The Entrepreneurs’ Forum and North East investor and businessman Jeremy Middleton CBE have welcomed an announcement by chancellor Rishi Sunak of a £1.25 billion support package for tech start-ups and innovative small and medium sized enterprises (SMEs).
Last year the digital tech sector in the North East supported more than 30,000 jobs, with many other SMEs developing across a range of sectors, including health, automation and fintech.
Chief executive Jonathan Lamb said that although entrepreneurs are used to overcoming challenges, the measure would support fast growing firms through a critical period.
Jonathan said: “The North East economy is based on the success of innovative SMEs and everything possible should be done to ensure their transition from start-up to scale-up.
“Starting any business always presents challenges but the Covid-19 pandemic is influencing access to finance.
“Tech start-up enterprises are leading the way in the creation of new industries here in the region that will support future growth. I welcome the chancellor’s announcement as an added layer of support so that tech start-ups and innovative SMEs can continue to prosper once the pandemic has passed.
“However, having announced this package of support, I would urge the government to act decisively and make it available as quickly as possible.”
Jeremy Middleton, who invests in early stage, high growth disruptive tech companies, also welcomed the measures.
He said: “There are a whole raft of businesses that are growing very fast and employing a lot of people, but they are pretty close to the wind when it comes to finances. There was no real help for them unless they were profitable.
“These are viable businesses but they’re not profitable, so this provides some support for those type of companies.
“It will require private investors to go in, and I think that’s right so the Government is well-placed to judge where the money should go. The Government will be taking equity cross the boar so they should be getting their money back, or more than their money back.”
Jeremy believes that the Government could go further to support very early stage or start up businesses. He said: “It would be great if the Government would look at increasing the incentives for people to invest under the Enterprise Investment Scheme.
“There’s a whole raft of companies, particularly very early stage and start ups that have never raised large sums of money before and are not eligible for this scheme.
“Currently the only source of funds is, correctly, from the private sector and we should keep it that way. But the Government gives income tax relief at 30%, they could increase this to 50% or even 80% for a short time.”
To receive the government money, a company must have raised £250,000 privately within the last five years and any sum received must be matched by private investors. If the money is not repaid, the government will take an ownership stake in the company.