Last month, Sir Keir Starmer won a landslide victory for labour in the 2024 general election. The new Labour government, propelled by the simple motto “Change,” has put forward various reforms to stimulate the UK economy and businesses.

But what does this mean for the future of tech start-ups?

This article breaks down the key manifesto commitments and recent developments.

Launch of the National Wealth Fund

Chancellor Rachel Reeves announced the launch of the £7.3bn National Wealth Fund, which aims to be a key source of funding for various sectors across the economy.

A core objective is to encourage private sector investment by improving expectations and risk exposure. In particular, start-ups requiring heavy hardware investments are likely to be targeted due to the dual debt and equity financing of the fund, which is appealing to venture capital.

Start-up leaders will need to demonstrate risk minimisation as they compete for funding, acquiring experienced finance and technical hires to meet the standards of eager lenders.

Supportive environment for data and tech

The new government wants to unlock the country’s potential in converting innovation into commercial success in data-led sectors.

A key aspect of this creating a supporting regulatory and planning framework. Plans include the removal of development barriers for data centres, particularly in unlocking brownfield and grey belt sites, and a new Regulation Innovation Office, specialised in dealing with dramatic industry developments (including A.I.) and providing shorter approval times.

Another, yet less explicitly addressed, reform has been upgrades to the British Business Bank to improve access to capital for SMEs.

This should foster booming conditions for the tech industry, encouraging Foreign Direct Investment due to established infrastructures.

Capital gains tax reform

The manifesto pledged for the reform of capital gains taxation. “Private equity is the only industry where performance-related pay is treated as capital gains increase”. Labour wants to close this loophole, where private equity capital gains are to be treated as income. This can equate to an up to 17% tax difference, generating up to £420mn in additional tax revenue generation (considering private equity executives do not leave the UK).

Private equity plays a crucial role in supporting the growth in funding and expertise for tech start-ups and scaleups, so caution must be taken to balance the sector’s reaction to tax reforms with the additional public funding that can be generated.

The future of the UK tech start-up industry looks promising, with increased investor confidence and government incentives likely to drive innovation in sustainable technologies and cutting-edge software solutions. However, navigating these changes requires the right talent to seize the opportunities and mitigate the challenges ahead.

At Harmonic, we specialize in helping tech start-ups thrive in this evolving landscape. Whether you need top-tier finance professionals to secure critical funding or technical experts to lead your next big project, we can connect you with the talent that will drive your business forward.

As the UK tech sector continues to grow, we're here to ensure you have the right team in place to capitalize on the emerging opportunities.

To arrange a catch up and find out more about who we are, get in touch at [email protected]