Britain faces warnings of a tech exodus over tax plans ahead of high-stakes budget
Britain’s Finance Minister Rachel Reeves has pledged to make the “necessary”, “urgent” and “incredibly tough” choices to restore the country’s economic stability.
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LONDON — British technology bosses and investors are warning that entrepreneurs may be forced to leave the U.K., if the government moves forward with controversial plans to raise capital gains tax on share sales.
Recent media reports have suggested Finance Minister Rachel Reeves is planning to hike capital gains tax (CGT) — which applies to the profit investors make on the sale of an investments — with The Guardian saying the levy could jump to 39%. Last week, U.K. Prime Minister Keir Starmer told Bloomberg that such speculation was “wide of the mark.”
Reeves is expected to announce sweeping fiscal changes during her Oct. 30 budget, as she seeks to close a multi-billion funding gap in public finances.
The government is also planning to increase capital gains tax on shares and other assets by “several percentage points,” the Times reported, meaning that those who sell their stakes in an acquisition, initial public offering or secondary share sale will be taxed on any gain in value.
Reeves also plans to cut the so-called business asset disposal relief (BADR), which allows entrepreneurs to pay a reduced 10% tax on profits from the sale of their firms, Bloomberg found.
CNBC has not been able to independently verify these reports. The Treasury did not immediately respond to a request for comment.
Several entrepreneurs and investors have warned that the U.K. could face an exodus of technology entrepreneurs as a result of the reported tax changes.
In an open letter to Reeves earlier this month, more than 500 entrepreneurs urged the finance minister to resist calls to hike capital gains tax or restrict the business asset disposal relief scheme.
“Higher CGT or any restrictions on BADR would make this relief less competitive at a time when the rest of the world is making their reliefs more competitive,” read the letter, published by The Entrepreneurs Network on Oct. 13.
“It would mean the UK has the second-highest CGT rate in Europe, and jeopardise the success of our country’s startup ecosystem by enormously weakening the incentive individuals have to build businesses.”
The list of signatories includes the likes of Giles Andrews, co-founder of digital bank Zopa, Rishi Khosla, CEO of financing platform OakNorth, and Victor Riparbelli, boss of artificial intelligence firm Synthesia.
They suggested that the plans would make it harder for entrepreneurs to build businesses in the U.K. — or indeed, force entrepreneur out of the country.
“By discouraging entrepreneurs from starting and growing their businesses, HM Treasury could well end up lowering the tax take overall,” the letter said.
“I’ve noticed a rising sense of stress in the U.K. tech ecosystem over proposals like this. If implemented, such a move would send a deeply negative signal,” Adam French, partner at seed investors Antler, told CNBC by email.
“There is a real risk of complacency in U.K. tech, in tandem with increasing competition from Paris and Berlin for talent, and a brain drain to the U.S.,” French added.
Harry Stebbings, a venture capitalist known for popular tech podcast “The Twenty Minute VC,” told The Guardian newspaper last week that entrepreneurs would leave the U.K. if the government raises capital gains tax.
Calling the government’s plan on capital gains tax the “biggest” issue for entrepreneurs, Stebbings said: “I know fewer entrepreneurs will be here. They will leave en masse.”
Not everyone agrees that capital gains tax shouldn’t be increased to raise public finances.
In a report by the center-left Institute for Public Policy Research published last week, a group of millionaire business owners said they would welcome an increase in the rate levied on capital gains to match the higher rate of income tax.
The analysis found that capital gains tax was not a primary driver of investment decisions, with entrepreneurs more focused on issues like access to financing, market opportunities and broader economic conditions.
Amazon said Tuesday it received regulatory approval to begin flying a smaller, quieter version of its delivery drone, the latest step in its long-running efforts to get the futuristic program off the ground.
The company unveiled the new drone, called the MK30, in November 2022. It said then that the MK30, in addition to the other changes, would fly through light rain and have twice the range of earlier models.
Amazon said the Federal Aviation Administration’s approval includes permission to fly the MK30 over longer distances and beyond the visual line of sight of pilots. The agency granted a similar waiver for Amazon’s Prime Air program in May, though that was limited to flights in College Station, Texas, one of the cities where it has been conducting tests.
Alongside the FAA approval, Matt McCardle, head of regulatory affairs for Prime Air, said the company is starting to make drone deliveries Tuesday near Phoenix, Arizona. In April, Amazon said it planned to spin up drone operations in Tolleson, a city west of Phoenix, after it shut down an earlier test site in Lockeford, California. The company will dispatch the drones near one of its warehouses in Tolleson as it looks to integrate Prime Air more closely into its existing logistics network and further speed up deliveries.
An FAA spokesperson said the agency granted Amazon permission to conduct beyond visual line of sight deliveries in Tolleson on Oct. 31.
Amazon founder Jeff Bezos first unveiled plans for the ambitious service more than a decade ago, remarking at the time that the program could be up and running within five years. Despite Amazon investing billions of dollars into the program, progress has been slow. Prime Air encountered regulatory hurdles, missed deadlines and had layoffs last year, coinciding with widespread cost-cutting efforts by CEO Andy Jassy. The program also lost some key executives, including its primary liaison with the FAA and its founding leader. Amazon hired former Boeing executive David Carbon to run the operation.
It’s also encountered pushback from some residents in the cities where it’s trialing drone deliveries. Residents in College Station complained about the noise levels enough that it prompted the city’s mayor to mention the concerns in a letter to the FAA, CNBC previously reported. In response, Amazon executives told residents the company would identify a new drone delivery launch site by October 2025.
Amazon isn’t the only company trying to crack delivery by drone. It’s competing with Wing, owned by Google parent Alphabet, UPS, Walmart and a host of startups including Zipline and Matternet.
WATCH: How Amazon’s drone delivery program stacks up to competitors
Palantir Technologies CEO Alex Karp appears on a Bloomberg television interview during the FoundryCon event in Palo Alto, California, on March 7, 2024.
David Paul Morris | Bloomberg | Getty Images
Palantir shares jumped 23% on Tuesday and headed for a record close after the data analytics software maker reported robust third-quarter results and issued uplifting revenue guidance.
The stock reached a high of $51.19, above the prior record of $45.14 reached last week. If the gain holds, it will mark the stock’s biggest jump since Feb. 6, when shares popped 30%.
Revenue climbed 30% to $726 million from a year earlier, topping the $701 million average analyst estimate, according to LSEG. Adjusted earnings per share of 10 cents beat the 9-cent average estimate.
Analysts at Deutsche Bank said in a report that “the beat was driven by better-than-anticipated US Government performance,” boosted by demand for artificial intelligence tools.
“Palantir is among a handful of infrastructure software companies that have started to meaningfully monetize generative AI, where its competitive positioning benefits from longtime investment and deep expertise in complex data integration, and particularly its reputation for data security built into its ontology,” the analysts wrote.
Net income of $143.5 million, or 6 cents per share, was up from $71.5 million, or 3 cents per share, in the same quarter a year ago. The company called for fourth-quarter revenue of $767 million to $771 million. Analysts surveyed by LSEG had been looking for $741.4 million.
Palantir is targeting more than $687 million in U.S. commercial revenue for the year, implying about 24% of the total.
Bank of America bumped its price target from $50 to $55 and maintained its buy rating.
“We continue to view the adoption of PLTR’s AI-enabled products and reach in its early days, as more companies realize the time, resource, and cost savings possible,” Bank of America analysts wrote in a note to investors. “In our view, Palantir’s moat as the differentiated agnostic AI-enabler is only growing with each new use-case carrying compounding unit economics.”
— CNBC’s Jordan Novet and Michael Bloom contributed to this report.
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