Entrepreneurs have plugged into London’s Tech City to make the digital business zone a magnet for start-up firms and new jobs.
The capital has more than 88,000 technology and digital businesses – up 76% in the past three years despite difficult trading and funding conditions following the recession, says a new report by Tech City UK.
Not only are new firms mushrooming, but almost 600,000 people now work in the science and technology hub around Old Street, North London.
And more than one in four digital and technology jobs in the capital are created in the area.
Prime Minister David Cameron has praised the seed enterprise investment scheme that comes with generous tax breaks as one of the incentives underpinning the success of the sector, according to SEIS specialist web site seis.co.uk.
SEIS has already provided around £90 million in equity finance for almost 1,250 new companies nationwide in less than two years – and many are based in and around Tech City.
Cameron and Chancellor George Osborne keep pushing the point that they want to see more start-up technology firms by offering government funding. SEIS, along with the Enterprise Investment Scheme and fast track visas for talented overseas entrepreneurs are all contributing to their vision for a digital British economy.
“Tech City serves not only as an example of how a city can be transformed into an engine for growth and innovation, but is also a blueprint for fostering growth that has been recognised globally,” said Cameron.
“The combination of the right policies, the right people and the right programmes, backed by a government that listens and takes action, has led to some of the world’s best entrepreneurs and their companies choosing the UK as their home.”
SEIS offers investors a 50% income tax reduction on tax paid in the year to all taxpayers, regardless of the rate they pay tax, according to seis.co.uk.
For investors, this represents a £50,000 rebate on a maximum SEIS investment of £100,000.
Investors also benefit from capital gains tax exemptions entering and exiting a SEIS.
Not only does the value of shares in a company grow CGT-free once they are held for three years, but generous tax breaks allow investors to cash in other assets without paying CGT, providing the cash raised goes into a SEIS.
However, the website warns that not all SEIS investments make a profit, so the Treasury has built in a fail-safe for investors that allows them to set off any losses against other income.