March 6, 2024

5 things UK startups should know about the government’s budget

Including a major U-turn in angel investing rules

The UK’s latest budget ahead of the next general election signalled an intention to boost investment in startups — but was short of fresh cash.

It also saw a major U-turn from the government on rules around angel investment, which would’ve seen the number of people (especially women) eligible to invest in startups drastically reduced.

Chancellor Jeremy Hunt said that Britain has double the number of AI startups than any other European country as well as a tech economy twice the size of Germany’s and three times the size of France.


“We are on track to become the next Silicon Valley,” he declared.

Dom Hallas, executive director of lobby group Startup Coalition, said the budget includes some “solid” measures to unlock patient capital, boost investment and embed AI in the public sector — but it is not “game changing”.

Here’s what the budget brings for tech startups.

Patient capital reforms

Hunt said the government will build on the Mansion House reforms to unlock more patient capital, by giving new powers to the Pensions Regulator and Financial Conduct Authority to “ensure better value for defined contribution schemes by judging performance on overall returns not cost”. Alongside this, it aims to create new vehicles to make it easier for pension funds to invest in UK companies.

It will also introduce new requirements in April for the Defined Contributions pension schemes and Local Government Pension Scheme (LGPS) in England and Wales to publicly disclose their international versus UK equity investment. Hunt warned the government may take further action if this data does not show that UK equity allocations are increasing.

In an attempt to boost the pipeline of future IPOs in the UK, Hunt also launched a consultation on the Private Intermittent Securities and Capital Exchange System (PISCES), which is designed to act as a crossover between public and private markets. The secondaries marketplace would give shareholders — like founders, VCs and angels — the opportunity to sell stakes in companies before they’ve gone public regularly. It’s expected to go live later this year — and could be the kind of solution the ecosystem, thirsty for liquidity, desperately needs.

“I want our brilliant tech entrepreneurs not just to start here but to stay here, even when the time comes for a stock market listing,” the chancellor said.

U-turn on angel investment rules

The government has reinstated the annual income threshold of £100k used to define so-called high net-worth individuals, which it had raised to £170k on January 31. 

The change to the Financial Promotions Act had triggered an outcry among some angel investors, who feared the higher threshold would hugely reduce the number of women, in particular, who could back startups.

Sarah King, founder and CEO of angel investment platform Obu, says the U-turn shows “the strength of voice that people who are overlooked and underestimated in the investment ecosystem can galvanise when legislation is implemented without thorough analysis of its impact”.

“Our economy needs us to diversify entrepreneurship and investment in the UK and we need progressive policy to enable this,” she adds. “I hope that a broader spectrum of voices will be consulted in the future.”

Emma Sinclair, CEO and cofounder of EnterpriseAlumni, an alumni management software company, says she’s been “enormously impressed” by how swiftly the government changed course. 


“My hope is that we channel this momentum to continue pushing for real change in favour of women both in terms of funding and revenue growth.”

Tax changes

The VAT thresholds for small and medium-sized businesses will rise from £85k to £90k from April 1, as part of a broader package of measures to help them grow. 

This is the first increase in seven years, but it is more modest than what industry groups had lobbied for — and its effect will be eroded by inflation. The Treasury estimates that more than 28,000 businesses will get out of paying VAT in 2024-25.

The government will also set up an expert advisory panel to support the administration of R&D tax reliefs.

Extra cash for AI

In a boost to the UK’s growing AI industry, the government announced a doubling of funding for the Alan Turing Institute, Britain’s national centre for AI and data science, taking its budget to £100m to be spent over the next five years. The extra cash will fund research on the application of AI in healthcare and environmental protection, as well as defence and national security.

A new £7.4m up-skilling fund pilot scheme aims to assist startups in developing AI skills. Additionally, the government intends to establish a SME Digital Adoption Taskforce to explore the best strategies for supporting the adoption of digital technology among SMEs, thereby boosting their productivity. 

The word semiconductor didn’t get any mention in the budget document, despite pressure from the chip industry, which is seeking clarity on how the government is going to allocate funding from its 20-year semiconductor strategy.

Life sciences hubs

The government promised to set a long-term budget for a new development corporation to lead on expanding Cambridge as Britain’s life sciences hub. Pharma giant AstraZeneca, meanwhile, will spend £650m to expand its footprint at the Cambridge biomedical campus and fund the building of a vaccine manufacturing hub near Liverpool, Hunt said.

The government has also allocated £242m to transform London’s former banking district Canary Wharf into a new hub for life sciences companies.

Cristina Gallardo

Cristina Gallardo is a senior reporter at Sifted based in Madrid and Barcelona. She covers Europe's tech sovereignty, deeptech and Iberia. Follow her on X and LinkedIn