The chancellor’s Autumn Budget announcement has sparked a mixed reaction from the UK financial services industry.

UK Finance, which represents 300 financial services firms across the UK, welcomed the Budget’s focus on investment and economic growth, areas in which it said the industry plays a “critical role”.

“The UK has a significant shortfall of homes and we welcome commitments to increase the supply of new housing, as well as the support being provided to help green the housing stock,” said David Postings, chief executive, UK Finance.

National Insurance

The chief exec went on to say that as the organisation's recent tax report highlighted, the sector is a significant contributor to employment taxes, which are set to increase as a result of National Insurance (NI) changes announced in the Budget.

The rate of employer's NI contributions will increase by 1.2 percentage points to 15 per cent from April 2025.

Todd Davison, managing director of Purbeck Personal Guarantee Insurance described the government’s plan to hike NI contributions for employers as a “fatal blow” to small businesses.

“We know the extreme financial pressure these businesses are already under,” continued Davison. “Our data shows the main reason for personal guarantee backed business loans taken by the owners and directors of the UK’s small firms are for working capital to just keep the business going.”

He said that the move would ultimately make it more expensive to run a business and impact the people employed by limiting hiring plans, reducing wage inflation, forcing redundancies and scaling back pension contributions.

Theo Chatha, chief financial officer of Bibby Financial Services agreed that the budget has failed to provide SMEs.

“Although the Employment Allowance did show recognition of the needs of the smallest businesses, an increase in employer national insurance payments still presents a real risk to SMEs,” continued Chatha. “Many are already struggling with high costs and thin margins, so making employment more expensive could result in an immediate cashflow crisis.”

Chief executive of Innovate Finance Janine Hirt said that while the Budget was always going to be a "challenging balancing act between stimulating growth and fixing public finances", the increase in employer NI will "increase costs" and "reduce incentives" for entrepreneurs to start and grow businesses, impacting the competitiveness of the UK.

"As a global leader and a driver of growth and productivity across the country, our UK FinTech sector - as well as creating a more inclusive and democratic financial services sector overall - has a vital role to play in growing the economy and thereby increasing tax revenues," added Hirt. "To do this, we need greater certainty on the fiscal measures that matter to innovative firms, their investors and their ability to compete for talent against large corporations who can offer higher salaries."

She went on to say that the five-year Business Tax Roadmap published this week provides some certainty on headline corporation tax rates and EIS and a welcome consultation on R&D tax credit pre approvals.

"We need similar commitments to stability, and in some areas improvement, on CGT, BADR and EMI," continued the chief exec.

Open Banking and data

Marion King, chair and trustee of Open Banking Ltd embraced the Budget’s focus on smart data.

“We are encouraged to see the importance of data threaded throughout the Budget, with SME access to finance, an open data scheme for road fuel prices, and the reaffirmed role of DSIT as the digital centre of government,” continued King. “Along with the Data Use and Access (DUA) Bill, now before Parliament, it is clear there is a strong commitment to furthering the UK’s leadership in data innovation and regulatory frameworks.”

She said that building on the success of Open Banking, which has facilitated tax collection for HMRC to the tune of £30 billion, the proposed support for smart data schemes across a range of economic sectors will "lay the groundwork for a smart data economy that benefits businesses, public services, and consumers.”

Fintech

Following Rachel Reeves’ announcement Ryta Zasiekina, co-founder of FinTech CONCRYT said that the new chancellor has put forward a new set of priorities which the “FinTech industry is notably absent from”.

“While it declared ambitious plans for innovation and growth, one glaring question remains: what happened to those lofty aspirations outlined in Spring?” continued Zasiekina. “From a lack of long-term government support to talent retention challenges, the vision of creating a thriving tech ecosystem that rivals Silicon Valley remains elusive.

"I question if the current strategy is enough to truly position the UK as a leader in the global technology race. If this Autumn’s statement is anything to go by, more decisive and bold action is needed to make that ‘Silicon Valley’ vision a reality.”

Banking sector

Susannah Streeter, head of money and markets and financial services company Hargreaves Lansdown said that bank shares have risen on a “wave of relief” given that there were no plans announced for a bigger levy on profits made in the sector.

“Barclays, Lloyds and NatWest all gained ground as the chancellor spoke,” she added.

Venture capital

Ekaterina Almasque, general partner at early-stage tech venture capital firm OpenOcean said: “We’re glad to see Chancellor Reeves step back from the brink on carried interest. When it comes to investment, there’s value in the carrot as well as the stick. Carried interest rewards fund managers who take long-term risks, which frees the capital needed to support early-stage innovation, particularly in R&D-intensive fields like quantum computing and AI. These sectors require sustained, high-stakes investment, where tremendous strategic asset value can be created, but the journey involves a great deal of risk-taking and patience.”

But she said that the Budget has given UK tech start-ups “mixed signals”.

“On one hand, the government touts support for infrastructure and innovation, even changing its borrowing rules to invest in infrastructure,” she said. “On the other, it slashed £1.3 billion in critical tech funding in August. Now, it’s increasing employer National Insurance contributions, which drives up day-to-day operating expenditure for start-ups.”

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