roundtable 41


Tim Mayes: “TheTMT sector came through the recession better than many other sectors. Many management teams had been through the dotcom downturn and were quick to reduce costs. Businesses with an international client base are performing better than those focused on the UK consumer.“


Kingsland’s company provides online domain names for companies, so has a good UK overview of activity. New start-ups need new web addresses; ongoing businesses need to renew their address registrations. “We are seeing continued growth, albeit not at the pace of the dotcom boom years. In recessionary times a lot of businesses change and do restructuring and that increases the number of start-ups coming through.“


groups. “We face similar challenges to IT suppliers in the public sector. Pitching for work with large financial institutions area can be a big investment for a company and it needs to be carefully handled as an integral cost of doing business.“


Hornsby: “A lot of the public sector work today is not leading edge, it’s not sexy. There is business there, but its largely just bringing systems up to date.“


“It may not be glamour business, but it is churn,“ said Newberry.


Good Budget, bad Budget?


It was broadly agreed that the Budget had helped place the technology sector as a key driver of the UK economic recovery. Budget tax breaks on R&D, capital gains, corporation tax, and entrepreneurial relief etc would also help deter companies from putting manufacturing and developmental work offshore.


Staunton: “Successive governments over the last 8-10 years have highlighted the importance of technology for the economy, but this Budget is really starting to put in place some really good building blocks to support our sector.“


Steve Rushin


Peter Francis: “I don’t see much of that happening; moving from a secure job today into the risk of an entrepreneurial start-up. It’s just not the right environment at the moment.“


Are the public sector cuts impacting?


Peter Hornsby’s company has 65% of its work in the public sector. He noted how the private sector had made itself lean and efficient in recent years. There had been plenty of public sector work on offer but “it just dried up immediately after the election, and I saw companies in the supply chain almost stop overnight. ’Consultancy’ especially became a dirty word; £1,000 a day consultants suddenly became £400 a day. The people who are providing IT things, building systems and installing them, are fine; people who are talking about IT things are not so fine.“


Sue Staunton agreed with Hornsby, but added: “There was a hiatus, but the public sector is now purchasing. The Government still needs to operate, still needs systems and IT input into areas in which it chooses to invest.“


Encouragingly, insolvency levels had not been as high as might have been expected two years ago.


Rushin said his company made a decision several years ago to move away from Government work because of the bureaucracy, unpredictability, and costly and difficult public sector bidding and procurement processes.


“A lot of the things we could do for the public sector would probably relieve some financial pressures and headcount reduction. I don’t think we are being given a fair opportunity to do that. The Government says it wants to encourage small businesses to get more business. I don’t see that coming through. There needs to be far more transparency on opportunities for the IT sector.“


Francis’s company deals mainly with the financial sector, from small 2-3 man IFAs to retail banking


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – MAY 2011 Peter Hornsby


Hornsby: “The Government does seem to have spent some time listening to the industry’s professional associations.“


Sharma said the sector should be the main beneficiary of the Budget’s support for R&D. “Tech companies typically have higher levels of inward investment on R&D so that will facilitate fast- tracking of plans to develop their own business and client offerings. Hopefully, clients will also want to develop their businesses and will seek IT guidance from people like us around this table to help them do that.“


Francis: “It is a definite pick up for us. It will be a cash positive increase for many. Of course the Government could always do more, but this aspect of the Budget was good for us.“


Murray mentioned the Budget’s ’patent box’ plan providing a reduced 10% corporate tax rate for profits from patents from 2013, which will encourage UK businesses to invest in further innovation and to retain high-value jobs associated with commercialisation of patents.


Tim Clark: “Anything that gives tax breaks and incentives to companies developing patents should help R&D.“ But, he pointed out that “only 4% of UK businesses have an IP or patent strategy, which is quite staggering really.“


Simon Wilcockson


Sharma: “Multinationals will also be able to remit profits more tax efficiently from global operations to UK holding businesses, so there are a number of drivers in this Budget. I think the Government has come up with the best it could with public liabilities so high.“


Clark: “Increasing the lifetime limit of Entrepreneurs’ Relief on Capital Gains Tax to £10m will also encourage entrepreneurs to reinvest.“


Staunton and Sharma also highlighted the motivational boost of the income tax relief increase from 20% to 30% available for new Enterprise Investment Scheme (EIS) investments, and other beneficial changes to the Venture Capital Trust (VCT) and Enterprise Management Incentive (EMI) structures.


The Thames Valley already is an enterprising zone!


Murray queried whether any companies would move to the new enterprise zones. The Roundtable responded: ’Why would anyone want to move out of the successful Thames Valley?’


Rushin’s company Star had recently moved into the area from Gloucester, setting up its new headquarters in Theale. “Our customer base tends to be within this area, and we wanted to drive our business by being closer to our key customers. Having said that, we have other bases throughout the UK so some of the enterprise zones may support them.“


Newberry agreed: “There is a lot of value in being in this area.“


Staunton stressed the value of the clustering of like-minded companies. She highlighted the Harwell siting of the Diamond Light Source Synchrotron by the Government because of the core scientific work already being carried out in the area.


R&D to follow manufacturing offshore?


Simon Wilcockson and Hornsby raised the concern that R&D operations might follow manufacturing and be placed outside the UK in the future to achieve lower costs.


Hornsby: “Most western economies rely on their impressive R&D functions, and the next battle will be because R&D capabilities offshore are developing so quickly now. It happened with manufacturing and now UK companies need to harness the rise of R&D offshore.“


www.businessmag.co.uk Continued overleaf...


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