Budget 1999: Enterprise Measures - Changes too cautious, say companies

The Budget and Business

GORDON BROWN promised a set of reforms which would create "a new enterprise economy for all". Yet, while the measures he announced received a guarded welcome from entrepreneurs and venture capitalists, some felt the Chancellor had been overly cautious.

"The direction is right, but the impetus should be much stronger," said Ronald Cohen, chairman of high-tech venture capitalists Apax and a member of a Department of Trade and Industry committee which is looking at encouraging young technology companies.

David Svendsen, the UK chairman of Microsoft, the software giant, said the measures announced by the Chancellor "get Britain started on the path to the enterprise economy".

The move to stimulate high-tech companies will allow smaller firms to lure experienced managers from larger firms by offering them large packages of share options.

The Government does not plan to publish the details until today. However, the broad outline is to allow small companies to offer equity worth up to pounds 100,000 to executives without it incurring income tax. The previous ceiling was pounds 30,000.

"It's a very good idea," said David Stroud, managing director of sparesfinder.com, an Internet-based company which helps firms find spare parts around the world. "If I want a good sales guy how am I going to lure him out of his nice established sales job? If I can offer him some equity he might think differently about it."

Venture capital groups, which have lobbied heavily for the move, also approved the initiative, although they had argued for the Chancellor to adopt a ceiling of pounds 250,000.

"It should make a significant difference in recruiting what is a relatively small number of people into a relatively small number of jobs," said Jonathan Clarke, an executive with Cinven and chairman of the British Venture Capital Association's taxation committee.

The Government also plans to introduce a new tax break that will encourage large firms with spare capital to invest in innovative smaller companies. Once again, the details will not be published until today, but the move is likely to allow large firms to write off some or all of the investment they make in smaller companies against tax.

The principle is well- established in the United States, where large high-tech firms, such as Microsoft and Intel, regularly provide backing to former employees who leave to start up their own companies.

"A large company that has got a vested interest in a small company's growth can offer some advice and mentoring rather than trying to smash the small guy because he's a threat," said Mr Stroud.

But other observers pointed out that large firms have traditionally been very bad at backing start-up companies, and have tended to fund bad businesses or strangle them in excessive bureaucracy.

Venture capitalists welcomed plans to make pounds 20m available for high-tech venture capital investment in small companies. The cash, which will be awarded through a competition to lever in cash from the private sector, is expected to be targeted at small firms requiring a relatively small amount of funding.

Treasury research has shown that the venture capital industry consistently fails companies that need cash injections of pounds 250,000 or less.

Another source of funding for small companies will come from a new capital gains tax relief which will encourage serial entrepreneurs and investors in Enterprise Investment Scheme companies. It will allow investors to carry their capital gains tax relief made on one investment over to another company. The move builds on last year's reform of CGT, by which the tax rate gradually declines depending on how long the investment is held.

However, observers said the Chancellor would not be able to create the large technology businesses of tomorrow with tax breaks. "If they have a good idea people will go and do it anyway," said Mr Stroud. "What we really need is less of the Government giving its money away and more structural incentives."

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back