Published on March 8, 2021 by Holly Porter

What’s been happening in the commercial world this week? Read on to find out!

Budget 2021

The Budget speech for the upcoming financial year was delivered by the UK’s Chancellor of the Exchequer, Rishi Sunak last week. Here are summaries of some of the key points mentioned – some of which will have huge ramifications for the commercial world.

A General Look at the State of the Economy

From March 2020, the UK economy shrank by 10%. As of the end of February, more than 700,000 people had lost their jobs.  Unemployment is expected to rise, peaking at 6.5% next year. The Chancellor’s strategy of ‘spend now, tax later’ will see the level of government borrowing at £335bn, the highest peacetime borrowing on record. In last year’s budget, the Chancellor set-out an economic plan that would see the government borrowing £55bn in 2020-21. The OBR’s prediction has been hugely surpassed, highlighting the devastating economic effects of the pandemic

Coronavirus-Related Measures

In the new budget, the government’s furlough scheme will be extended until the end of September. This means the government will continue to pay 80% of employees’ wages for hours they cannot work. Between 20th April 2020-15th February 2021, 11.2m jobs were furloughed under the job retention scheme. Employers will pick-up 10% of pay in July and 20% in August and September. Support for the self-employed has also been extended until September as the government increases access to grants. The COVID-19 £20 uplift in Universal Credit has also been extended for 6 months – this equates to over £1,000 extra a year for claimants.


The main change made to taxation is the increase of 19% to 25% corporation tax on company profits above £250,000. It is estimated that only 10% of companies will have to pay this higher rate. The rate of 19% will be kept on as a ‘small profits rate’ for the 1.5m smaller companies with profits of less than £50,000. The changes will come into effect in 2023 and marks the first time corporation tax will have been raised since 1974. The Institute for Fiscal Studies believes the revenue stemming from the higher rate of corporation tax may not reach the government’s purported £17bn a year estimate.

The government also announced a new ‘super-deduction’ tax relief for capital investment. This new incentive aims to boost investment allowing 130% relief on purchases of equipment up until 2023, when the new higher tax rate comes into effect. The cost of the ‘super-deduction’ tax for the Treasury over the next two years could reach £25bn.

The government is also freezing the higher rate income tax threshold of £50,270 from April 2021 until 2026. Therefore, although there is no increase to income tax, an estimated 1m people who enjoy pay rises over the next five years, will be pulled into this higher rate income tax threshold, meaning they will have a higher tax burden ‘by stealth’ or more officially ‘fiscal drag’. The tax threshold freeze will see additional revenue for the Treasury of £2bn, £4bn, £6bn, £8bn each year from 2022-2025. Combined, these changes will raise the UK tax burden to its highest level since the late 1960s.

Another important change is the retention of the stamp duty holiday on house purchases in England and Northern Ireland until 30th June. The holiday means homebuyers will not pay stamp duty on the first £500,000 of a property purchase. Following this, the relief will be reduced to the first £255,000 of a purchase until the end of September, before returning to a pre-pandemic level of £125,000 in October. The extension comes at an estimated £1.75bn cost to the Treasury but could see up to 300,000 house sales by June as buyers rush to benefit from the holiday.

Environment, transport, infrastructure and housing

During the Budget, the Chancellor pledged £12bn to set-up the UK’s first Infrastructure Bank. This will launch in Leeds in April this year as part of the wider Conservative plan to accelerate investment in projects to help Britain reach its net-zero carbon emission by 2050 goal. It is hoped that private sector investment may reach £40bn, which can be used for energy, water, waste, transport and digital projects. This marks a slight move away from Britain’s heavily privatised infrastructure market. Telecoms, water, energy and ports are all currently owned by a combination of private equity and sovereign wealth or infrastructure funds. Despite the extra public financing, the National Infrastructure Commission is doubtful that Britain will reach its climate goals without more government investment.

Talking points: What do you think about the new approach towards corporation tax? These are just a few of the changes announced by the Chancellor on Wednesday – what else was discussed during the delivery of the 2021 Budget?

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London’s IPO Market 

Wednesday’s budget also gave an update on a government-led review for relaxing listing rules. The move comes as part of a wider plan to attract tech talent to Britain. Since 2015, London has only accounted for 5% of global IPOs since 2015 and last month, Amsterdam overtook London as Europe’s largest trade-sharing centre. Currently, London lags behind New York and Amsterdam largely on account of strict and complex listing requirements which have proved a problem for special-purpose acquisition companies (SPAC) that are popular in the US.

The review will consider a number of recommendations including:

  • Allowing dual-class shares: This means there would be two different classes of shares with differential voting rights. Advantages of this approach are that founders and other pre-IPO holders can maintain voting control – often popular with fintech and other start-ups. Swedish music company Spotify and British online fashion retailer Farfetch both went public in 2018 in the US on account of the dual-class share structure there.
  • Lowering the free-float threshold: Currently, companies listing on the London Stock Exchange must make 25% of their shares public. A lower free float threshold would allow founders to maintain more control after going public
  • Liberalising the rules regarding SPAC listings

One day after the Chancellor backed the review’s recommendations, Deliveroo announced it would choose London for its IPO. The online food delivery company is reportedly targeting a price tag of $10bn which would see a market capitalisation of more than £7bn. Deliveroo intends to opt for a dual-class structure for 3 years after the listing, meaning CEO Will Shu and other founders will retain extra voting rights for this period. The move comes as Deliveroo enjoyed six months of consecutive profit in 2020 driven by a lockdown surge in demand.

Watch this space for future tech listings from payments provider Wise, cybersecurity, cyber defence AI company Darktrace and Dutch consumer review website operator Trustpilot.

Talking points: What are SPACs? What is the current composition of the FTSE 100, especially vis à vis technology? 

TikTok Agrees Pay Outs Over Facial Recognition

TikTok has agreed to settle a 21-wide class-action lawsuit. The group challenge alleged that TikTok has breached the law by using software to recognise facial features. This information was then, allegedly, algorithmized and used to track and profile users for ad targeting. There are also claims that user data was sent to China.

This week, TikTok owner ByteDance announced it would pay £66m to avoid further privacy-related disputes. The video-sharing social network released a statement, “While we disagree with the assertions, rather than go through lengthy litigation, we’d like to focus our efforts on building a safe and joyful experience for the TikTok community”

Pending approval from a federal judge in Illinois, the settlement money will be divided among US-based TikTok users. However, the claimant pool is around 89 million US-users so any pay-out to the individual will be small. This is not the first time ByteDance has faced a privacy lawsuit, following a similar settlement in 2019. This time, the settlement includes a provision that TikTok must be more transparent about data gathering and provide better training to its employees about user privacy.

Talking point: What are the advantages and disadvantages of making a settlement as opposed to taking the dispute to court?



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