The mini-budget – potential impact on UK innovators and the grant funding landscape

At the heart of the Growth Plan, released on Friday, is its objective to increase private investment across the UK. This is a central principle of the government’s aim to achieve a national growth rate of 2.5%. This approach is consistent with recent announcements from key UK grant funders, such as UKRI, who have also increased their focus on attracting and stimulating private business investment.

How is the UK government seeking to achieve this aim?

In this mini-budget, the focus is on reducing taxes and changing the regulatory environment to increase the flow of private capital. The most eye-catching elements are:

Corporation Tax Reduction to 19%, lowest in G20

• Corporation Tax rate will remain at 19% for all firms (rather than rising to 25% from April 2023 as planned)

Permanent increase in Annual Investment Allowance (AIA)

• Annual Investment Allowance (AIA) set permanently at £1 million level. This level had previously been due to expire after 31 March 2023.
• The aim of this increased allowance is to increase business investment in capital infrastructure offering a 100% capital allowance for qualifying expenditure on plant and machinery.

Expansion of the Seed Enterprise Investment Scheme (SEIS)

• Designed to enable more UK start-ups to raise higher levels of finance (up to £2,000/year through SEIS).
• From April 2023, companies will be able to raise up to £250,000 of SEIS investment (two-thirds increase). The eligibility criteria has also been adjusted to increase the number of companies who can use SEIS to raise funding e.g.

1. The gross asset limit will be increased to £350,000 and the age limit from 2 to 3 years
2. The annual investor limit will be doubled to £200,000

Creation of new Investment Zones across the UK

• Created with the aim of increasing growth through localised tax incentives and light-touch planning frameworks to encourage rapid development and business investment.

Reformation of the pensions regulatory charge cap

• Bringing forward draft regulations to reform the pensions regulatory charge cap. The aim of this intervention is to enable defined contribution pension schemes, a significant potential investor, the ability to directly invest in innovative businesses that have higher risks (and potentially higher returns) than current investments.
• Alongside the proposed reforms, the UK Government will launch a Long-Term Investment for Technology & Science (LIFTS) competition providing up to £500 million to support new funds designed to increase investment from pensions schemes and other investors into the UK’s science and technology businesses. This initiative will be led by the British Business Bank with the aim of launching in early 2023.

In addition to the raft of striking tax and regulatory interventions planned, the Growth Plan also notes that the government continues to review the UK’s R&D tax relief schemes with any changes to the schemes expected to be announced during the next quarter. Also anticipated in the next quarter from the UK Government is a critical decision regarding the UK’s continued association with Horizon Europe (and potential reshoring of this R&D budget back to the UK).

Overall, this Growth Plan is likely to release capital in the short-term, enabling companies to invest more in R&D complementing other government initiatives to provide business-led grants that further extend and expand the scope of UK businesses’ R&D activities.

Granted Consultancy has over a decade of experience within the grant funding landscape. We have weathered the changes of new Government Party leaders, change in Government budgets and a recession, and, throughout those challenges, we still continued to secure transformative grant funding for our clients. Our team has a track record of success spanning a variety of sectors from Cleantech to Health and Life Sciences to Digital Technology – why not get in touch today to explore how we can support you?