Fintech Leaders Herald “Positive and Balanced” UK Budget

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Fintech leaders have heralded a “positive and balanced budget” as the UK Chancellor Rishi Sunak pledges to protect jobs and livelihoods as the country comes out of lockdown.

The extension to the furlough scheme, new stimulus initiatives, and a measure to bring in more overseas tech expertise announced in the Budget have been welcomed by the industry.

Josh Levy, CEO, Ultimate Finance said: “A positive and balanced budget, hammering home the magnitude of support given to households and businesses throughout the pandemic.

“Extending existing support, including the furlough scheme, until restrictions on trading are removed in the summer is both necessary and sensible. For the most impacted industries, my sense is that the support announced is positive and more than expected.”

However, some fintech leaders expressed concern about the timing of tax hikes while a new loan recovery scheme will favour high-street banks and not fintechs, they said.

Sunak unveiled a package of new measures to combat the impact of Covid 19 which he said: “has caused one of the largest, most comprehensive and sustained economic shocks the country has ever faced.”

But the chancellor said the government would “protect the jobs and livelihoods of the British people.”

Extending furlough

The chancellor confirmed that the furlough scheme, which has cost Britain £53bn, will now be extended until the end of September, which is beyond the official target date for ending lockdown on June 21.

Several fintechs, including neobanks Starling and Monzo, made use of the furlough scheme last year, to help protect their businesses.

Funding Options CEO Simon Cureton backed the move, saying the extension would help save thousands of jobs as the country comes out of lockdown.

Darren Upson, VP small business Europe, Soldo, the prepaid card firm, said: “We hope that its extension will mean we can avoid a sudden surge in unemployment once it is eventually wound down. This would almost certainly have been the case without the extension.”

Recovery Loan Scheme to replace BBLS and CBILS

The chancellor also announced a new loan scheme to support businesses hit by the pandemic, replacing the previous emergency government loan scheme.

The Recovery Loan Scheme will offer loans from £25,000 to £10m up to the end of the year, with the government providing lenders with an 80 per cent guarantee.

The scheme replaces the BBLS and CBILS scheme, which have paid more than £70bn to British business supporting them through the pandemic.

While further financing to support businesses has been welcomed by the fintech industry, Cureton pointed out the new scheme could see fintechs at the back of the queue, behind high-street banks when it comes to dishing out the loans.

Cureton said: “With the interest rates capped, however, the balance still remains firmly in favour of the incumbent banks that have unfettered access to the Bank of England Term Funding Scheme. 

“All the while, a raft of agile fintechs wait in the wings with the rescuers, technology and expertise to deliver fit al funding to UK business.”

It is not clear which fintechs will take part in the new scheme, although Funding Circle said it would be involved. A raft of fintechs lent through BBLS and CBILS.

Corporation tax lifting to 25 per cent in 2023

It was announced that corporation tax will increase from 19 to 25 per cent in 2023. “This new higher rate won’t take effect until April 2023, well after the point when the Office for Budget Responsibility expect the economy to have recovered,” the Chancellor said.

However, he said around 70 per cent of companies would be unaffected by the tax hike.

“And even then, because corporation tax is only charged on profits, any struggling businesses will, by definite, be unaffected,” he said. “Second, I’m protecting small business with profits of £50,000 or less, by creating a Small Profits Rate, maintained at the current rate of 19 per cent.

“This means around 70 per cent of companies – 1.4 million businesses – will be completely unaffected. And third, we will introduce a taper above £50,000, so that only businesses with profits of £250,000 or greater will be taxed at the full 25 per cent rate.”

Levy said: “The rise in corporation tax to 25 per cent is not something that businesses will welcome but it still remains competitive internationally and the small profits rate is a layer of protection for the SMEs that need it most.”

However, some fintech leaders criticised that the tax hike could still impact businesses recovering from the pandemic.

Fast-track visas

A previously announced initiative to introduce fast-track technology visas to help British startups was confirmed by the Chancellor.

The visa scheme will see highly skilled migrants who have a confirmed job offer from a tech firm on a “fast track” to obtaining a visa.

Fast-track visas were a key recommendation of the government-backed Kalifa Review, carried out by Ron Kalifa, the former Worldpay boss.

UK tech bosses argue that rival tech hubs get speedier access to talent than they do.

Adam Holden, CEO of NorthRow, the compliance solutions software provider, said he welcomed the proposals for fast-track visas.

“In order to keep ahead of the game and cement the UK as a leading player in the global fintech sector, the industry needs access to the very best talent,” he said.

However, he pointed out that the UK should not be forgotten and that support should not be solely concentrated on the capital.

Holden said: “This support should not be focused on London alone. We welcome the findings of the Kalifa Review, which recommended that focus is given to nurturing the high growth potential of fintech clusters across the UK.”

Help to Grow initiative

Also announced in the Budget were details of the Help to Grow initiative, which will provide £530m to aid SMEs recovering from the pandemic by adopting digital technology and providing management training.

Upson said: “It’s particularly exciting to see the digital element of this, with the offer of technology advice and discounted software. This is exactly the kind of creative thinking required to get businesses back on their feet.”

Pensions

The chancellor confirmed the government has frozen the lifetime allowance (LTA) for pension contributions to just over £1m for the remainder of the parliament.

The freeze is set to net the Treasury an extra £250m in tax and it’s understood high earners in the public sector, who have sizeable defined benefit (DB) pensions, will take a hit because of the freeze.

Clare Reilly, head of corporate development for PensonBee, said it would impact “lots of normal people who want to enjoy their retirement without being penalised. So we are really against the freeze, because we think it penalises people for saving.”

Also on pensions, the government is planning to unlock UK pensions funds to invest in high-growth businesses.

Reilly said: “This is very controversial in that basically what they are proposing is to use people’s pension savings to invest in highly illiquid, high-growth risk businesses.”

Green savings bonds

The chancellor also unveiled green savings bonds, offering investors the chance to invest in projects to help the country become a low carbon economy.

Gerard Hurley, chief compliance officer at savings app Chip, said, he welcomed the move.

Hurley said: “We are imminently about to launch our own wealth-building platform and ESG (Environment, Social and Governance) is very important to our customers.”

Contactless cards boost

The Chancellor also said he was more than doubling the limit shoppers can spend using contactless cards and phones to £100 a day.

But Paul Marcantonio, executive director at Ecommpay, said the move would increase fraud levels.

He said: “For many fraudsters, the UK is a key target market since it has one of the highest fraud levels in Europe. Fraudsters are particularly attracted to a market where citizens tend to trust the city’s infrastructure and the safety of their personal space and data. 

“Fraudsters and scams are becoming increasingly sophisticated and can fool even the most aware and tech-savvy amongst us. 

He added that fraudsters are aware that there is an influx of new adopters to digitals transactions and online e-commerce brought about partly due to adjustments made during COVID-19. 

“These new adopters are amongst the most vulnerable as they may be exposed to these new methods to trick people out of personal data and money. This means the increase in the UK contactless payments limit is very likely to result in increased amounts of fraud.”

https://thefintechtimes.com/fintech-leaders-herald-positive-and-balanced-uk-budget/