax and R&D

The review recommends that Labor maintain the Seed Enterprise Investment Program (SEIS) and Enterprise Investment Program (EIS) and commit to continuing the EIS and Venture Capital Trust Incentives after they expire in 2025.

EIS and SEIS should be reviewed in terms of scope, scale and design to “make sure they provide the right incentives“, including whether the limits on how many companies can raise or caps on the investor’s side are too low, whether the qualifying period should be extended and whether there are innovative sectors excluded from the current rules.

Labor should ensure the continuation of the current system of tax credits for research and development”adequate incentives for investment and innovation“by high-growth companies

Commentary by Osborne Clarke

The review – which also discusses public procurement and university spin-out policy – is not official Labor Party policy. Two years after the last date for the next general election, Labor is still searching for a detailed political platform, and this review is part of that process.

Nevertheless, the enthusiasm of the shadow chancellor (a former Bank of England economist) and the relatively conventional nature of the recommendations in the review suggest that Labor is carefully considering how the venture capital space can play a role in spurring economic growth.

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