Finance

UK bid to take global tech crown in doubt after Budget

Published

7 months ago

November 1, 2024

UK Finance Minister Rachel Reeves makes a speech during the Labour Party Conference that is held at the ACC Liverpool Convention Center in Liverpool, UK on September 23, 2024.

Anadolu | Getty Images

LONDON — British tech bosses and venture capitalists are questioning whether the country can deliver on its bid to become a global artificial intelligence hub after the government set out plans to increase taxes on businesses.

On Wednesday, Finance Minister Rachel Reeves announced a move to hike capital gains tax (CGT) — a levy on the profit investors make from the sale of an investment — as part of a far-reaching announcement on the Labour government’s fiscal spending and tax plans.

The lower capital gains tax rate was increased to 18% from 10%, while the higher rate climbed to 24% from 20%. Reeves said the increases will help bring in £2.5 billion ($3.2 billion) of additional capital to the public purses.

It was also announced that the lifetime limit for business asset disposal relief (BADR) — which offers entrepreneurs a reduced rate on the level of tax paid on capital gains resulting from the sale of all or part of a company — would sit at £1 million.

She added that the rate of CGT applied to entrepreneurs using the BADR scheme will increase to 14% in 2025 and to 18% a year later. Still, Reeves said the U.K. would still have the lowest capital gains tax rate of any European G7 economy.

The hikes were less severe than previously feared — but the push toward a higher tax environment for corporates stoked the concern of several tech executives and investors, with many suggesting the move would lead to higher inflation and a slowdown in hiring.

On top of increases to CGT, the government also raised the rate of National Insurance (NI) contributions, a tax on earnings. Reeves forecasted the move would raise £25 billion per year — by far the largest revenue raising measure in a raft of pledges that were made Wednesday.

Paul Taylor, CEO and co-founder of fintech firm Thought Machine, said that hike to NI rates would lead to an additional £800,000 in payroll spending for his business.

“This is a significant amount for companies like us, which rely on investor capital and already face cost pressures and targets,” he noted.

“Nearly all emerging tech businesses run on investor capital, and this increase sets them back on their path to profitability,” added Taylor, who sits on the lobbying group Unicorn Council for U.K. FinTech. “The U.S. startup and entrepreneurial environment is a model of where the U.K. needs to be.”

Chances of building ‘the next Nvidia’ more slim

Another increase to taxation by way of a rise in the tax rate for carried interest — the level of tax applied to the share of profit a fund manager makes from a private equity investment.

iProov CEO discusses 'arms race' against deepfakes

Reeves announced that the rate of tax on carried interest, which is charged on capital gains, would rise to 32%, up from 28% currently.

Haakon Overli, co-founder of European venture capital firm Dawn Capital, said that increases to capital gains tax could make it harder for the next Nvidia to be built in the U.K.

“If we are to have the next NVIDIA built in the UK, it will come from a company born from venture capital investment,” Overli said by email.

“The tax returns from creating such a company, which is worth more than the FTSE 100 put together, would dwarf any gains from increasing the take from venture capital today.”

The government is carrying out further consultation with industry stakeholders on plans to up taxes on carried interest. Anne Glover, CEO of Amadeus Capital, an early investor in Arm, said this was a good thing.

“The Chancellor has clearly listened to some of the concerns of investors and business leaders,” she said, adding that talks on carried interest reforms must be “equally as productive and engaged.”

Britain also committed to mobilizing £70 billion of investment through the recently formed National Wealth Fund — a state-backed investment platform modelled on sovereign wealth vehicles such as Norway’s Government Pension Fund Global and Saudi Arabia’s Public Investment Fund.

This, Glover added, “aligns with our belief that investment in technology will ultimately lead to long term growth.”

She nevertheless urged the government to look seriously at mandating that pension funds diversify their allocation to riskier assets like venture capital — a common ask from VCs to boost the U.K. tech sector.

Clarity welcomed

Steve Hare, CEO of accounting software firm Sage, said the budget would mean “significant challenges for UK businesses, especially SMBs, who will face the impact of rising employer National Insurance contributions and minimum wage increases in the months ahead.”

Even so, he added that many firms would still welcome the “longer-term certainty and clarity provided, allowing them to plan and adapt effectively.”

Meanwhile, Sean Reddington, founder and CEO of educational technology firm Thrive, said that higher CGT rates mean tech entrepreneurs will face “greater costs when selling assets,” while the rise in employer NI contributions “could impact hiring decisions.”

“For a sustainable business environment, government support must go beyond these fiscal changes,” Reddington said. “While clearer tax communication is positive, it’s unlikely to offset the pressures of heightened taxation and rising debt on small businesses and the self-employed.”

He added, “The crucial question is how businesses can maintain profitability with increased costs. Government support is essential to offset these new burdens and ensure the UK’s entrepreneurial spirit continues to thrive.”

Finance

China’s April retail sales growth of 5.1% misses expectations as consumption remains a worry

Published

5 hours ago

May 18, 2025

Business Finance News

Citizens are shopping at a supermarket in Nanjing, East China’s Jiangsu province, on March 9, 2024.

Costfoto | Nurphoto | Getty Images

China’s retail sales growth slowed in April, data from the National Bureau of Statistics showed Monday, signaling that consumption remains a worry for the world’s second-largest economy.

Retail sales rose 5.1% from a year earlier in April, missing analysts’ estimates of 5.5% growth, according to a Reuters poll. Sales had grown by 5.9% in the previous month.

Industrial output grew 6.1% year on year in April, stronger than analysts’ expectations for a 5.5% rise, while slowing down from the 7.7% jump in March.

Fixed-asset investment for the first four months this year, which includes property and infrastructure investment, expanded 4.0%, slightly lower than analysts’ expectations for a 4.2% growth in a Reuters poll.

The drag from real estate worsened within fixed asset investment, falling 10.3% for the year as of April.

The urban survey-based unemployment rate in April eased to 5.1% from 5.2% in March.

The data came against the backdrop of trade tensions between China and the U.S.

U.S. President Donald Trump placed tariffs of 145% on imports from China that came into effect in April. Beijing retaliated with tariffs in kind, with 125% levies on American imports.

Trade-war fears have receded after a meeting of U.S. and Chinese trade representatives in Switzerland earlier this month led to a lower set of levies between the world’s two largest economies.

Beijing and Washington agreed to roll back most of the tariffs imposed on each other’s goods for 90 days, allowing some room for further negotiation to reach a more lasting deal.

That prompted a slew of global investment banks to raise their forecasts for China’s economic growth this year while paring back expectations for more proactive stimulus as Beijing strives to reach its growth target of around 5%.

This is breaking news. Please check back later for updates.

Finance

Scott Bessent calls Moody’s a ‘lagging indicator’ after U.S. credit downgrade

Published

17 hours ago

May 18, 2025

Business Finance News

Treasury Secretary Scott Bessent said in an interview on NBC News’ “Meet the Press” that Moody’s Ratings were a “lagging indicator” after the group downgraded the U.S.’ credit rating by a notch from the highest level.

“I think that Moody’s is a lagging indicator,” Bessent said Sunday. “I think that’s what everyone thinks of credit agencies.”

Moody’s said last week that the downgrade from Aaa to Aa1 “reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.”

The treasury secretary asserted that the downgrade was related to the Biden administration’s spending policies, which that administration had touted as investments in priorities, including combatting climate change and increasing health care coverage.

“Just like Sean Duffy said with our air traffic control system, we didn’t get here in the past 100 days,” Bessent continued, referring to the transportation secretary. “It’s the Biden administration and the spending that we have seen over the past four years.”

The U.S. has $36.22 trillion in national debt, according to the Treasury Department. It began growing steadily in the 1980s and continued increasing during both President Donald Trump’s first term and former President Joe Biden’s administration.

Bessent also told moderator Kristen Welker that he spoke on the phone with the CEO of Walmart, Doug McMillon, who the treasury secretary said told him the retail giant would “eat some of the tariffs, just as they did in ’18, ’19 and ’20.”

Walmart CFO John David Rainey previously told CNBC that Walmart would absorb some higher costs related to tariffs. The CFO had also told CNBC separately that he was “concerned” consumers would “start seeing higher prices,” pointing to tariffs.

Trump said in a post to Truth Social last week that Walmart should “eat the tariffs.” Walmart responded, saying the company has “always worked to keep our prices as low as possible and we won’t stop.”

“We’ll keep prices as low as we can for as long as we can given the reality of small retail margins,” the statement continued.

When asked about his conversation, Bessent denied he applied any pressure on Walmart to “eat the tariffs,” noting that he and the CEO “have a very good relationship.”

“I just wanted to hear it from him, rather than second-, third-hand from the press,” Bessent said.

McMillon had said on Walmart’s earnings call that tariffs have put pressure on prices. Bessent argued that companies “have to give the worst case scenario” on the calls.

The White House has said that countries are approaching the administration to negotiate over tariffs. The administration has also announced trade agreements with the United Kingdom and China.

Bessent said on Sunday that he thinks countries that do not negotiate in good faith would see duties return to the rates announced the day the administration unveiled across-the-board tariffs.

“The negotiating leverage that President Trump is talking about here is if you don’t want to negotiate, then it will spring back to the April 2 level,” Bessent said.

Bessent was also asked about Trump saying the administration would accept a luxury jet from Qatar to be used as Air Force One, infuriating Democrats and drawing criticism from some Republicans as well.

The treasury secretary called questions about the $400 million gift an “off ramp for many in the media not to acknowledge what an incredible trip this was,” referring to investment commitments the president received during his trip last week to Saudi Arabia, Qatar and the United Arab Emirates.

“If we go back to your initial question on the Moody’s downgrade, who cares? Qatar doesn’t. Saudi doesn’t. UAE doesn’t,” he said. “They’re all pushing money in.”

When asked for his response to those who argue that the jet sends a message that countries can curry favor with the U.S. by sending gifts, Bessent said that “the gifts are to the American people,” pointing to investment agreements that were unveiled during Trump’s Middle East trip.

Sen. Chris Murphy, D-Conn., criticized Bessent’s comments about the credit downgrade, saying in a separate interview on “Meet the Press.”

“I heard the treasury secretary say that, ‘Who cares about the downgrading of our credit rating from Moody’s?’ That is a big deal,” Murphy said.

“That means that we are likely headed for a recession. That probably means higher interest rates for anybody out there who is trying to start a business or to buy a home,” he continued. “These guys are running the economy recklessly because all they care about is the health of the Mar-a-Lago billionaire class.”