On 27 October 2021 Rishi Sunak outlined the UK government’s spending and taxation plans for the next financial year, alongside a wider review of government spending for the next three years (2022-2025) – with generally positive impacts for the fintech sector.
The government is incentivising innovation in the tech sector through soft rather than hard intervention, and it’s encouraging to see ongoing dialogue between public and private sectors, with a number of the recent Kalifa Review recommendations coming to fruition. The following announcements highlight the key impacts for the fintech sector in the recent budget:
1. Various recommendations from the recent Kalifa Review are set to be implemented, including:
- the introduction of a range of new visas by spring 2022, including a scale-up stream enabling fast track visas for recognised UK scale-ups, in addition to a global business mobility visa, to attract highly skilled individuals to the UK and to support inward investment. Additionally, the global talent visa and the innovator visa will be respectively reformed and reviewed going forward;
- a global talent network will be established to proactively market the UK’s visa offering and explore building an overseas talent network of individuals – this will assist the critical science and tech sectors – and help fill a potential skills gap (which if unremedied could otherwise have had a destabilising impact on the wider fintech sector);
- seed funding a new Centre for Finance, Innovation and Technology to tackle barriers to growth, plus accelerate the UK fintech sector. This will act as a focal point, mandated and supported by government, but led by the private sector – to coordinate targeted fintech policies aimed at scaling the wider fintech sector. This will include activities such as building industry-wide coalitions on various issues, acting as a focal point for skills training, helping to build connectivity between national fintech clusters, and working alongside the Department for International Trade in executing a global plan for fintech.
2. The role of fintechs in lending to small businesses was recognised with a 6-month extension of the Recovery Loan Scheme (albeit on reduced terms).
3. The impact of the corporation tax bank surcharge on challenger banks has been recognised, with a rise in the annual profits allowance from £25m to £100m from April 2023.
4. Additional funding for British business bank investments outside of London, through business angels and patient capital.
5. The pension charge cap will be reviewed to consider options for facilitation of institutional pension funds being able to invest more easily in UK growth firms. This could result in a significant injection of capital into the sector.
6. Extension of R&D tax credit regime to cover data and cloud computing, thereby accommodating the cost of creating the types of financial datasets which are critical to developing and scaling fintechs.
Notably, the budget included nothing on regulation – although HM Treasury is expected to release an update on a future financial services regulatory framework in the coming weeks.