View from Chancery Lane - A Weekend Walking the Tightrope
And breathe. That was close. A week ago the low rumblings of the Silicon Valley Bank collapse became audible on this side of the Atlantic and by Friday evening the UK subsidiary was in the care of the Bank of England. The speed of the collapse honoured the old cliché – things moved slowly for months and then very, very quickly indeed.
The industry moved at exceptional pace in response. The Government’s first call was to signal that this was an isolated failure, and not part of something more serious, such as Lehman Brothers’ demise before the Great Financial Crisis. As Credit Suisse has navigated some ugly turbulence this week, it is hard to deny that this was a legitimate issue to address.
But at the start of the weekend it felt as though the consequences for the UK’s private capital industry, and the tech businesses in which they were invested, were being downplayed. The industry’s leaders, supported by the BVCA team, knew the seriousness of the situation needed to be made clear.
Throughout Saturday data was collected from member firms, analysed and presented to government through multiple channels in the Treasury and Downing Street. The key points were put into the public domain to reinforce the messages delivered to government ministers on hastily arranged Zoom calls later that day. This flow of information and analysis went on ‘rinse and repeat’ through Sunday as well.
To give them their due, the government got it. Ministers didn’t pull off the sale of the remnants of SVB to HSBC ahead of market opening on Monday by waiting around until Sunday night. The state moved with some alacrity and delivered what was needed. It was impressive and very welcome.
Of course, that managed takeover was not planned as the dramatic highlight of the Treasury’s week. Even if the Budget on Wednesday was expected to be a low key affair, in tune with the ‘stabilisation’ theme of the Prime Minister and Chancellor’s tenures to date, it was still to be a big moment as Messrs Sunak and Hunt put further distance between themselves and their predecessors. Time will tell which of the events turns out to have been more significant.
The Budget did have some dramatic gestures, such as the childcare provisions for England (the devolved nations will receive extra funding allocations and may follow suit, but are not obliged to), and the pension changes for high earners. But the blizzard of figures which the Chancellor uttered at the start of the speech about the state of the economy were not great. It says everything when the headline point is that revised projections suggest we will avoid a ‘technical recession’ this year.
Nevertheless, the tone was brisk and the emphasis on growth welcome, including incentives to increase capital expenditure, which to an extent offset the coming increase in corporation tax. There was a partial backtrack on R&D tax credits, with a better targeted scheme, if not full recognition of the challenges facing a lot of early stage tech businesses and others. Some welcome tidying up of tax provisions will help avoid some double taxation issues and there was further progress on the ‘LIFTS’ programme for science and technology funding.
Stripping away the political argy bargy which is a feature of all Budgets, the Opposition, too, put the emphasis on growth. They made the argument that the UK needs to raise its investment game substantially to address the underlying challenges in the economy and to tackle climate change. Attracting the capital required, and incentivising the people who have the skills to invest actively and patiently is clearly of some importance. The industry should have a big role to play.
So while there were ‘noises off’ on tax matters affecting the industry, simultaneously with all the other drama of the week, what private equity and venture capital have to offer, in terms of helping politicians to address the public policy challenges of the moment, is hugely significant. And that gives us some grounds for optimism at the end of a seven day period which didn’t have a lot of it on display.
Michael Moore
Director General, BVCA
