The Startup Coalition has published a manifesto urging the Government to tackle some of the challenges that it says are being faced by the UK’s ‘startup and scaleup ecosystem’.

While the manifesto acknowledges progress that has been made over the past decade – pointing to encouraging VC investment figures and effective tax incentives programmes – it warns that there are “clear and critical challenges” that the Government should address. Four areas in particular are highlighted, and a number of recommendations are made in respect of each.

First is the subject of talent. As the manifesto explains “without the ability to attract and retain the best talent, either as founders or startup employees, the UK will lose its status as one of the leading places to start and scale a startup”. It calls on changes to the visa system such as: including stock options as part of an employee’s compensation package when calculating the salary threshold for the Skilled Worker visa; expanding the Youth Mobility Scheme to allow more people to live and work in the UK for a fixed period; and expanding the High Potential Individual visa to avoid losing ‘top tech talent’, explaining that the existing narrow criteria that apply means that only those from a limited number of institutions are accepted in practice. It also urges greater clarity about the different types of visas that are specifically created for startups, stating that “founders can struggle to differentiate between them and determine their eligibility”. In addition to recommendations about specific visa schemes, the manifesto makes the general point that the actual practical administration of visa applications at the Home Office is a ‘mess’. Finally, the manifesto argues for a “skills strategy fit for the 21^st century” which would, for example, expand access to initiatives such as coding bootcamps, and reform the Apprenticeship Levy “in a way that encourages meaningful investment in skills development”.

Next is the matter of funding. While the manifesto notes that the UK draws the third most venture capital investment in the world after the USA and China, it points out that the number and value of equity deals for UK startups has declined since 2021. To address challenges of funding, the manifesto argues that R&D tax credits – what it calls the “lifeblood for tech startups” – must be fixed. It states that the current system is “incoherent”, “incomplete”, and “a mess”. To fix this, it recommends that, among other things, the current policy is changed so that due diligence is completed before funds are distributed, to avoid the possibility of them having to be claimed back. Furthermore, it argues that the existing system should be more generous and targeted at the right firms so that it “matches the UK’s ambitions to be world leader in R&D”. The manifesto also argues that the Government should shape a tax environment that “acknowledge[s] the role Venture Capital plays in innovation, makes it easier to set up new funds, creates a British Business Bank that is easier to work with than ever and broadens the base of private LPs”. Finally, it calls for pension investment in the UK tech sector, an upgrade of the Enterprise Management Incentive, and measures to ensure that capital and support is available to all sections of society, irrespective of ‘gender, race and place’.

Regulation is the third focus of the manifesto, as it calls for “startup-friendly regulation” that supports innovators. It states that it often hears complaints from founders of a lack of clarity from regulators, insufficient technical expertise, and an inflexibility to adapt to the way startups work. On the subject of regulating AI, the manifesto appears to welcome what it calls the current “balanced and pragmatic approach to regulation” but argues that more needs to be done to attract top-end AI talent, to create an “equitable outcome for copyright”, to provide access to cloud computing, and to encourage wider AI adoption. Finally, on competition policy, the manifesto argues for a “pro-competitive regime that proactively supports innovation” and reflects “the complicated symbiotic relationship between the startup world and corporate ‘big tech’”. This means, in the authors’ words, “creating a pragmatic and innovative regulatory environment that recognises that competition among technology-led businesses often plays out in different and more complex ways than it does in the traditional economy”.

The fourth and final subject that the manifesto addresses is innovation. It argues that there is a need for more schemes such as the Advanced Research and Invention Agency (ARIA) which focus on startup innovation, and bemoans the current need to navigate what it describes as “byzantine bid bureaucracy”. It also argues that procurement processes need to change, stating that they are “too slow, overly bureaucratic, costly and confusing”. Finally, it calls on the Government both to deliver the conclusions in the Independent Review of University Spinout Companies in November 2023, ensuring that “founders can spinout world-beating companies from British academic institutions in a fair and open manner”, and also to “get smart data done” by reviving the measures advanced in the now-scrapped Data Protection and Digital Information Bill.

Commenting on the manifesto, Marcus Foster, Head of Policy Campaigns at the Startup Coalition, said “Britain’s startup and scaleup ecosystem is at a crossroads. Over the past decade we have seen incredible progress on almost every measure. The venture and debt financing for British tech firms in the single month of May this year outpaced funding in the whole of 2014. We see more and more ambitious people being drawn to work in startups or to build their own. And we’re leading the way in the newest cutting edge industries like AI and ClimateTech.

As founders, investors and champions of British tech – we all agree we can’t let this progress stop. And despite this success, we see clear and critical challenges for both our ecosystem and the British economy. We believe the best way to address them will be to tackle them together. By supporting the UK’s great entrepreneurs and startups – the Government wouldn’t just be driving the success of our tech ecosystem, but our country’s economic prospects too.

Doing that means delivering on Government policy that fills in existing gaps in investment, ensures companies can access the talent they need from at home and abroad, and creates a regulatory landscape that works for startups not against them. Above all, it means being laser focused on breaking down the barriers that prevent our very best companies and entrepreneurs from thriving”.

To read the manifesto in full, click here