When a government announces tax increases and business owners celebrate, you know something is deeply wrong. Yet that’s exactly what happened in Britain this week, when tech founders applauded Labour’s “modest” capital gains tax increase, simply because they feared worse. It’s like watching passengers applaud because their delayed flight has finally taken off: the relief is real, but it overlooks the bigger problem.
I’ve seen this drama unfold from a unique point of view. My company, Cleo, was born in London in 2016 but now operates entirely in the United States. Moving to the United States went beyond market size: it was a clear recognition that Britain stifles ambitious tech companies.
Superficial explanations are familiar. Brexit took Britain out of the world’s largest trading bloc. A decade of austerity squeezed public investment. The political chaos (five prime ministers in five years) spooked investors. But these are symptoms of a deeper illness: Britain has built an economy that rewards security rather than taking bold risks.
Look at the biggest companies on the London Stock Exchange. They are dominated by oil giants such as BP, mining companies such as Rio Tinto, cigarette manufacturers such as British American Tobacco and traditional banks such as HSBC. These are not just mature companies: they are declining industries. They do not create new jobs, they do not drive innovation and they certainly do not position Britain for the future.
The magnitude of our missed opportunity becomes clear when we look at the numbers: American venture capital firms manage $270 billion in assets, while European venture capitalists collectively manage just $44 billion. This represents more than a funding gap: it is a chasm separating ambition from achievement. It’s the difference between building the next generation of world-changing companies and watching from the sidelines.
Let’s compare this to the transformation of the United States. Over the past two decades, the United States created conditions in which technology companies could prioritize growth over immediate profits. Stock markets embraced companies that poured money into expansion rather than dividends. Its regulators balanced oversight with innovation. The result? Seven of the 10 most valuable companies in the world are now American technology companies.
Britain has the basic ingredients for a similar transformation. Our universities are among the best in the world. London’s financial sector rivals that of New York. Our talent pool is deep. Even our cost structure should be an advantage: European tech companies can hire high-level software engineers for half what they cost in Silicon Valley, and our employees stay on the job almost twice as long. This combination of talent stability and cost efficiency should be fuel for growth.
However, despite these advantages, we have failed to build the ecosystem that turns promising startups into global giants. When our companies succeed, they often outperform their American counterparts, making our systemic failures even more frustrating. These failures are painfully concrete. Britain’s public markets demand profitability too soon, pushing growing companies to sell their assets early. Our venture capital scene has plenty of money for startups, but it dries up when companies need hundreds of millions to compete globally. Our regulators often seem more focused on restricting innovation than enabling it.
Even our tax incentives, while well-intentioned, reflect this small-thinking mentality. Programs such as Corporate Governance Incentives help new companies offer stock options to their first employees, and research and development tax credits support early innovation. But these tools were designed for modest growth, not for building the next Google or Amazon.
This is not a partisan issue. Many of Britain’s most important pro-tech policies were introduced by previous Labor governments. But they were created for a different era, when “tech” meant adding a website to your traditional business, not rebuilding entire industries from scratch.
Britain needs more than just tight tax rates. We need a complete rethink of how we support technological innovation. We need stock markets that reward long-term investment. We need regulators who see their role as enabling progress, not just preventing harm. We need growth capital to keep businesses in Britain as they grow.
Most importantly, we must rebuild our appetite for risk and ambition. The current system pushes British founders toward cautious growth, early departures or emigration abroad. Beyond individual businesses, this shapes the economy we will leave to our children.
Labour’s clamping down on capital gains, amid wider tax rises, shows it is listening to British business owners. But listening is not enough. Britain needs to make a fundamental decision: continue on our cautious path and watch the future happen elsewhere or unleash the full potential of our entrepreneurs. We have the talent. We have the ideas. What we need now is the courage to think big.
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