Following the highly-anticipated Autumn budget where Chancellor Reeves’ capital gains tax hike on carried interest was diluted down under pressure from investors, increasing to 32% rather than the feared 45% (the top rate of income tax), OpenOcean’s Ekaterina Almasque has provided her thoughts.
Ekaterina Almasque, General Partner at early-stage tech VC OpenOcean, said:
“We’re glad to see Chancellor Reeves step back from the brink on carried interest. When it comes to investment, there’s value in the carrot as well as the stick. Carried interest rewards fund managers who take long-term risks, which frees the capital needed to support early-stage innovation, particularly in R&D-intensive fields like quantum computing and AI. These sectors require sustained, high-stakes investment, where tremendous strategic asset value can be created, but the journey involves a great deal of risk-taking and patience.
“Given Reeves’ mandate for growth, she needs a steady flow of capital that UK startups can access to scale their businesses. It’s been only one month since three British scientists won Nobel Prizes for achievements in AI – and this landmark achievement could serve as the rallying cry for a resurgent UK tech sector. One which works hand in hand with private capital.
“However, it’s another set of mixed signals for UK tech startups. On one hand, the government touts support for infrastructure and innovation, even changing its borrowing rules to invest in infrastructure. On the other, it slashed £1.3bn in critical tech funding in August. Now, it’s increasing employer National Insurance contributions, which drives up day-to-day operating expenditure (OpEx) for startups.
“From our daily discussions with startup founders, what they want to see is a clear, long-term plan for the sector. One backed up by substantial investment in digital infrastructure. This could involve supercomputers, AI facilities, and data platforms that startups can readily access to fuel innovation. Without targeted support for our talented founders, the UK risks creating an innovation bottleneck, ceding ground in high-growth fields to global competitors with a stronger commitment to these startups’ future.”
