Britain must soon learn to wrestle with more responsibility over its domestic policy than it has had since the 1970s.
For decades, the country’s financial direction has been increasingly influenced at a European level, but with Brexit looming, our next Prime Minister and his likely-new chancellor must be prepared to grab both existing and newly-available financial levers if they want to ensure that Britain’s world-leading industries continue to thrive.
For instance, the country is already punching well above its weight in the technology industry – only the US and China produce more leading tech companies.
Plus, the number of UK tech unicorns – companies valued at $1bn or more – rose by a third in the last year, thanks to the likes of Deliveroo and Monzo.
But as a serial entrepreneur in the social impact tech sector, I have seen firsthand just how challenging it can be for companies that focus on improving the lives of people and communities to attract enough investment to make a real, lasting change.
A few helpful initiatives do exist, such as the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS), set up in 1994 and 2012 respectively to provide tax breaks to investors in fledgling companies. Having raised more than $20bn, these schemes have served as vital help for entrepreneurs. The government also created a tax relief scheme for social investment in 2014 – so far, the effects have been encouraging.
But whether you are trying to improve education, healthcare, or the environment, social impact ventures require considerably more time to succeed, due to lower initial profitability and longer buying cycles. It is far cheaper and quicker to prove the profitability of a food delivery app, for example, while an app designed to help educate refugees requires lengthy impact studies to satisfy investors.
Simply put, a non-social impact tech company can much more rapidly demonstrate how it is addressing a gap in the market, and rarely has to deal with prolonged public sector procurement processes.
Schemes like EIS and SEIS can help buy time for social impact firms to begin generating the revenue and results needed to attract further investment.
The new government should seize the opportunity to turbocharge investment in social enterprises by placing rocket boosters on these schemes, raising the relief offered and increasing the caps for social impact ventures focused on sectors that are aligned with public services. This will intensify investment into companies that are solving our most pressing social problems, while also allowing the government to harness the best private sector expertise without “picking winners”.
The next inhabitant of Number 11 will soon find that the public purse is too limited to solve every social problem. Instead, we must unleash the power of entrepreneurs to address social problems in a faster and more efficient manner than government.
Incentivising investment in this way will also result in a healthier UK business sector – a vital pillar of our economy, and one that it will be essential to maintain throughout the turbulence of Brexit.