Tony Spillett, Partner at BDO, looks at the challenges facing growth-hungry technology companies as they look to expand to the US and how the Government can help them

 

If there is one segment of the British economy that understands the importance of disruption, innovation and change then it’s the technology and media sector.

The world is going through a period of immense change.  Brexit, the increasing pace of globalisation and developments in regulation now means that uncertainty is the ‘new normal’.

Underpinning much of this uncertainty – as well as providing opportunity – is the dramatic impact of digital technology: developments where the UK is leading the way in many key areas.  The businesses involved in tech are, by their nature, innovative and hungry for growth but what should be their response to Brexit?

Earlier this month we invited over 50 UK technology and media companies to a breakfast seminar to discuss the commercial issues involved in expanding to the US and how to mitigate the common pitfalls.

But we also wanted to ask them some questions about why they wanted to expand into the US, or develop their existing US operations, and what the government could do to support them.  The results were fascinating.

Roughly half of those businesses at our seminar were motivated by Brexit in deciding to expand into the US.  The same number saw the uncertainty caused by Brexit as being their number one business concern (followed by 32% who were worried about finding people with the right skills to help their business grow).

Given the challenges being faced by UK firms expanding to the US we asked our seminar audience what was the main thing the Government could do to help them successfully grow abroad?

Unsurprisingly, 56% wanted the Government to prioritise the signing of a US trade deal immediately post-Brexit. More surprising was that the second most popular answer – at 38% – was for the Government to focus on business growth in the UK by simplifying the tax system and providing a strong base to export from.

And this is what our New Economy campaign is all about.  The big question facing policy makers and the Government is how to build a successful economy once the UK leaves the EU.  We believe a ‘new economy’ is needed which can help the UK thrive post-Brexit by making the most of its mid-sized entrepreneurial businesses, by balancing growth by sector and by region and by ensuring open and simple access to world markets and global talent.

How do we achieve this?  Our New Economy report has twenty two policy recommendations and two are particularly relevant to the challenges being faced by the technology businesses that attended our seminar.

Firstly, on tax simplification: we would like to see National Insurance and Income Tax aligned to create one simple payroll tax.  We would also like to see a moratorium placed on UK corporate tax changes (unless they simplify the system) until 2020 or when Brexit negotiations are finalised to give businesses certainty in uncertain times.

And as we have seen, the challenge to find people with the right skills continues to be a worry for these businesses.  One simple step to help address this would be to reinstate the two year post-study work visas for postgraduates in STEM (science, technology, engineering and maths) subjects.

The businesses we met at our seminar are entrepreneurial with high growth plans.  They will make a success of their expansion abroad. The Government must play its part too in creating an environment where businesses can succeed.

 

Tony Spillett is Tax Partner and National Head of Technology & Media at BDO.

“The businesses we met are entrepreneurial with high growth plans. They will make a success of their expansion abroad. The Government must play its part too in creating an environment where businesses can succeed.  “

Tony Spillett, Tax Partner and Head of Technology & Media, BDO

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