SOUTHERN TECH 100
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home-working and more part-time work or job sharing. This level has increased from 2011. One respondent highlighted an emphasis on the provision of a mix of minor but valued benefits such as gym, bike scheme and so on.
Methods of retaining staff
It is interesting that while companies are continuing to offer flexible working arrangements to staff, this year there has been a reduction in those granting share options. Although historically equity funders have tended to be in favour of share option schemes as a valuable way of incentivising and retaining staff, it has been recently noticed that a few have been against their introduction in their investee companies.
The use of interns appears to be an increasing trend with some 31% of survey participants using them, whereas it hardly featured last year. Notwithstanding the recession, however, over 74% of respondents are planning to recruit within the next 12 months with the majority of these planning on hiring up to five employees. It is, however, interesting that 5% are expecting to recruit more than 50.
There are mixed feelings about the quality of university graduates, despite the strong belief that the UK‘s academic base is a key strength in the sector. A number of respondents such as Dr Richard Skaife consider that if there is an issue it lies in the roots of academia. Others such as David Laskow-Pooley, feel that the majority are excellent but believes that there should be more interface between business and academia and believes this is where government could help more.
Although a number of respondents indicated a concern at the lack of basic skills among prospective employees, very few felt that the government‘s apprentice scheme would be of value to them.
Impact of governmental initiatives
In order to stimulate the growth of technology and innovation within the UK, there have been a number of measures introduced by the Government including: • Tax incentives for businesses engaged in R&D and exploiting the resulting IP
• Tax incentives for those investing in such businesses
• Grant funding both in academia and R&D businesses
• Establishment of Catapults; Enterprise Zones and Launchpad.
But are these measures having the desired effect? According to the results of the survey, far and away the most popular initiative has been that of R&D tax credits, which enable SMEs to claim tax relief on R&D costs at a rate of 225%.
It can be seen that there appears to have been a consistent reduction of those accessing UK state aid among respondents compared with last year.
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – APRIL 2013
Other tax initiatives such as EIS and EMI share schemes have also been of use, although to date Seed EIS seems to have had relatively low take-up.
A high proportion of respondents have benefited from grants – be they UK or European ones. Essentially grants are free money and a useful supplement to other sources of funding. Increasingly grants awarded are narrowly defined in terms of technological interest and calls for applications for grants may well have relatively short timescales for applications.
From this month the Government is introducing the Patent Box Tax Regime, which reduces the rate at which companies will pay corporation tax on profits generated from patented innovations or technology. Within five years the effective rate will be 10% as compared to the main corporation tax rate from April 1, 2013, of 23%. It is concerning that 49% of respondents within the core sector this initiative is aimed at are unaware of it.
The key beneficiaries of Patent Box will not be R&D companies in their earlier stages but companies already generating taxable profits. It is arguable that the intention of the introduction of Patent Box was to attract overseas investment into the UK and movement of business here – competing particularly with the perceived beneficial corporate tax regime in Ireland. What is certain is that it has already ensured that GSK invests £500 million in manufacturing in the UK including building a new factory in Cumbria and the creation of up to 1,000 new jobs.
Among the more recent government initiatives have been a number focused on creating infrastructure to promote innovation and technology – the establishment of Enterprise Zones; the development of Tech City in London; the setting up of a range of Catapult Centres and the BioMedical Catalyst Fund. Although only 30% of respondents felt these measures had any impact upon their businesses, for life science companies it was clear that the Biomedical Catalyst Fund has been particularly welcomed.
Tech City isn‘t just about trying to attract large overseas tech companies to set up in the area, its also about trying to develop and enhance the local tech and entrepreneurial community. It was announced in December 2012 that the Government is putting £50m towards a project which will regenerate the Old Street roundabout area in Tech City to create Europe‘s largest indoor civic space, which will be dedicated to startups and entrepreneurs in East London.
Technology – a global sector
The technology sector is a global industry with the majority of companies, regardless of size or stage of development, having strong international links. Just over 40% of respondents utilise overseas resources to develop their technology in a range of locations.
www.businessmag.co.uk
This is a reduction from 46% of respondents in 2011, reflecting potentially the UK‘s increased attraction as a location to generate innovation.
The reasons cited for using overseas resource are principally because of the perception that there are better skills overseas (60%) and that they are cheaper, but a significant proportion consider that overseas environments have better state aid provision than in the UK, despite the government initiatives outlined above.
In the past year there appears to have been a shift away by respondents from using US resources in favour of the Far East and Europe.
Some respondents expressed concerns about the level of competition from overseas which they perceived to be based upon different cultures and the US in particular is highlighted in this respect.
There is also concern about a perceived drain of intellectual property to the Far East.
Where now?
So what do technology businesses consider would assist them most going forward?
There is the perennial plea for a reduction in red tape and legislative burden.
From a funding perspective, some call for the Government to make more money available to the earlier stage companies with one respondent suggesting the set up of a £2 billion Bank of England ‘Dragons Den‘ fund. Another suggests that the Government should consider mandating banks to lend to pre-revenue companies.
From a tax point of view respondents largely call for extensions of existing tax incentives – the increase of the EIS cap from 30% for example. There are calls for the reduction in PAYE/ NI for new employees in technology-based businesses. As a method of retaining intellectual property and entrepreneurialisation in the UK one respondent suggests that there should be income tax relief for engineers and natural scientists. This has similarities to the Irish Artists Exemption Tax Relief.
As participants in the sector and following three years of such surveys many of the themes drawn out are consistent year on year. Of particular interest, however, are the numbers of respondents who appear unaware of key initiatives, such as Patent Box. Before other measures are introduced it would seem to be of sense for the Government to publicise and communicate more effectively those opportunities they already offer within the sector.
Details:
www.jamescowper.co.uk
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