UK Tech Founders Urge Reeves to Rethink Budget Tax Proposals

Executives from prominent UK technology start-ups have expressed serious concerns regarding proposed tax measures in the upcoming budget, warning that these changes could jeopardize plans for initial public offerings (IPOs) in London. A letter, reportedly sent this week, includes signatures from influential companies such as Revolut and ClearScore, urging the UK Treasury to reconsider the introduction of an exit tax on high-net-worth individuals. These founders emphasize that such measures could erode investor confidence in the UK market.

The companies that co-signed this letter boast a combined valuation exceeding $100 billion (£80.3 billion). They cautioned that modifications to capital gains tax or inheritance tax regulations might diminish the UK’s appeal to entrepreneurs, stifle investment in start-ups, and ultimately delay or cancel planned IPOs. This correspondence received backing from the Unicorn Council of Innovate Finance, which represents the interests of the UK FinTech sector.

Pressure on the Treasury

This warning arrives at a critical juncture for the UK Treasury, as Rachel Reeves has engaged with the start-up community over recent months. She has hosted discussions with various firms, including ClearScore, OakNorth, and Revolut, to advocate for London as a premier venue for tech companies seeking listings. Earlier this week, Reeves held a reception at Downing Street, celebrating the performance of the UK equity market.

“I am not immune to the narrative that has surrounded UK equity markets, and I too want to see more listings, both joining and staying on our equity markets,” Reeves stated during the event. She highlighted that the FTSE 100 and FTSE All-Share indices are nearing record highs, countering the less favorable perspectives often presented in financial media.

Among the letter’s signatories is Francesca Carlesi, chief executive of Revolut and co-chair of the Unicorn Council. Other notable signatories include Vishal Marria, founder of financial crime detection firm Quantexa, Rishi Khosla, founder of OakNorth, Justin Basini, chief executive of ClearScore, and Paul Taylor, chief executive of ThoughtMachine.

Concerns Over IPO Landscape

The letter’s issuance coincides with growing trepidation about London’s capacity to attract and retain high-growth firms. Recent IPOs have faced significant challenges. For example, Deliveroo, which went public in 2021 with a valuation of £7.6 billion, was acquired by US competitor DoorDash for just £2.9 billion this year after its share price plummeted by over 50 percent post-listing. Similarly, cybersecurity firm Darktrace, which debuted in 2021 at a valuation of £1.7 billion, was taken private by US private equity firm Thoma Bravo in 2024 for $5.3 billion, citing the greater flexibility offered by US markets for employee equity and investments.

Charles Hall, head of research at Peel Hunt, remarked at a recent capital markets summit that numerous firms are eager to go public. “We’ve got a list of 20 to 25 companies that would be excellent IPOs for the UK. The challenge for us is keeping them in the UK,” he noted. Hall warned that if major players like AstraZeneca or Revolut opt for US listings, it may trigger a trend where other firms follow suit.

Reeves is scheduled to present her second budget on November 26, 2023, with expectations of an increase in the basic rate of income tax as the government seeks to address a fiscal shortfall amounting to tens of billions of pounds. Founders’ warnings indicate that the treatment of tech entrepreneurs and investors will be under close scrutiny as the Chancellor strives to balance fiscal challenges with the imperative of maintaining London’s competitiveness in the global IPO landscape.