Britain's technology sector is preparing for potential upheaval as concerns mount that Labour's forthcoming Budget might prompt investors to withdraw their capital from the nation.
Brent Hoberman, co-founder of Lastminute.com and a key advocate for º£½ÇÊÓƵ start-ups via Founders Forum and Firstminute Capital, cautioned that venture capital (VC) firms are seriously contemplating relocating to Europe should taxation increase further, as reported by .
"I spoke to someone yesterday from one of the top three VC funds who said 'we're all going if they push us any more", Hoberman told the Telegraph.
He characterised suggestions to align capital gains with income tax and implement a two per cent wealth levy as both "alienating" and "crazy", observing that Italy and Switzerland are already under consideration as potential destinations.
The caution emerges as Chancellor Rachel Reeves prepares for a taxation restructure designed to address a projected £30bn deficit in public finances.
Whilst the Labour administration has encountered pressure to establish a wealth levy and a "mansion tax", detractors contend that aggressive measures targeting affluent individuals could prove counterproductive, triggering an exodus that would diminish, rather than enhance, the Treasury's revenues.
The Chancellor has dismissed a dedicated wealth tax though economists anticipate raids on pensions and property.
Economists at the Centre for Economics and Business Research calculate that should half of non-domiciled individuals depart the º£½ÇÊÓƵ, the Exchequer could forfeit £12.2bn during this parliament.
AI investment and the º£½ÇÊÓƵ's goldilocks opportunity
Despite the fiscal concerns, Hoberman maintains an optimistic outlook regarding Britain's AI prospects.
He pointed to recent American investment, including the $31bn secured during President Trump's state visit, targeting AI data centres and initiatives from firms such as Microsoft, Google, and Nvidia.
"Look at the upside. Say there's a five per cent chance that it destroys the world or a nine per cent chance that it cures all cancer. I'd take the bet on the cure for cancer", Hoberman remarked, observing that energy expenses represent the primary obstacle to expanding AI across the º£½ÇÊÓƵ.
Energy bills for data centres in Britain are several times higher than those across continental Europe, constraining competitiveness until ministers tackle this challenge.
Nevertheless, he identifies possibilities ahead. Nvidia's backing of British start-ups including Wayve, which Hoberman also supports, demonstrates the º£½ÇÊÓƵ's capacity to emerge as a centre for AI advancement.
However, he cautioned that Whitehall's purchasing methods continue to create obstacles.
"It is easier for the government to buy from Palantir than from a startup. Nobody wants to get fired for hiring from a startup that goes bust", he contended.
Hoberman also urged the administration to draw in skilled professionals, particularly from America, given increased H-1B visa charges.
"People in government are focused on getting migration down, whereas there should be a focus on getting skilled migration up", he stated, championing a more efficient system for highly qualified visas. Hoberman also endorsed the rollout of digital ID cards to enhance governmental efficiency, pointing to India's Aadhaar system as an exemplar.
"I love the government to have data on people. The argument is you don't want that if you don't trust the government – which I understand – but overall, I think more data will help them spend money better", he said.
The suggestion continues to divide opinion politically, with opponents cautioning it could establish a "papers please" society and represent governmental overreach into personal liberties.
Declining investor sentiment
British tech small and medium enterprises employ approximately 700,000 individuals and generate over £80bn each year for the economy.
With the chancellor preparing the Budget, company leaders seek consistency, transparent multi-year fiscal planning, and research and development backing.
Persistent adjustments to corporation tax, national insurance, and R&D tax breaks complicate long-term capital commitment, with many advocating for enhanced capital allowances to encourage digital and artificial intelligence uptake.
City AM survey data published on Monday highlights the difficulties facing the Labour administration.
Most Britons anticipate Rachel Reeves' Budget will leave them financially worse off, whilst three-quarters have abandoned confidence in the government's economic expansion strategy.
Approximately 56 per cent predict economic deterioration over the coming year, whilst 57 per cent foresee the Budget damaging their household finances, climbing to 80 per cent amongst senior voters. The survey indicates that Labour has a significant challenge ahead to regain trust in its economic management.
There is notable pessimism among older voters, reflecting worries over pension and property taxation.
Almost half of those surveyed stated that their living standards have deteriorated over the past year, with only 16 per cent noting an improvement.
Investors such as Hoberman caution that aggressive taxation and policy uncertainty could push capital overseas, even as the nation draws billions in AI investment.
Given that SMEs are the driving force behind innovation, the government is faced with a decision: bolster the ecosystem with consistent policy, talent incentives, and supportive infrastructure, or risk losing the very innovators that could fuel Britain's next wave of economic growth.
