The UK economy is facing a stark warning from Paul Taylor, chief executive of Thought Machine, one of the country's fastest-growing fintech firms. With its banking software valued at $2.7bn and revenue growth of 57% to £75m last year, the company has seen firsthand the impact of escalating costs on businesses. Taylor cautions that the current trajectory of high taxes and regulation risks discouraging entrepreneurs and deterring companies from listing in the UK.
The remarks come as the UK prepares for a change in leadership, with former Manchester Mayor Andy Burnham expected to become the next Prime Minister. His policy proposals, including nationalisation of utility companies and potential compensation for 'Waspi women', have intensified fears among some of a third consecutive tax-heavy Budget under a Labour administration.
One particular proposal that has drawn criticism from Taylor is the suggestion to align Capital Gains Tax (CGT) with income tax rates. This idea, floated by figures such as former Health Secretary Wes Streeting, aims to raise an estimated £12bn by mirroring CGT with existing income tax bands of 20%, 40%, and 45%. Taylor describes this proposal as 'profoundly unfair', arguing that the current 28% rate on long-term gains is already a significant burden. He suggests that such a hike could deter business owners from selling their companies, leading them instead to 'hang on' in anticipation of more favourable tax policies.
Furthermore, Taylor criticises the UK's approach to initial public offerings (IPOs), specifically highlighting the 0.5% stamp duty levied on share purchases by investors. He labels this an 'anachronistic' feature of the UK market, arguing that recent attempts by the Treasury to ease listing costs were insufficient to significantly alter companies' decisions on where to list. Instead, he proposes a system of capital gains tax holidays for venture capital investors to foster a more positive sentiment towards UK listings.
Thought Machine's experience underscores broader concerns about London's competitiveness as a global financial hub for emerging tech companies. As the company considers its public debut within the next two to three years, Taylor has not ruled out other international markets due to the need for a 'rational side' to their decision-making process.
Source: City AM