Meeting the challenges faced by UK-based tech companies

SECTION 2 - Our Recommendations

Access to capital

  • Significantly increase the annual public sector contribution to R&D investment
  • Introduce an R&D for equity policy – capped at 10%
  • Introduce a similar equity cap on university tech transfer offices following the transfer of university developed IP to tech company founders
  • Substantially increase R&D tax reliefs to participating companies
  • Loosen benchmarking for institutional investors who invest in companies with significant R&D overheads
  • Significantly increase centrally provided grants and loans for businesses focusing on tech innovation and incrementally converting Government loans and grants into capped equity stake
  • In considering the implementation of its state aid regime the Government should see creating technology to sell into Asian and US markets as a higher priority than competing in the EU
  • Incentivise equity investment by institutional investors (particularly pension funds and insurance companies) whilst disincentivising short-termism and rewarding long-term investment
  • Relax FCA regulatory requirements such as liquidity constraints on funds, and the requirement that insurance companies can only invest in assets and instruments the risks of which it can properly identify, measure, monitor, manage, control and report
  • Incentivise the development of listed private equity funds and investment trusts focused on patient capital to enable institutional investors to invest in unquoted securities through regulated vehicles
  • Increase consumer investment by obliging retail funds to offer patient capital and tech funds
  • Legislate for mandatory disclosures by pension and insurance funds as to the proportion of their assets invested in patient capital and unlisted or AIM listed tech companies
  • Enlarge existing restrictions to block the sale of or investment in companies in sensitive areas so as to create a barrier to sales of startups too early in their business cycle
  • Relax the general criteria, including the annual limit and tax reliefs, for investment in Venture Capital Trusts to increase capital expenditure by private individuals Introduce a new form of VCT relief, aimed at institutional investors

Maintaining and increasing the flow of talent

  • Provide long-term funding incentives for UK MSc and science / tech PhD students, including subsidising tuition costs
  • Provide short-term gap funding for prospective overseas MSc and PhD students and relax the requirement for them to provide proof of savings to meet their living costs
  • Relax the minimum salary requirements under the new immigration rules for overseas applicants for jobs in the tech sector
  • Exempt medium and large sized tech companies from paying the Immigration Skills Surcharge on visas to overseas employees, which costs companies £1,000 per employee each year
  • Offer grants or long-term low or no interest loans to incentivise noncomputing graduates to undertake conversion degrees
  • Provide financial incentives to tech start-ups to employ and train up home grown staff

Policy and tech sector regulation

  • Out of the six or so Government Departments with an interest in the tech sector, carve out a lead Department with overall policy responsibility
  • The lead Department should focus on:
    • a remit of introducing transparent legislation governing the sector; and
    • creating a new tech regulatory body responsible for:
      • levelling the playing field for tech companies; and
      • reducing the cost of innovation