"The spring budget is a nightmare for entrepreneurs and start-ups," according to a CEO
I set up my agency, Emerge PR, in 2012 at the age of 22, with a desire to work alongside ambitious entrepreneurs, invest in them and be part of their stories, ultimately impacting the industries they chose to innovate.
Running my own business has been a humbling journey; I've had the good fortune of being exposed to so many brilliant ideas. While 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 nightmare.
The incentives for entrepreneurs, particularly women, to start businesses decrease daily. The risk profile, stress and burnout, impact on fertility and personal relationships, not to mention the cost of living and childcare, means that the government ought to be working harder to reduce barriers to entry, 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 per cent of private sector businesses. The new, heightened corporation tax Jeremy Hunt has announced in his new budget threatens to annihilate this, especially if you are unfortunate enough to have chosen an industry that the government has previously ignored: hospitality and beauty being easy examples.
Businesses in the UK previously paid 19 per cent of their profits in Corporation Tax, which has risen to 25 per cent in Jeremy Hunt's new budget. The 6 per cent rise will have a significant impact on British entrepreneurs. Female-founded businesses already have a long way to go: women-founded start-ups raised just 1.9 per cent of all venture capital funds in 2022, a drop from 2021.
A hike in corporation 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 and invest in hiring and retaining talent – evaporates if 25 per cent of that margin is paid to the government.
Imagine, just for a second, paying a quarter of your profit immediately to the government. Imagine what could be done if this were funnelled into mental-health initiatives for your staff, flexible working arrangements, opportunities for egg freezing, better office conditions, robust technology and communications platforms to enhance productivity, or team-building off-site days. 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 the pandemic provided a life line. There was an expectation that, for those who managed to hold on, there would be some light at the end of the tunnel, some relief that would allow 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.
The war in Ukraine, Liz Truss' short tenure as Prime Minister and the sad death of the Queen created the perfect hat-trick to compound our misery. Many of us were unable to pay our mortgages, offering staff four-day weeks and sitting in our coats, because we couldn't bear to turn the heating on. And yet, yesterday, Jeremy Hunt had more bad news. The spring budget looked initially as though it would contain a positive outcome for business owners, with a focus on motivating the country to get back to work. However, we were sadly disappointed.
The hike in corporation tax wasn't the end of the troubling news. The Chancellor announced that, for many women, “a career break becomes a career end”. The introduction of 30 hours of free childcare for every child over the age of nine months will, no doubt, give options to those who have previously been paralysed by the cost of childcare. However, there is no provision for young people, starting a business, who are concerned about fertility.
The average age for those starting a business is 28 years old. 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 of choice for me. Last year, I started offering fertility tests to my employees. While 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 when doctors start referring 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 £6,500. The recent measures are hardly enabling young, energetic women to embark upon, remain in, 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 the fact that adds insult to injury: that while we are all struggling with the government’s inability to support enthusiastic entrepreneurial communities, companies like Google, Apple and Amazon, collectively avoided paying an estimated £1.5 billion in tax on their profits in the UK in 2019.
The danger is that businesses will work with far less operating capital. Reducing profit means reducing the corporation tax due which, in turn, means that – should the markets move the wrong way again – businesses will have far less in their bank account. That will lead to more 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 budget. What we got was a distracting, virtue-signalling, 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.
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