Time is running out for Rachel Reeves to reassure the sector she has spent months courting.
With tax rises looking increasingly likely in Wednesday’s Autumn Budget, the mood across UK tech has shifted to concern, reviving the warning issued earlier this month by some of Britain’s most valuable founders: change course, or risk watching high-growth firms leave home soil.
That warning came in the form of a letter to the Treasury, signed by firms including Revolut, ClearScore, OakNorth and Quantexa, companies collectively worth more than $100bn.
Together, they warned that any move on capital gains tax, inheritance tax or a form of exit levy risks undermining confidence, risks delaying London listings and pushing founders offshore.
As the signatories put it: “Founders need to see a stable and favourable taxation environment in order to take the risk of building a business in the UK.”
Reeves has made no secret of her desire to reverse London’s IPO drought.
But this week’s Budget lands at a moment when tech businesses say they are already losing the ability to move at pace.
Tech sector shows signs of strain
New research from Menzies describes the slowdown bluntly as an “agility crisis”.
In a survey of senior decision-makers across multiple industries, including 143 from tech, more than four in five respondents said their organisations can no longer adapt quickly enough to rising costs and policy instability.
Many admit they are now spending more time responding to threats than identifying new opportunities, and a significant proportion say they have already missed at least one major opportunity in the past year because they could not move quickly enough.
Financial pressures are still the most immediate brake, where tighter cash flow, rising operating costs and weaker access to investment have all created a more defensive mindset.
Yet the tech sector’s frustration is also directed at Westminster.
After years of policy churn, shifting incentives and repeated adjustments to R&D relief, firms say they have no clear view of what the government expects from them, or where they can have support.
Simon Massey, Menzies’ managing partner, said: “Too many UK businesses are stuck in ‘wait and see’ mode. Waiting for the Budget, waiting for the economy, waiting for international politics to settle. The result is that too many are missing the opportunity to innovate and grow.”
It is an uncomfortable backdrop for a Budget expected to raise more revenue from precisely the people the government wants to keep.
Founders’ fear resurface
The founders’ letter to Reeves did not emerge in a vacuum.
London’s difficulty in holding onto its most ambitious firms has been visible for several years.
Deliveroo’s fall from a £7.6bn float to a £2.9bn sale, and Darktrace’s move to go private in the US, continue to hang over the market.
Venture capital funding has weakened since Reeves increased tax rates on carried interest last year, and investors warn that any further pressure could accelerate a shift of capital to New York, the Gulf or European hubs.
The Treasury’s consideration of new National Insurance charges for LLPs, a move that would capture venture capital partnerships as well as law firms and accountancies, is seen as a fresh complication.
“A tax raid like this will mean less VC partners basing themselves in the UK, less UK-based VC funds, and as a result less investment in UK startups,” warned Dom Hallas, executive director of the Startup Coalition.
His concern is that existing global funds will simply continue relocating decision-makers abroad.
Workforce pressures and uneasy climate
There is also underlying tension in the sector concerning talent.
Rumoured changes to salary sacrifice pensions and ongoing speculation about property and wealth taxes have unsettled a workforce already facing higher costs and tighter migration rules.
Skilled migration fell 10 per cent last year, and tech employers warn that further pressure could weaken the UK’s position just as AI, quantum computing and cybersecurity reshape global competition.
R&D tax relief is another touchpoint. While 99 per cent of tech firms claimed R&D support last year, a significant share faced HMRC challenges, delays or repayment requests.
This is also the backdrop that too many sectors are still struggling with digital readiness. Even as the government forecasts that AI could add £400bn to the economy by 2030, many large employers report they cannot recruit people with the right skills, or indeed retain them.
Reeves urged to steady the ship
For all the speculation about specific measures, the sector’s ask is a fundamentally modest one: a stable, predictable policy environment that encourages long-term investment.
Lee Edwards, VP EMEA at Amplitude, argued: “Technology and data are not optional extras, they are foundational to productivity, growth, and resilience.”
And, with the digital economy accounting for around 13 per cent of UK GDP, he argued that the case for long-term investment should be self-evident.
But implementation also matters. The UK’s tech position as it stands isn’t guaranteed, but will depend on whether Reeves can offer a credible long-term strategy rather than another year of stop-start policymaking.
The question now is whether the measures Reeves unveils on Wednesday will keep Britain competitive, or else convince the country’s fastest-growing firms that their future lies elsewhere.