Delivering his second budget as the chancellor of the exchequer, Rishi Sunak promised to do “whatever it takes” to protect the UK economy from the aftereffects of Covid-19.
With the country mired in a third national lockdown, Sunak unveiled a slew of new measures aimed at boosting FinTech startups and SMEs in the ecosystem.
The budget entailed a three-part plan to protect jobs and businesses. “First, we will continue doing whatever it takes to support the British people and businesses through this moment of crisis. Second, once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that. And, third, in today’s Budget we begin the work of building our future economy,” Sunak said.
Unveiling a new loan scheme to support businesses hit by the pandemic, Sunak replaced the Bounce Back Loan and Coronavirus Business Interruption Loan Scheme with the Recovery Loans Scheme. The scheme will offer loans from £25,000 up to £10m until the end of the year where the government will be providing lenders with an 80% guarantee.
This measure was welcomed by the UK FinTech community with CEO of business finance marketplace Funding Options Simon Cureton saying, “It is encouraging to see the creation of a Small Profits Rate to protect SMEs… as we come out of the national lockdown and take the first steps towards economic recovery. The Treasury-commissioned Kalifa Review of UK Fintech is evidence that in the midst of the crisis last year, Sunak was looking ahead too.”
Cureton added, “It has become abundantly clear the country must look beyond a reliance on incumbent banks to support SME finance. We hope there has been a realisation at the highest level that FinTech has come of age. The new UK state-guaranteed loan programme reflects understandable concerns around access to standard bank loans through the current schemes. With the interest rates capped, however, the balance still remains firmly in favour of the incumbent banks that have unfettered access to the Bank of England Term Funding Scheme. All the while, a raft of agile FinTechs wait in the wings with the resources, technology and expertise to deliver vital funding to UK businesses.”
According to Cureton, the British government must boost the financial industry by giving startups more access to capital. “To facilitate an economic resurgence, the government simply must look to the increasingly robust technology stacks of the FinTechs, which can perform crucial due diligence at great speed. It is time for the government to go further and commit fully by affording FinTechs the opportunity to deliver where only it can – fast access to competitively priced capital with accurate due diligence in minutes. I’m buoyed by the progress, but opening access to the Term Funding Scheme is the key challenge that needs to be resolved,†he said.
Sharing the same opinion, AND Digital CEO and founder Paramjit Uppal said, “Matching public money with private sector venture capital will provide a catalyst for growth, supporting innovation and enable sustainable scaling up as the economy begins to recover. It’s great to hear of more investment in digital and tech skills to come. Supporting youth and employment in the tech sector will be particularly important as we look to rebuild the economy, a revamped Kickstart scheme and more incentives for businesses to take on apprentices and support young peoples’ development is a good place to start.â€
In another step towards plugging the deficit, Sunak sketched out plans to increase corporation tax to 25% from the current 19%, taking effect in 2023.
“The government is providing businesses with over £100bn of support to get through this pandemic, so it is fair and necessary to ask them to contribute to our recovery,” Sunak said. “Even after this change, the UK will still have the lowest corporation tax rate in the G-7.”
Given that corporation tax is only charged on profits, “any struggling businesses will, by definition, be unaffected,” the chancellor added. The 19% rate will continue for firms with profits of £50,000 or less, which means that 1.4 million businesses would be “completely unaffected” by the tax hike.
While the loan scheme was received well, the corporation tax hike was criticised by many. CEO at London-based FinTech Previse Paul Christensen opines that the government should introduce ways for SMEs to improve their cash flow.
He said, “Continuing to feed the measures rolled out to support small businesses just creates a mounting wall of debt. The government should be looking to chronic pain points that have worsened during the pandemic, rather than hiking up corporation tax to perpetuate loan schemes. Creating sustainable cash flow for SMEs can ensure they survive without being dependent on the hand of the government. Paying suppliers quickly is one easy way to do this that all large corporates can do immediately.â€
Another key reform as recommended in the recent Kalifa Review of UK FinTech was a new fast-track visa route for FinTech specialists to fill the skills gap present within the sector post-Brexit. The visa is set to come with simplified bureaucracy for talent worldwide.
Quantexa founder and CEO Vishal Marria said that given how FinTechs rely on international talent, the new visa will aid the UK’s financial industry to maintain and cement its reputation as a global leader. “As a fast-growth London-based scale-up in the FinTech space, we see the need for a boost to a sector which has long served the country well and made it a cornerstone of financial services across the world. It’s fantastic to see the government taking a proactive approach to cement the UK’s reputation as the leader in global FinTech,” he said.
“The fast-track visa program for global talent, along with the development of 10 country-wide FinTech clusters are extremely exciting initiatives for us from a business perspective, as they set in motion a plan that could soon see the entire UK teeming with FinTech talent,†he added.
Echoing a similar sentiment, Seema Farazi, UK and Financial Services Immigration Leader at EY, said that this decision will be a massive step forward to position the UK as a leading hub for FinTech.
“A tailored visa route into UK scale-ups will have far-reaching positive implications and will support the tech sector as it looks out to the global marketplace. It is crucial the UK leads the way in attracting skills from all over the world as well as creating homegrown talent. Today’s announcement will drive progress in establishing the UK as a leading scale-up market.
“Supporting the growth of UK tech and FinTech is fundamental for the sectors’ global success and will also aid the UK’s economic recovery as we look to counter unemployment and increase skills in growth areas,” Farazi said.
Highlighting how businesses need access to top talent in order to stay ahead, Kingsley Napley immigration partner Katie Newbury said: “New visa arrangements for highly-skilled individuals…who do not yet have a job offer in the UK, is a welcome step, particularly for those planning to be self-employed or to establish a business in the UK.”
However, Newbury urged companies to be wary of the details of the visa and ensure they read the fine print. “The new visa categories need to provide potential applicants with a clear, straightforward route to the UK, without the uncertainty and often unattainably high bar set by the current global talent visa which, whilst excellent, is limited in scope.
“This is not in and of itself a new idea, but we hope the detail lives up to the promise of ambitious change and that the new arrangements are introduced swiftly. It will be somewhat disappointing if the much hyped points-based visa is restricted to the sectors mentioned by the Chancellor today but the detail remains to be seen,” she continued.
Some other measures included the extension of the furlough programme by five months until the end of September. “For employees, there will be no change to the terms – they will continue to receive 80% of their salary, for hours not worked until the scheme ends. As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July when we will ask for a small contribution of just 10% and 20% in August and September,” Sunak said.
Jonathan Richards, CEO and founder of Breathe, believes that the decision will boost SMEs as well as employee morale. He said, “This economic support will be particularly welcomed by SMEs across the country as restrictions begin to lift. These measures will not only enable them to get back on their feet after a really tough year but will allow them to focus on their people and nurture a strong company culture. Building an inclusive culture will retain top talent and allow businesses to embrace both the challenges and opportunities of Brexit with ease.â€
The Budget comes at a time when a host of businesses are suffering due to months of Covid-19 restrictions and continued lockdowns. According to official figures, the economy contracted by 9.9% in 2020 with unemployment rising to 5.1% in the three months to December – the worst it has been since 2015.
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