Sean Kohli: Britain risks losing its young entrepreneurs without bold reform

Kirstie Allsopp recently mocked Rachel Reeves by likening the Chancellor to Baldrick, the hapless but well-meaning sidekick to Blackadder. A sharper comparison might be to Captain Blackadder himself in the final moments of Blackadder Goes Forth: resigned to going ‘over the top’, fully aware it will spell the end, all the while General Melchett (Sir Keir Starmer) remains safely insulated far behind the lines beckoning his troops on.

The risk is that, like Blackadder’s final advance, the Budget itself simply reflects the Chancellor’s fate. That this becomes a stop-gap Budget aimed at patching over the financial holes. Instead, Reeves needs to go down fighting. She needs a Budget that balances the books, but that also signals the Government’s long-term ambition.

Last year’s Budget set a clear direction, but for founders that direction was the wrong one: higher capital gains tax, rising National Insurance, and reforms to non-dom and inheritance rules layered complexity on top of uncertainty.

That uncertainty has consequences. Nearly 3,800 company directors have removed Britain as their country of residence since last October’s Budget, a sharp increase on the previous year. Talent is mobile and policy missteps pushes it abroad faster than ministers realise.

Britain cannot afford to lose its next generation of founders. This year’s Budget is the chance to put that right.

Start-up nation, scale-up desert

One of the more striking findings from a new survey of entrepreneurs is that Britain is seen as a good place to start a business but only 13 per cent believe it is easy to scale one. That gulf between starting and scaling is where too many companies fall through the cracks.

The consequences are visible in the UK’s economic make-up. We are world-class at producing start-ups but far less successful at building them into global players. Shazam, invented by British founders, became a global household name only after being acquired by Apple. DeepMind, a pioneering British AI company, was bought by Google in 2014 and has since been central to its global AI strategy. The pattern is familiar: British-born innovation too often finds its long-term home elsewhere.

Tax is at the heart of the frustration. More than 80 per cent of founders now hold a negative view of the UK tax system. One in ten already expect to leave Britain entirely within the year. When capital and leadership drift away, the upward spiral that gives life to unicorns begins to unravel.

How the Budget can reset

The good news is that the path forward is clear. Labour’s Start-Up, Scale-Up report, published while in opposition, recognised many of these challenges. It is now up to the Chancellor to deliver.

The reality is that EIS fundraising has already fallen back, down 20 per cent last year, with fewer than 3,800 companies raising capital. SEIS, by contrast, is on the rise, attracting a record £242 million in 2024 after rule changes lifted the ceiling on investment. The lesson is clear: modernising the schemes works, and more of it is needed.

Caps remain too low, age limits too restrictive, and important sectors such as fintech still excluded. The result is a heavy bias: two-thirds of all funding flows into London and the South East, leaving ambitious firms elsewhere underserved. Meanwhile, the October 2024 rise in capital gains tax risks discouraging private investment at exactly the wrong moment. Reliefs offered through EIS and SEIS now matter more than ever, ensuring capital is recycled into high-growth businesses here rather than diverted overseas or into property.

International comparisons show what is possible. France has recently modernised its own schemes with a reinvestment allowance that channels billions back into growth firms in Paris and Lyon. Crucially, it has also broadened the investor base, attracting not only traditional venture capital but also individuals and family offices who might otherwise have stayed on the sidelines. The lesson is clear: where governments update their incentives, capital follows.

The government should seize the moment. Providing certainty until 2035 was the first step; the next is to update limits to reflect modern round sizes, extend age eligibility beyond the South East’s growth cycle, and expand qualifying sectors. Reinforcing and refreshing EIS and SEIS is the clearest, fastest way to restore investor confidence and keep entrepreneurial wealth circulating at home.

A choice about the future

Across the globe, countries are competing fiercely to attract and retain entrepreneurial talent. Some offer clarity through low taxes and generous reliefs, giving founders the confidence to stay and build. Britain cannot hope to compete if it sends the opposite message, that risk is punished and reward uncertain.

The choice for the Chancellor is simple. Persist with short-term tax grabs that drive out the very people we need most. Or deliver a framework that rewards risk-taking, encourages reinvestment and provides the stable support innovation requires.

This Budget is not just about numbers. It’s about whether the next generation of world-changing companies carries a British passport or a boarding pass.