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How Labour can fix the UK tech industry

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How Labour can fix the UK tech industry

One way Labour can unlock capital is to harness the power of pensions and allocate more funds to venture capital to plug the Series A funding gap, says Edward Prior, head of investor services at early-stage venture capital fund SFC Capital. “There is more US pension fund money in UK startups than there is UK pension fund money,” he says.

“Yes, we have to be the best place to start a business, and we really are in a world-leading position in that, but we also have to be the best at growing a business, because we are losing too much value to our economy in those scaling stages, where there is not enough money to get to Series A and beyond.”

If the new government is looking for inspiration to close the funding gap, it could adopt some of the previous government’s initiatives and carry them out. The Labour manifesto does not mention any change to the Conservatives’ programme. EIS (Business Investment Plan), SIX (Seed company investment plan), and APV (Venture Capital Trust) tax schemes, but venture capital funds argue that it is important for these initiatives to continue to improve the economics of startups.

Russ Shaw CBE, founder of Tech London Advocates & Global Tech Advocates, a startup support community, says the biggest problem is funding for companies seeking unicorn status. He also highlighted issues around the talent pool, which Labour could address by digging deeper into the thorny issue of immigration.

“We have the Scale-Up Worker visa and the Global Talent visa, which are good, but the process that candidates have to go through is fundamentally broken,” says Shaw.

Alan Chang of Fuse Energy, a clean energy company founded two years ago, says his company has had to “jump through a lot of hoops” to bring talent from overseas to the UK, and this is a problem Labour will need to address by making visas for highly skilled talent easier, quicker and cheaper. “In my network, I know a lot of people who are very successful and have left the UK or are thinking about leaving,” he explains.

If Labour were to scrap the immigrant health surcharge – a tax of around £1,000 ($1,276) a year on workers – it would make it much more attractive for skilled people to come to the UK, says Zach Meyers, deputy director of the Centre for European Reform. “The immigrant surcharge is crazy, because it’s basically like a tax on immigrants. And I think that’s a one-off measure that would go a long way towards tackling the skills problem.”

The new government would also do well to pay attention to the £250bn of new value. Identified in Alison Rose’s 2019 review This could be unlocked if women were supported to the same extent as men. Only 2 per cent of venture capital funding goes to women, says Emma Wright, a partner at UK law firm Harbottle & Lewis, co-director of the Invest-HER campaign and director of the Interparliamentary Forum on Emerging Technologies. She argues there would be “a lot of benefit” in providing transparency about where investment money goes. “It would address some of the missions around, for example, social mobility or regional funding, but also the ability to make an assessment of whether there is more to unlock within the economy.”

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