Open letter to the Chancellor
The Rt Hon John Healey MP
Chancellor of the Exchequer HM Treasury
7th October 2026
Dear Chancellor,
Britain starts companies as well as anywhere in the world. It loses them at the point of scale. The capital to grow, the people to deliver that growth and the first serious customers are all harder to find here than they should be. Each time one of these is missing in Britain, companies look elsewhere, more often than not, in the United States.
As investors, AlbionVC has backed British companies since 1996, across deeptech, healthtech, fintech and software. The founders we back raised their money here, hired here and built here. For many founders, it would be easier to build their next company somewhere else. This letter is about changing that, making the UK the obvious choice rather than the harder one.
Britain is at a tipping point. Our technology sector provides strong foundations to stimulate the economy, create high-value jobs and build generational companies that will drive growth across the country. We have the largest technology sector in Europe, yet in areas such as AI, momentum is building faster elsewhere. The opportunity now is to turn our existing strengths into lasting advantages.
Below, we set out a series of practical measures, ordered around the life of a company, from the day it is an idea to the day its founder starts the next one. Together they are designed to unlock the full potential of Britain’s technology sector and ensure that the Budget delivered on 28 October is used as a lever for growth.
Make it easier to start
The first challenge is getting companies started at all. Britain’s best technical people are in university labs and inside established firms but current rules can make it slower and more costly than it should be to leave either and build. The Government’s attention has rightly moved to the scale-up gap, but the pipeline that feeds it needs the same continued attention.
1. Curb non-competes and notice periods. The government has consulted on non-compete clauses and recognised that restrictive practices are a barrier to keeping the best entrepreneurs here. More than twenty founders and investors, from ElevenLabs, Synthesia, Fractile and others, have written to the Prime Minister asking it to act. We add our names to that case. The goal should be a fluid technology labour market, where the best people can move between companies, and into companies of their own, at the speed the technology now moves. Non-competes, months-long notice periods and enforced gardening leave can inhibit entrepreneurship, leaving engineers sitting idle through the exact window in which a new company is formed. We ask the government to finish the job: cap enforceable non-competes at three months, and limit garden leave to the same.
2. Make it simple for the best people to come here. According to the 2026 Dealroom report, 87% of UK unicorns have at least one immigrant co-founder. Britain’s frontier companies are built by people from everywhere, who leave global technology companies and the world’s leading universities to build here. The system should make that decision easy. It does not. A senior engineer or researcher with a UK job offer for a seed-stage company using the Skilled Worker route needs that company to hold a sponsor licence first. That can take up to eight weeks, before paying around £6,500 in government fees for a three year visa, mostly upfront. The government has taken steps to double the Global Talent Taskforce, offer fee reimbursement for specialists in AI, quantum and semiconductors, open a fast-track sponsorship route for high-growth firms the Taskforce refers, and extend the Global Talent visa to more than a hundred research-intensive businesses. Almost all of it is built for established companies and academic researchers. It does not reach the person leaving a large lab to start a company, or the five-person company trying to hire them. We ask the government to go one step further: open the fast-track route to any company with funding from a UK venture investor, allowing funded companies to hire from anywhere without first becoming a licensed sponsor, with a decision within two weeks. The aim should be to make Britain the easiest place in the world for exceptional people to build the next generation of technology companies.
3. Make employee equity a competitive advantage for UK startups. UK startups often cannot compete with larger companies on salary, making equity a critical tool for attracting and retaining talent. The Enterprise Management Incentive is designed to make that equity more attractive, but companies can lose access as they grow. The scheme was widened this year to companies with up to £120m in gross assets, 500 employees and £6m of EMI options, which is welcome. But the limits still create a cliff: once a company crosses one, it loses the scheme outright, at exactly the point it begins to grow and is hiring the people it most needs to keep. Replace the cliff with a taper, so that eligibility falls away over several years rather than overnight, and benchmark the tax treatment against international schemes such as France’s BSPCE and Ireland’s KEEP. This would help UK companies retain key talent through the scale-up phase.
4. Exempt early-stage rounds from mandatory National Security and Investment Act filings. The Act’s ownership thresholds in semiconductors, computing hardware and quantum are set at levels that pre-seed and seed rounds and spinout formations routinely cross. This year, UK deeptech company and UCL spinout Intrinsic, raising £15m from three UK-based investors, had to delay its round and incur significant legal costs to make a mandatory filing because one investor’s holding crossed a threshold. This is not what the Act was written for. Startups should not be treated the same as a major global technology company. A small-deal exemption, for rounds below £20m or where every investor is UK-domiciled, would remove unnecessary cost and delay from the companies the government says it wants to see grow, while preserving the Act’s core security protections.
Fund R&D that builds
R&D tax relief is the most important piece of public support an early-stage, research-intensive company receives. It works well for software, where the biggest cost is salaries and salaries are claimable. It works less well for the sectors the government says it most wants to grow. In semiconductors, photonics, power hardware and biotech, the largest costs are equipment and contract research. In AI, it is compute. Neither of which the relief covers.
5. Pay a cash credit on R&D capital spend. A hardware company’s largest R&D cost is capital expenditure: test gear, deposition tools, probe stations, pilot lines. None of it qualifies for R&D tax relief. Companies can claim a 100% Research and Development Allowance, but for a loss-making company that is a tax loss carried forward, with no cash benefit until the company is profitable. For a deeptech company, that can be seven to ten years away. We ask to allow R&D-intensive SMEs to surrender RDA-generated losses for a payable credit at the ERIS rate, capped at £3m of qualifying capex a year. The credit should be clawed back if the asset is sold or leaves the UK within three years. The cap contains the cost. The clawback keeps the equipment in Britain.
6. Restore relief on overseas contract research that has no UK supplier. Since the 2024 restriction on overseas R&D costs, biotech and deeptech companies that use contract research and manufacturing organisations abroad have not brought the work home, because in most cases the capability does not exist here. A survey by RCK Partners found that most companies instead kept their arrangements and claimed less relief. Cloud computing has already been re-admitted as a qualifying overseas cost. Extend the same treatment to Contract Research Organization (CRO) and Contract Development and Manufacturing Organisation (CDMO) work where there is no UK alternative. For many research intensive companies, this is often the single largest line in R&D spend.
7. Give British companies British compute. The AI Research Resource was built so that UK researchers could train models without renting capacity abroad. UK startups should be able to access it too. Let funded UK companies draw sovereign compute on credits through AIRR so British capacity is being put behind British companies at the point where they decide to build. The scheme should operate on simple terms comparable with major global cloud providers. A UK-headquartered company from pre-seed to Series A, with a deeply technical product and five or more employees, should qualify for sovereign compute on equity-free credits, capped at £250,000 a year up to £500,000 total, with no research partner required.
Back growth with capital
A company that has proved it works needs capital to grow, alongside a high-performing team. In Britain, that is where the gap is widest, and too often, the companies that leave are the ones that have already earned the right to stay.
8. Reinstate VCT tax relief to 30% to unlock private capital for UK entrepreneurs . We should be direct, AlbionVC manages venture capital trusts, so we have an interest in this. But the case does not rest on ours. VCTs raise over £800m a year to invest in UK companies at the stage where institutional capital is thin and risk is high. In doing so, they derisk companies, making them investable for larger funds. The record shows it. Quantexa, for example, is one of the UK’s few data unicorns that was VCT-backed before any institutional fund would invest. The Chancellor has set an ambition to double the number of British unicorns. Every unicorn was once a start-up, and it takes many funded start-ups to produce one; the way to get more out of the bottom of the funnel is to widen the top. The cut from 30% to 20% tax relief in the last Budget is expected to reduce VCT fundraising and thus cut the amount of capital available to UK early stage entrepreneurs. It is one of the few instruments that reliably crowds private money into British startups and scale-ups, and it was cut at the moment it was needed most.
9. Get pension capital into companies as they scale. Britain is good at creating high-growth companies, but too little domestic pension capital reaches them as they scale. The government has recognised the problem: the Chancellor said in July that “we create great companies in Britain but don’t do enough to grow them with British capital.” The building blocks for change are now in place, including the Pension Schemes Act, the Value for Money framework and the proposed UK Scale-up Fund, being developed by Railpen, Nest and three local government pools with the British Business Bank. We support these measures, but they need to translate into capital reaching businesses.
Three things would help: First, get the Scale-up Fund deploying by January 2027, with clear reporting on how much is being invested in UK growth companies. Second, set out how the initial £1bn-plus will attract further pension and private capital, so the fund grows towards £5bn-£10bn commitments by 2030. Third, make net returns, not fees alone, central to the Value for Money framework when the rules are finalised. If pension schemes are assessed primarily on keeping costs low, they may continue to favour cheaper, more liquid assets over private markets, limiting the capital available to the companies Britain needs to scale.
10. Match pension capital into fintech, where Britain’s lead is clearest. Fintech accounts for more than a third of the UK’s unicorns and more than half of their combined value, while financial services earn Britain its largest trade surplus. Yet UK fintech investment fell to £1.8bn in the first half of 2026, from £5bn a year earlier, almost all of it at the late-stage, where British capital is thinnest and overseas capital increasingly determines where companies scale. The vehicles to address this already exist. The British Growth Partnership reached its first close in April and the UK Scale-up Fund was announced in July. Three changes would make them work for fintech. First, name financial services as an eligible sector for both vehicles. Second, commit the British Business Bank to match pension capital into them, up to £250m from the £4bn Industrial Strategy Growth Capital already announced, as it did with Phoenix under LIFTS. Third, publish commitments and deployment each year, by sector and stage. British Business Bank has returned 12.5% a year since inception, this is an investment. Matched, it puts £500m of British money behind fifteen to thirty companies that will generate the next decade’s financial services exports.
Exit and start again here
When a founder sells, what they do next decides whether the exit was the end of one company or the start of several. A founder who has done it once can start the next company faster, hire people who have already built, and back the next generation as an angel investor. That is the flywheel Britain should be building: each exit funds the next generation of founders and each turn makes the next easier. But it only turns if founders who took the risk are incentivised to do so and rewarded for going round once more in the UK. The tax system currently treats it as an end.
11. Introduce Repeat Entrepreneur Relief. A founder who sells shares and reinvests the proceeds in a new qualifying venture within 12 months should be able to defer Capital Gains Tax, with the liability crystallising only when the new shares are sold without further reinvestment. The United States has run a version of this for years through its Qualified Small Business Stock rules, and it is one reason American exits fund American companies. In the UK, the same principle could be used to keep more of the capital generated by successful companies circulating into the next generation. Founders Forum’s survey found that nearly nine in ten founders said such as measure would make them more likely to reinvest in the UK. The gain is taxed eventually; in the meantime it is building British companies.
12. Give founders stability on capital gains. Business Asset Disposal Relief rose from 10% to 15% in 2025 to 18% in 2026. We are asking for a commitment that it will not rise again this Parliament and that the £1m lifetime limit rises to £10m. At £1m it covers a fraction of a modest exit and none of a good one. Founders make ten-year decisions. The rate today matters less than knowing what it will be when the decision pays off. A stable regime will find more founders willing to build here as they would have greater certainty that if they build and sell in Britain, they will be able to retain more of the value they created and put it towards what comes next.
Everything above comes from the experience of building companies in Britain, and from the desire to build the next ones here too. Britain already has the founders, the research and the ambition.The task now is to make it easier for more companies to start here, grow here, and still be here in ten years. The measures above are the ones we believe would make the most difference, soonest.
One final point, which is not a Budget measure but belongs alongside them. Britain promotes its football, its universities and its monarchy to the world with conviction, and leaves its technology companies to promote themselves. In a country that is unusually good at starting technology companies, with world-class strength in AI, fintech, cyber, quantum and advanced engineering, it is an odd choice and one with a cost. A stronger national technology brand is the cheapest industrial policy there is. Companies benefit when the world knows that Britain is a place where important technology is being built. It lowers the price of every hire and every funding round for companies here because talent and capital go where they believe the future is being built. France has made a deliberate effort to put Mistral at the centre of its technology story, and this decision did as much for the company as any cheque. Britain should be doing the same with its own success stories too: champion them abroad, buy from them at home, and say so each time it does. The Budget can put the mechanics in place but being seen to believe in the result is the government’s job too.
We would welcome the chance to meet to discuss any of these measures with you or your officials before 28 October.
From the Partners at AlbionVC
Will Fraser-Allen, Managing Partner
