Between Brexit and Megxit, everyone seems to want to get out of Britain. Yet the UK is still very welcoming, especially for startups. Not that they treat them like queens (there is only one Elizabeth II), but certainly like princesses. Let’s see why.
First of all, British taxation is startup-friendly. Staff recruitment in the UK is overpaid and the cost of importing brains is deductible thanks to PAYE deductions. This means that if an entrepreneur hires a person from abroad, the government reimburses the cost of the relocation.
Another very interesting fiscal policy is the tax relief for innovators, such as startups. We are referring to R&D expenditure credits, which allow companies that develop new products/processes/services or improve existing ones to receive tax reductions or cash payments equal to 12% of the R&D expenditure incurred, depending on whether the company makes a profit or a loss. This measure was launched by the British Government precisely to promote innovation. The more you invest in innovation, the greater the tax credit, which can be reinvested to make more innovation, which in turn gives rise to a greater tax credit, triggering a virtuous circle of innovation.
Another very interesting aspect is the tax relief of profits from trademark use, which has helped to stop the relocation of trademarks. The Patent Box in fact allows companies to apply lower taxation (10%) on profits from its patented inventions earned from April 2013 onwards.
Investments in startups enjoy 3 other incentives: SEIS (Seed Enterprise Investment Scheme), EIS (Enteprise Investment Scheme) and VCT (Venture Capital Trust). SEIS benefits small companies (less than 25 employees and gross revenues of less than £200,000) and less than 2 years old, i.e. in the seed stage of their growth, by providing their investors with income tax relief at a rate of 50% on the value of the investment, with a maximum of £100,000 of investment per fiscal year. There is also a tax relief of up to 50% of capital gains (up to a maximum of £50,000) on earnings reinvested in EIS eligible shares. EIS benefits companies with fewer than 250 employees, sales of less than £15 million and active for at least 7 years, whose investors receive up to 30% of their investment in tax relief and can delay payment of up to half the capital gains tax after the EIS investment expires. VCT is reserved for companies that invest or lend money to unlisted companies.
It is also thanks to these incentives that Great Britain has become the second best European country for startups after Germany (source: NimbleFins) and is the fourth highest number of startups per capita (source: Funderbeam). At a global level, Great Britain is the third country in terms of number of startups (5,179), after the US (48,037) and India (7,432), according to StartupRanking. Moreover, the UK is the third country in the world in terms of number of unicorns created (companies valued at least 1 billion dollars) and the first in Europe: in 2019 there were 8 unicorns, bringing their total number to 77 (source: Dealroom and Tech Nation).
This is also due to the concentration of venture capital in Great Britain, which is home to around 30% of European venture capitalists. According to Tech Nation and Dealroom, the country catalysed one third of Europe’s 30.4 billion investments.
Time to get what you need and culture have also contributed to the birth of numerous startups. Indeed, Anglo-Saxon countries recognizes that failure is in the nature of startups, according to the tagline “Fail fast, fail often”. That’s why you don’t stigmatize those who fail. On the contrary in Europe, and particularly in Italy, failure is seen as a disgrace, something to hide, and the risk of failure paralyses.
In contrast to us, in the UK the time it takes to act, react, choose and implement a decision is much shorter. Bureaucracy is less, but the way of working is also different and more results oriented. Suffice it to say that in Italy it takes 11 days to open a business, while in Great Britain 5 days is enough (source: World Bank
A default implies a dispersion of human, material and immaterial resource of startups.. But in Great Britain, luckily, startup districts serve as a reservoir of skills and reabsorber of human resources freed from inevitable failures. For instance, there are technology hubs in areas such as Belfast, Birmingham, Cardiff and Edinburgh. Their birth was also helped by the £21 million Tech Nation programme.
In the meantime, technology has also become increasingly popular in the financial sector, which has been affected by the fintech revolution (acronym for financial technology). Great Britain in particular is the European epicenter of fintech, also because the sector has been supported by the government since 2010. We recall in this sense the Innovation Hub and Regulatory Sandbox of the FCA and the Fintech Accelerator of the Bank of England.
What about Brexit, you say? Well, we are not afraid of it. The catastrophic forecasts of an immediate collapse of the British economy have so far proved wrong. The British economy is also doing well: the stock market is doing well, the pound is recovering, consumer confidence has risen, wages are increasing and unemployment stands at 4.9%.
Finally, another great reason to go to Britain is that English cuisine has improved considerably. Startuppers no longer have to eat fish & chips, but we have a greater variety of restaurants and bars, of all nationalities and for all budgets.
In short, Great Britain is a true paradise for startups: not only for the tax incentives it offers, but above all for the culture that produced them: favorable to innovation, to entrepreneurship, quick to respond and that sees failure as a chance to start over, without stigmatizing those who fail. That is why we have decided to land in the United Kingdom as well. Are you coming with us?
