What the Spring 2023 Budget Means for Entrepreneurs
I set up my PR Agency in 2012, at the age of 22, with a desire to work alongside ambitious entrepreneurs, eventually investing in them, and being part of their stories to positively impact the industries they chose to innovate.
It’s been a humbling journey, running my own business and having the good fortune of being exposed to so many brilliant ideas. Whilst there have been no ‘easy’ years, and it took showing up for many of those to eventually turn over millions of pounds, by anyone’s standards, the last three years have, for most, been a professional shit show.
The incentives for entrepreneurs, particularly women, to start businesses decreases daily. The risk profile, stress + burnout, impact on fertility, personal relationships, as well as call out culture, the cost of living and childcare, means that the Government ought to be working harder to reduce barriers to entry, (or helping business owners to) rather than putting them up. Entrepreneurs are the backbone of the British economy. The small business arena makes a hugely significant contribution to the UK economy, forming 98% of private sector businesses. The new corporation tax threatens to annihilate this. Not least, impacting morale — a collective groan as the light at the end of the tunnel flickers. Especially if you are unfortunate enough to have chosen an industry that the Government has previously ignored; hospitality + beauty being easy examples.
Businesses in the UK previously paid 19% of their profits in Corporation Tax, which has risen to 25% in Jeremy Hunts new budget. The 6% rise has a significant impact on British entrepreneurs. Female founded businesses already have a long way to go, with women-founded startups raising 1.9% of all VC funds in 2022, a drop from 2021. A hike in corp tax discourages investment. It creates a confusing dilemma for business owners, who need to present profits to their shareholders. Many of my entrepreneurial friends have reported that investors will no longer look at businesses that aren’t profitable. The incentive for entrepreneurs to generate large profits to offset the challenges of the last 36 months, fuel growth, pay themselves, invest in attractive infrastructures to hire and retain talent, and provide reasonable negotiating leverage to avoid a down round, evaporates if 25% of that margin is paid to the Government. Imagine paying a quarter of your profit immediately to the Government. Not to mental health initiatives for your staff, flexible working arrangements, egg freezing, better office conditions, robust tech and communications platforms to enhance productivity, team building off site days for team morale, just, you only make 75% of that profit. The promise of financial freedom dilutes as the need to raise money on bad terms floods the investment landscape.
For many businesses in the UK, the Government support throughout Covid provided a life line. There was an expectation that for those who managed to hold on, that there would be some light at the end of the tunnel. Some relief that allowed us to fight the desperate decline. Having worked the hardest we ever had, just to stay afloat, many business owners had very little left in the tank, metaphorically and figuratively. In fact, there were nearly 700,000 ‘business deaths’ (businesses which have ceased to trade) recorded from Q1 of 2020, to Q3 of 2021. Cue Putin, Liz Truss + the sad news of the death of the Queen, creating the perfect hat trick to compound our misery. If we hadn’t all given up due to being unable to pay our mortgages, offering staff four day weeks, sitting in our coats because we couldn’t bear to turn the heating on, not being able to leave the house because public transport sporadically ceased to exist, the global embarrassment of the mini budget and Christmas at home because international flights cost more than the holiday itself, Jeremy Hunt had more bad news. The Spring budget looked initially as though there would be a positive outcome for business owners, with a huge focus on motivating the country to get back to work. However, Hunt’s focus seems to have locked in on everyone but the business owners.
The Chancellor announced in the Spring Budget 2023 that for many women, “a career break becomes a career end.” The focus on mothers no doubt will help give options to those who have previously been paralyzed by the cost of childcare (even if they have to wait for 2 years for it to kick in). Last year, I started offering fertility tests to my employees (20 women, two men). Why? Because the reality is, decades of biology and marketing suggest that women’s fertility drops off a cliff at the age of 35. As a 33 year old unmarried woman running a business, egg freezing provides an opportunity for choice for me. Whilst it’s not insurance, being able to thrive in your career in your thirties and have the option to have a child later on, motivates women to remain in the workplace, avoiding the societal pressure that hurtles towards you in your early thirties whilst doctors refer to you as geriatric. What would be helpful, in this instance, is a subsidy for egg freezing. Why? Because 30 years old is the best time to do it. The average salary in the UK for a 30 year old woman is £32,000. Egg freezing costs approximately £6500. The average age for those starting a business is 28 years old. The recent measures are hardly enabling young, energetic women to embark, remain or return to the workplace. How can businesses support the needs of their staff by allocating profits to the Government instead of to impactful initiatives that improve their options?
We will see a continued exodus of talent from the UK, led by James Dyson. Why would anyone want to start a UK company in this climate? Bear in mind also, that whilst we are all being shafted on the daily by the tightening grip of the British Government’s inability to support enthusiastic entrepreneurial communities, Google, Apple, Facebook, Amazon, Microsoft, eBay, Adobe and Cisco collectively avoided paying an estimated £1.5 billion in tax on their profits in the UK in 2019.
The danger, alongside lack of motivation, stunting financial freedom, and losing faith in a directionless Government, is that businesses will work with far less operating capital. Reducing profit means reducing the corp tax due. This means, that should the markets move the wrong way again, businesses will have far less in their bank account, meaning faster redundancies, downsizing, and stripping employees of added benefits. Make no mistake, business owners start businesses to make money.
With the news of Silicon Valley Bank’s UK arm collapsing this weekend (it was sold to HSBC for £1), British entrepreneurs were hoping for a more stable, positive and reassuring impact from the Spring budget. What we got was a distracting, virtue signaling, watered down, piecemeal plan, that overlooks entrepreneurs and undervalues our contribution to the economy. If small businesses are the backbone of the British economy, at least chiropractors will be getting more work.
