Wise boss Steve Hare: Our tax system should be overhauled
Sage boss Steve Hare: Our tax system should be overhauled so that every pound spent on tech equipment is treated as a capital investment rather than an operating expense
Advocacy: Steve Hare, CEO of Sage
There is no denying that the economy is currently facing real challenges, with some dark clouds on the horizon for the UK. Rising inflation that remains uncontrollable. A global pandemic and war have further fueled this pressure. The net effect is a revenue squeeze, unprecedented in recent times, which will continue to cause real hardship.
I do not underestimate the situation in which we find ourselves, however, my assessment remains positive. As someone who started my working life in the early 1980s in Liverpool, I’ve seen the UK economy go through tough and written off times before, sometimes prematurely, and I’d rather be a bit more optimistic.
It’s fair to say that my position is not universally supported among my FTSE 100 peers – nor in the comments we read every day. But beyond the immediate economic and political cycles, there are reasons to be quietly and cautiously optimistic about the future.
At Sage, we work daily with small and medium-sized enterprises (SMEs). They are a resilient and thriving part of the fabric of our country, responsible for 62% of all economic activity. They are loyal employers, and after the last downturn they were the fastest to rebound and created two-thirds of new jobs. They are also ambitious innovators and technology adopters, so I disagree with some comments that the pace of UK tech innovation is stagnating.
A substantial digital tailwind is coming down the line that has its roots in work done during the COVID-19 lockdown. This tailwind will be as significant as the personal computing revolution of the early 1980s and the original Internet revolution that took off during the turbulent economic times of the early 1990s. took place in the space of just three months during the first lockdown – and that made a difference in the long run. So our restaurant customers who digitized online reservations and orders in 2020 are not going back to pen and paper. Plumbers who have grown accustomed to taking receipts on their phones and uploading them to easily share with their accountants aren’t going back to piles of scrap paper.
We estimate that if small and medium-sized businesses fully exploit the potential of this digitization in the years to come, an additional £232 billion could be added to the UK economy.
There is a caveat to my optimism.
The biggest risk is that some will not be able to participate in the coming digital boom. In just ten years, it might be redundant to use the word digital in the same sentence as the economy at all; in twenty years, it will definitely be the case. If you’re not part of the digital economy, you just won’t be part of the economy. My big ask of the UK government in the years to come – whether Conservative, Labor or some complicated coalition – is that they understand what is at stake.
All political leaders who want to be taken seriously should boost their political ambitions to support this digital future. All levers must be pulled to deliver 5G and high-speed broadband across the country as a basic utility affordable for everyone. Our schools should demand digital literacy in their students the same way they do with traditional literacy.
Our tax system should be reshaped so that every pound spent on technology equipment is treated as a capital investment rather than an operating expense. Policy makers also need to be consistent in their journey; it makes no sense to increase tax incentives for investing in digital tools on the one hand while levying a tax on online sales on the other.
The UK has significant structural advantages that will continue to make it an attractive place to do business. Our population is literate with more young people studying STEM subjects in the UK than ever before – and with more universities in the world’s top 20 than any country outside the US. It helps explain why the UK is still Europe’s top destination for venture capital investment – and why last year our tech companies raised more venture capital than China. As long as businesses remain hungry, these advantages will continue to work in our favor.
There is no denying that the immediate economic picture is bleak and it is fashionable to say that our best days are over. But through my job, I talk to British entrepreneurs almost every day. My overall observation is one of resilience rather than discouragement. The UK economy of 2022 has abundant traditional strengths – now associated with tens of thousands of businesses keen to make the most of the digital revolution. Cyclical conditions will improve and better times will be within reach. The real challenge then will be to ensure that everyone benefits.