Despite uncertainty, Innovation will thrive in the UK

The autumn budget creates an environment to attract investment to innovative Fintech companies, says Abe Smith, founder and CEO of Dealflo.

Delivering the message that growth forecasts are being revised down is never an easy message for a Chancellor to give. Setting aside £3 billion for unspecified Brexit costs must be galling, too, for a Chancellor who was firmly in the ‘remain’ camp.

Despite his rousing challenge to Britain to defy expectations over the coming year, Brexit was the elephant in the room for Hammond in the Autumn Statement. While the FTSE was largely unchanged after the budget statement, there is no doubt that this lower-than- expected growth, and the continued lack of clarity around Brexit is unsettling both for businesses and for investors.

That uncertainty makes it even more critical that the Chancellor works hard to ensure that the UK remains an attractive place to invest and innovate post-Brexit. And so despite my personal feelings about Brexit (I too, was firmly in the ‘remain’ camp) I was pleased to see a focus in the budget on attracting investors and supporting business growth in the UK.

Investing £2.5 billion in a new investment fund (combined with an action plan to create a £20bn pot in total) to spur investment in ‘scale up’ companies is welcome news. And while it was no surprise that the Chancellor is clamping down on the use of EIS and VCTs as a means of preserving capital tax-free and at low risk, doubling the EIS investment limit for knowledge-intensive companies sweetens that pill. (Others have questioned how the government will define knowledge intensive versus low risk investments, the answers to which remain to be seen.)

Overall, though, innovative companies should be cautiously optimistic. The aim of EIS was to encourage investment in innovative, scalable companies, and not to hide capital from the tax man in ‘safe’ investments. Doubling the limits for higher-risk (and therefore higher innovation and higher growth potential) companies effectively redirects that investment to the companies that will provide the Treasury with higher revenues, and ultimately stimulate growth in the economy.

This – combined with a commitment to investing in tech infrastructure such as high-speed broadband and 5G – should mean that even after Brexit, the UK will remain a hub for tech innovation. That, in turn, will continue to attract fast-growing tech companies (and their investors).

Fintech is at the heart of this. London has been a world-leading financial centre since the 19th century, and now leads the world in Fintech innovation. Despite the shadow of uncertainty cast by Brexit, 2017 saw record-breaking investment in UK Fintech companies, including from investors new to the UK market.

If Britain is to be “at the forefront of this technology revolution” as Hammond envisages, we need to create an environment where those Fintech companies will thrive and grow. I hope that this budget was the first step in doing so.