What does the Budget mean for FinTech? – Hear from Iana Vidal, Head of Policy and Government Affairs at Innovate Finance
Uncategorised, Blogs, FinTech on 3rd March 2021
This time last year, a matter of weeks into his new job, Chancellor Rishi Sunak delivered a Budget that announced an unprecedented package of support for individuals and businesses across the country as the pandemic took hold.
This year however, with a successful vaccine campaign underway, there are tentative signs that the economy could bounce back when restrictions are lifted, and this Budget puts in place a safety net to allow businesses to fully recover as we emerge from the crisis.
The Chancellor has also used this Budget to look to the future, and an economy driven by entrepreneurship and innovation that delivers the jobs and technology of tomorrow. Young people and employment, the levelling up agenda, ‘greening’ the economy, and FinTech as one of the key drivers of the UK’s post-Brexit, post-pandemic success, featured heavily in the Government’s ‘Build Back Better’ plan for growth. Alongside the recommendations in the Kalifa Review, these measures have the potential to help the UK’s FinTech sector forge ahead of its peers.
- Extensions to existing emergency support measures until September, including a tapered furlough scheme, expansion of support for the self-employed, reductions in VAT, and the suspension of business rates until the end of June.
- A Recovery Loan Scheme for businesses of all sizes for loans from £25,000 to £10 million with an 80% government guarantee to last until the end of the year. This replaces the existing loan schemes, Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans (BBLs). A number of FinTech lenders have played a key role in delivering vital funding to businesses during this period, and we expect many to participate in this new scheme.
- Recommendations in the listings review by Lord Hill to enhance the UK’s position as an international destination for equity listings, including reforms to modernise listings rules, reduce free float requirements and allow for special purpose acquisition companies (SPACs). With a number of FinTechs looking to list in the next few years, these measures will help to provide greater options for growth and patient capital in the private and public markets. Innovate Finance provided a submission to the review and responded to the final report.
- Future Fund: Breakthrough to stimulate investment in key sectors, which will be focused on companies with high R&D intensity that are aiming to raise at least £20m of funding. This is a successor to the Future Fund and will help to plug the growth capital gap for promising companies as they scale. You can read more about our work on the growth capital gap in our report with the Scale Up Institute and Deloitte.
- Under the Global Talent visa route, a scale up visa stream for highly skilled candidates from abroad accepting roles in high growth firms. There will also be improvements to visa processes to support scale-ups and entrepreneurs. The FinTech sector has been calling for these reforms for many years, and this was a key recommendation in the Kalifa Review.
- Consultations on the expansion of the Enterprise Management Incentive (EMI) scheme, and R&D tax credits. Access to the scheme has been a particular challenge for fast-growing FinTechs and an expansion of its limits will help companies to attract and retain the best talent.
- Reforms to pensions regulation to encourage investment in innovative firms. The government will consult on the ability of pension schemes to invest in a broader range of assets.
- A core focus on jobs and skills – further funding for apprenticeships and traineeships to support young people, and those retraining, into high quality, well-paying jobs. A number of FinTechs are already taking advantage of these programmes, like the Kickstart scheme, to train up young people interested in building careers in the sector.
- Investing in green and new technologies, including a UK Infrastructure Bank to deliver projects to build a sustainable economy, support to help businesses invest in their tech capabilities through Help to Grow, and a network of freeports in cities across the UK to to make it easier and cheaper to do business.
- Corporation tax will increase to 25% in 2023, with concessions for profits below £50,000 and a tapered scale for profits up to £250,000.
- The Super Deduction – a tax break to encourage business investment.
- Extended loss carry back for businesses. To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carry-back rule will be temporarily extended from the existing one year to three years.
This package of measures signals a sea change in Whitehall on the UK’s future economic success, with high growth sectors like FinTech at the heart of this strategy. With a renewed focus on FinTech within Government, and an official response to the Kalifa Review expected in the coming months, the spotlight is firmly on the sector and the potential for technology and innovation to fuel fairness, transparency and sustainability in financial services.
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