12 Mar 2020

Budget 2020: private equity and venture capital has a lot to play for

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As you will have seen from Wednesday’s email, this week the BVCA Council agreed a series of extraordinary measures in response to the developments in the spread of Coronavirus. 

To put our events and training on hold and turn other meetings into conference calls for the next 12 weeks was not done lightly, of course. The following day the seriousness of the situation was driven home by the announcements from the World Health Organisation (that COVID-19 had reached pandemic status) and from the UK government in its Budget, offering significant economic stimulus to overcome growing concerns about a downturn. We are grateful for the understanding shown by everyone in the circumstances and will re-schedule events and training to minimise the inconvenience to members and our stakeholders across the country. Otherwise, we are seeking to carry on business as usual, so far as circumstances allow.

And so to the Budget. He may have been sitting at his new Treasury desk for barely a month, but the Chancellor looked completely at ease when he crossed Whitehall and made his speech in the Commons midweek. There were few moments of pain to deliver, of course, which will have helped. 

Instead there was a £30 billion package to respond to Coronavirus and move on from a decade of austerity by investing in the NHS, doubling the 40 year average spending rate on investment (as a percentage of GDP), increasing support for R&D, the English regions (including an elected mayor in Leeds and a northern Treasury outpost) and other parts of the country. In a complementary move, the Bank of England reduced interest rates by half a percentage point and announced other measures to maintain confidence in the banking system and the economy more broadly.

Indeed, for reasons beyond the freezing of duty on Scotch whisky, this Budget will have been palatable to many across the UK (if we ignore the after-taste of increased taxes) and might even be mistaken for the political ‘blends’ of Mr Brown in 2004, or, at a push, the (now) Lord Lamont in 1992. And certainly preferred to the more astringent Osborne and Hammond ‘single malts’ of recent years. 

A note of caution though - Budgets are always about the detail, not the pre-packaged headlines. Even with only a month to prepare, Budget Day is so stacked in the government’s favour that the key messages and drama almost always favour the Chancellor. It’s in the days afterwards, when the policy costings documents and the list of consultations have been carefully scrutinised, that the full impact can be best understood. 

For us, Gurpreet Manku, Deputy Director General and Director of Policy, is working with her team and our technical committees to prepare the detailed BVCA analysis which will be distributed as soon as it is ready.

Although widely-trailed, the changes to Entrepreneurs’ Relief were a disappointment, even if  this was better than outright abolition: there remains a platform to work on to promote incentives for real businesses which take real risks (to paraphrase the Chancellor) – criteria which are very closely aligned to venture investors and others. We will keep working with the Treasury on this issue. 

Otherwise the focus on R&D, science and the additional funding for the British Business Bank were all positive for members across the country. So, too, the planned consultations to find ways to make UK funds structures more attractive and to reform regulation in a post-Brexit UK.

The Budget may have had to change its focus in recent days as Coronavirus has taken hold globally. But it was still a big statement of broader political intent and promises of action (a variation on the ‘getting it done’ theme appeared two dozen times in Mr Sunak’s speech). The government is urgently focused on growth (with all future year forecasts reduced), innovation and a pivot to new international markets. (As an aside, and a sign of the new politics, ‘Brexit’ was mentioned only twice from the Despatch Box.) On this agenda, there is a lot of scope for private equity and venture capital to showcase what success in these priority areas looks like. There’s a lot to play for here.

Michael Moore
Director General, BVCA


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