CI has received multiple comments on next week’s Autumn Budget presentation, which will outline Labour’s plan for the UK economy. We have received multiple comments pertaining to expectations that certain taxes are poised to increase. Higher taxes like the CGT will directly undermine the innovation sector of the UK economy, which frequently uses shares as compensation in lieu of a high salary.
Phil Kwok, CEO and co-founder of EasyA – a startup that aims to boost Web3 (blockchain) development, sent over a statement on Labour’s goal of “future Proofing” the economy. Kwok is also an Attorney – having worked at big law firms like Linklaters. Kwok said that if CGT (capital gains taxes) are hiked, it will impact early-stage firms seeking to scale. He said that an increase in CGT will compel founders and employees who hold options to sell their shares. Maturing businesses will see exit options and future plans penalized for their success. This harm could create extended harm as successful founders tend to fund future startups and frequently return to the startup scene to launch other businesses.
Kwok also explained that an increase in CGT will “play on the mind of investors” negatively.
“We’re already seeing early-stage firms in the UK struggle to secure pre-seed and seed funding, with VCs here having a lower risk appetite. A higher CGT will act as a further deterrent. With all the factors at play, we could see investors and the next generation of founders looking to another market like the US,” said Kwok. “If the government sees tech as the bedrock of economic productivity and innovation, the approach seems clear – fostering an environment which encourages and nurtures these innovators so they can explore the full potential of all Web3 has to offer.”
Kwok said that, based on his experience as a recent grad, entrepreneur, and CEO, the UK has a growing population of rising talent – a very good thing.
“There’s a new generation of entrepreneurs with the creative minds and drive to pursue new innovations in Web3. It is all happening at an exciting time – Web3 and AI will change the way we work, so we need to be driving this dialogue. Any approach demands an agile mindset. For too long, there has been a degree of complacency, assuming traditional education paths like tertiary degrees will spur on tech innovation. Yet we face a digital skills gap – people are not being equipped with the digital skills required to engage with technologies that will define the future of work, like blockchain and AI. Being creative, and embracing new forms of education to complement the university degree process is vital.”
He stated that young companies that generate new tech innovation need access to capital, which is not as accessible in the UK as investors take a more risk-averse approach.
“This is in contrast to the US, where early-stage startups can tap into investment and scale at pace. There are countless examples of renowned US startups whose rapid rise and success are down to the funding they secured early on. To be globally competitive, we need initiatives to support these young companies. We should be taking advantage of London’s reputation as a tech hub, which it has successfully built over the last two decades. Initiatives which bring together business leaders, investors, the public sector and academia will address this. The talent is there – it is up to us to tap into it!”
Kwok understands the risk capital ecosystem well. Any government, be it Tory or Labour, would do well to focus more on supporting the smaller, innovative firms that generate economic growth rather than penalizing entrepreneurship that generates new jobs and drives wealth creation