Free childcare and an AI revolution: Spring Budget business demands

One last roll of the dice before the coming election? All eyes are on Jeremy Hunt this week, as the Chancellor of the Exchequer reveals his Spring Budget announcements in an attempt to woo voters in a crucial election year. With a national insurance cut catching attention, the expected tax giveaway has already emerged. But, business voices are seeking far more assurance from the Chancellor’s office.

With our own research finding that the majority (58%) of small business owners would support a change in government this year, Hunt is playing to a tough crowd. The business landscape is reeling after a bruising couple of years that have seen some huge brands tumble into administration, with The Body Shop as the most recent high profile example.

From our research findings, UK businesses are keen to see the government prioritise growth-oriented policies. We surveyed 546 small business leaders, and a quarter of respondents (25%) emphasised the need for increased access to capital and funding. Other favoured initiatives included reductions in corporate tax rates; subsidies for workforce skills training, and business grants supporting sustainable practices. These policies are geared towards access to vital capital; cost reductions; increased productivity, and heightened competitiveness.

Despite the gloomy polling for the Conservative party, there is still a business vote to play for. We spoke to UK business leaders to hear from them directly on what government support and initiatives they’re keenest to hear from in the Budget – or, in the upcoming election manifestos.

“The high cost of childcare disproportionately hurts small businesses”

“Significantly more government funding for free childcare would be of huge benefit to the technology ecosystem. The high cost of childcare disproportionately hurts small businesses and organisations – a key driver of innovation and employment in the economy.

“Entrepreneurs and early employees in small businesses often have to work extremely long hours, without the flexibility of those working for larger employers. For example, it is almost impossible for a female founder to take a year’s maternity leave. This creates a double hurdle for female entrepreneurs who already struggle for anything close to an equal share of investment. Small businesses are also unable to match the salaries of giant corporations. This makes it harder to attract parents who are shouldering crushing childcare costs.

“If free childcare started before two years of age, was not means tested, and could be paid for pre-tax it would be a big boost to the entrepreneurial and small business ecosystem, and to women in particular.”

Robyn Scott, CEO and co-founder of Apolitical

“Support early-stage AI startups”

“Government support for early-stage and scaling AI startups, which have historically led the charge on AI and have the potential to truly revolutionise the UK’s economy, is crucial. Three areas stand out where the government can help.

“Make it easier and more cost-effective for private investors to invest in early stage and scaling AI startups. The R&D tax credit process, recently fraught with difficulties, must be optimised. Finally, due to the regulatory uncertainty still prevalent in the space, the government should think about offering free support to navigate legal and ethical complexities to startups seeking to build a sustainable future in the space.”

Roeland Decorte, CEO and founder of Decorte Future Industries

“Don’t stifle the growth of female-focused and led businesses”

“The government changing the rules for what constitutes and classifies as a high net worth individual has been difficult to stomach for the female investor community. Not only do these changes disproportionately affect female investors, but it will also stifle the growth of female-focused and led businesses (who are often championed by female investors).

“Reducing the diversity of the LP base is in no way helpful for founders. I am sure it is not the government’s intention to restrict investment into the UK’s early-stage businesses on the basis of gender. It simply does not fit with the UK’s goals of becoming a science and technology superpower!

“We also need more transparency around R&D tax credits, which have been subject to frequent changes over the last few years. From cuts to bureaucratic burdens, the government has made it harder for research-based and innovation-led companies to reap tangible benefits from the scheme. Simplifying the tax credit system will be critical to developing world-leading companies here in the UK.”

Priya Oberoi, Founding General Partner at Goddess Gaia Ventures

“There are common myths surrounding angel investing that put women off, you have to either be extremely wealthy, an exited entrepreneur or from a private equity background. This is not the case. The reversal of the angel investment threshold will be fantastic news, which we’re hearing will be confirmed tomorrow.

“In a nutshell, if you have more women angel investing, it means more money for female founders. We need more intelligent people, who have achieved success in their career or who own a business and therefore have the financial capacity to angel invest in our ecosystem.”

Sarah Turner, Home Grown Club Ambassador and CEO & Co-Founder at Angel Academe

“Promote a favourable regulatory environment for fintech innovation”

“Continued investment in tech infrastructure is essential, and collaboration between the government and fintech companies can drive growth. This includes support for digital banking infrastructure, cybersecurity measures, and digital payments.

Such investments would enhance the efficiency and security of the financial ecosystem. With the cost of living crisis continuing to loom, government focus on financial inclusion and initiatives aimed at promoting this, as well as digital literacy, is crucial.

Measures that promote a favourable regulatory environment for fintech innovation enable clear and conducive regulations, which can empower digital players to provide useful financial services and solutions for people.”

Babs Ogundeyi, Group CEO and Founder, Kuda

“Take the once-in-a-generation opportunity to transition to a clean, green, cheaper economy”

“Without making real tangible changes at the Spring Budget, I worry that the government will miss out on a once-in-a-generation opportunity to transition to a clean, green, cheaper economy – which will be to the detriment of everyone. So far there has been speculation about the Chancellor announcing VAT relief on EV charging. This would be a small win, but it feels more like box-ticking than anything that’s going to have a huge impact on the climate crisis we’re facing today.

“There’s a real opportunity for the government to create a ‘green sovereign wealth’ fund by supporting the green transition – sharing in the rewards from British innovators and improving the nation’s long term prospects. Right now, the government is stuck in a 20th century mindset and we’re missing the boat.

“I’d also like to see new policies in the budget make it easier for innovative startups to receive the funding they need. My business, Smart Green Shipping, has secured government funding in the past, but not without our fair share of challenges. One of these is match funding: unless a startup receives a 100% grant, they are tasked with proving where the rest of the funding will come from.

Often, a startup just can’t match the remainder, and the government grant falls through altogether. I’d like to see the government consider more 100% funding grants to support these innovative startups that have the potential to change our tech landscape and turbocharge our economy.”

Di Gilpin, founder and CEO of Smart Green Shipping

“Consider specific incentives to encourage investment in unlisted companies”

“The UK is home to some of the world’s most promising early-stage innovation. It’s encouraging to see that unlocking previously untapped capital to fund this is a top priority for the government through the Mansion House reforms. Hopefully, a larger pool of potential investors will be unlocked.

“It will be interesting to see how this new investment form is approached. Specifically, whether investments will be made with long-term, mutually beneficial gains in mind, rather than the short-term sprint for revenue as with angel and venture capital investments. Of course, this is a good start to unlocking potential, but to make the most of it, the government needs to consider specific incentives to encourage investment in unlisted companies, so they have the opportunity to grow.”

David Holt, Partner and Solicitor, Potter Clarkson

“Give a much-needed tax reduction to the hospitality industry”

“Right now, hospitality leaders have their backs against the wall. There is a clear requirement for the government to reduce VAT in the upcoming budget to deliver urgent relief.

The hospitality industry is vital to the UK’s economy and a much-needed tax reduction would show genuine commitment to the future of the sector and its workforce.”

Conor Sheridan, founder and CEO of Nory AI

“Reduce the bias to software”

“The UK government needs to do more to support cleantech startups, a sector that is predominantly hardware plus software based. This is more capital intensive, requires larger facilities, more people with hands-on skills and other challenges which software only startups don’t have.

“The government needs to recognise the challenges of deep-tech hardware startups and incentivise R&D much further and faster. Currently, the bias to software only helps other sectors like fintech, consumer etc. but it won’t shift the needle for the planet. At an early stage we need R&D credits, business rate changes and mechanisms to lower early-stage costs.

“As hardware businesses scale we need greater support for production tax credits and a clear skills strategy that develops the practical, technical capabilities we need for clean-tech. The UK is behind the US, Europe and will find it harder to catch-up without dramatic change now.”

Jonathan Carrier, CEO and Co-Founder Allye Energy

“Develop a plan for how to be 100% renewable”

“The main investment areas on the demand and supply side are well understood. On the supply side, government investment needs to go into areas such as carbon capture and storage (CCS), renewables, nuclear, energy storage and hydrogen. On the demand side, the electrification of transport and buildings as well as sustainable materials are key areas.

“Each of these sectors needs well-articulated plans with specific targets and strategies to stimulate investment. This is more straightforward in some sectors than others. For example, it should be relatively straightforward to predict future energy consumption and to develop a plan for how to be 100% renewable with enough redundancy in the system via energy storage and nuclear power to ensure that the intermittent nature of renewables like wind and solar do not cause any issues.

“In other areas, setting targets and developing industrial strategies are a bit more challenging. CCS for example is nowhere near as technologically mature as renewable energy generation, so the emphasis here is probably more on stimulating investment in R&D and early-stage companies who de-risk the technology.”

Sebastian Peck, Partner at KOMPAS VC