The government has announced a £100 million package of measures aimed at mobilizing private investment for UK entrepreneurs, start-ups and scale-ups, but business leaders have watered down the plans, warning that established small businesses are being forgotten while the wider business strategy remains “in disarray”.
The changes will take effect at the start of the new tax year and expand eligibility for the Enterprise Management Incentives program, which allows eligible companies to offer tax-advantaged stock options to their employees. The package also doubles the amount a company can raise through the Enterprise Investment Scheme and venture capital trusts, both of which offer tax breaks to channel capital into riskier, early-stage companies that are struggling to secure growth funding.
Chancellor Rachel Reeves said she supported “doing business with a more active state” and making “big commitments to industry”, adding that the measures would make it easier for wealth creators to access the finance crucial to their success.
However, the response from the business community was extremely positive. Critics have pointed to the stark contrast between the amounts involved and the £25 billion a year the Treasury is now raising from employers following the increase in national insurance contributions.
Katrina Young, digital transformation strategist at KYC Digital, said the arithmetic does not flatter politics. The expanded EIS, VCT and EMI relief targets businesses with gross assets of up to £120 million and up to 500 employees, she noted. Excluded are dental practices, family logistics businesses and small bakery chains, which employ the majority of the workforce but face an additional £900 per employee per year as the NI limit has been reduced from £9,100 to £5,000. She pointed to data from the British Chambers of Commerce showing that 82 per cent of companies expect the NI rise to impact their business, with 58 per cent expecting a fall in hiring.
The hospitality industry was particularly affected. Jess Magill, co-founder of Devon-based Powderkeg Brewery, said there was little point in pouring money into setting up new businesses if they would then be wiped out with taxes. She argued that established businesses needed to be supported to survive, warning that popular venues were closing every week and the domino effect on suppliers was getting worse.
Colette Mason, author and AI consultant at London-based Clever Clogs AI, echoed these concerns, describing the £100 million as “stingy” compared to the NI increases. She pointed out that the EMI expansion over five years targets about 1,800 expanding companies that are already attractive to investors, while the companies that employ the most people are cutting working hours, freezing wages and considering whether to hire new employees at all.
Samuel Mather-Holgate, managing director of Swindon-based Mather and Murray Financial, said the government was sending mixed signals at exactly the wrong time by increasing the amount companies can borrow while cutting benefits for investors in the same companies. The UK, he argued, must create incentives for companies to set up and remain on British soil.
The announcement is likely to intensify the debate over whether the government’s growth agenda is reaching the companies that need it most or merely recycling a fraction of what it has already earned.
