British start-ups that benefit from taxpayer-funded support schemes will have to pay back the country if they move overseas or go public, according to a prominent British lobbying group.
In its latest report, UK Finance praised government-backed schemes such as EIS and SEIS for encouraging capital to flow into start-ups, but it has targeted companies that subsequently move operations overseas or go public.
“Most UK companies choosing to participate in public markets do so within the UK, but there is no doubt that they face increased competition from overseas markets,” the report said.
UK Treasury is calling for a “two-way commitment” system where tax-funded aid could be repaid in part or in full if “recipients” listed overseas or relocated “valuable businesses”.
“It is a choice for UK companies to participate in the public markets and where to base themselves,” the report said, “but there is a strong case to link taxpayer support to a future commitment to use the UK public markets and to operate in the UK.”
Britain’s public offering market has faced criticism for not being competitive enough to encourage high-profile start-ups to list in London, with big names such as Arm and Imagination preferring New York.
The government is exploring solutions to reform public markets to stimulate activity, but the perception remains that the US will always be more attractive because of its deeper pool of capital.
Hussein Kassai, founder of digital identity startup Onfido, which was acquired by Entrust earlier this year, had previously proposed a form of equity refund for taxpayers if government-backed startups complete their IPOs overseas.
“It’s hard to imagine that there would be a company that would prioritise listing in the UK over the US when they could list in the US,” Kassai told the UKTN podcast.
But Dom Harras, executive director of industry lobby group the Startup Coalition, is opposed to clawing back tax-funded support for companies to leave overseas.
“This is the stupidest policy proposal I’ve seen in a long time,” Halasz wrote on X. “It’s stupid and dangerous. Why should these companies feel unwelcome in the marketplace? Asks the UK’s largest financial services lobby.”
This is the stupidest policy proposal I’ve seen in a long time. Stupid and dangerous. Why should these companies feel unwelcome in the market? asks the UK’s largest financial services lobby. 🤔 https://t.co/iGvpyFn255 pic.twitter.com/e2FyS09cIq
— Dom Hallas (@Dom_Hallas) July 4, 2024
