The government has announced a £100million package of measures aimed at unlocking private investment for Britain’s entrepreneurs, start-ups and scale-ups, but business leaders have rounded on the plans, warning that established small firms are being forgotten while the broader strategy for enterprise remains “in a muddle.”
Brought into force at the start of the new tax year, the changes expand eligibility for the Enterprise Management Incentives scheme, which allows qualifying companies to offer employees tax-advantaged share options. The package also doubles the amount a company can raise through the Enterprise Investment Scheme and Venture Capital Trusts, both of which offer tax reliefs designed to channel capital towards higher-risk, early-stage businesses that struggle to secure growth funding.
Rachel Reeves, the Chancellor, said she was “backing business with a more active state” and making “big commitments to industry,” adding that the measures would help wealth creators access the finance critical to their success.
The reception from the business community, however, was notably cool. Critics pointed to the stark contrast between the sums involved and the £25billion a year the Treasury is now raising from employers following its increase to National Insurance contributions.
Katrina Young, a digital transformation strategist at KYC Digital, said the arithmetic does not flatter the policy. The expanded EIS, VCT and EMI reliefs are targeted at companies with gross assets of up to £120million and as many as 500 employees, she noted, leaving out the dental practices, family logistics firms and small bakery chains that employ the bulk of the workforce yet face an additional £900 per employee per year since the NI threshold was cut from £9,100 to £5,000. She pointed to British Chambers of Commerce data showing that 82 per cent of firms expect the NI rise to affect their business, with 58 per cent anticipating reduced recruitment.
The hospitality sector offered a particularly blunt assessment. Jess Magill, co-founder of Devon-based Powderkeg Brewery, said there is little point in throwing money at getting new companies off the ground if they are then taxed out of existence. She argued that what is needed is support for established businesses to survive, warning that popular venues are closing every week and the domino effect on suppliers is worsening.
Colette Mason, an author and AI consultant at London-based Clever Clogs AI, echoed those concerns, describing the £100million as “miserly” when set against the NI rises. She noted that the EMI expansion targets roughly 1,800 scale-up companies over five years, firms already attractive to investors, while the businesses that employ most people are cutting hours, freezing wages and reconsidering whether to hire at all.
Samuel Mather-Holgate, managing director of Swindon-based Mather and Murray Financial, said the government is sending mixed signals at precisely the wrong moment, increasing the amount companies can raise while simultaneously slashing the benefits for investors in those same businesses. The UK, he argued, needs to be incentivising companies both to start and to stay on British soil.
The announcement is likely to intensify the debate over whether the government’s growth agenda is reaching the businesses that need it most, or merely recycling a fraction of what it has already taken.