UK general election 2024: what would a Labour government mean for venture capital, start-ups and founders?

Most of Labour's business policies were trailed in Labour's Business Partnership for Growth, published in February 2024, and so most of the party's manifesto commitments will not come as a surprise to the venture community. Below we take a look at the main policies of relevance to the venture community, particularly in the areas of industrial strategy and growth, tax and workforce.

Industrial strategy and growth

According to the Labour Party's manifesto, its industrial strategy would be directed by a statutory Industrial Strategy Council made up of government, business and trade unions. Labour has sector plans for financial services, automotive, life sciences, creative industries and artificial intelligence (AI). Read our Insights about what the election means for the AI sector and financial services sector for more details on these in particular. 

Labour has also set out plans to invest significantly in infrastructure, particularly in the green economy:
 

• A National Wealth Fund capitalised with £7.3 billion over the course of the parliament, to invest in ports and supply chains, gigafactories, the steel industry, carbon capture and green hydrogen. 
• A separately capitalised Great British Energy company with £8.3 billion allocated to invest in green technologies, support capital-intensive projects and partner with local players to support local clean power projects. (For more on energy policy, see our Insight.)
• A new National Infrastructure and Service Transformation Authority will oversee delivery of projects in road, railways (via a newly created Great British Railways), water, aviation and 5G infrastructure.

When it comes to innovation and supporting smaller businesses specifically, the manifesto has a range of (more general) promises. For example, R&D will be funded on ten-year budget cycles to allow for "meaningful partnerships" with industry. There is a special mention of support for university spinouts and ensuring start-ups have "access to finance they need to grow". Labour will create a National Data Library "to bring together existing research programmes". The British Business Bank will have its mandate widened to include supporting growth in the regions and nations to make it easier for small and medium-sized business to access capital. Procurement rules will be reformed to give small businesses greater access to government contracts. 

Regulatory delays (which Labour implies stifles innovation) are to be addressed by the creation of a new Regulatory Innovation Office to help regulators "update regulation, speed up approval timelines and co-ordinate issues that span existing boundaries". On AI specifically, Labour plans to introduce AI regulations on "the handful of companies developing the most powerful AI models".

On the topic of foreign direct investment, it is not known whether a Labour government would take forward the changes to the National Security and Investment Act (NSIA) which the current government had been considering. The "National Securonomics" paper by the influential think tank Labour Together suggests that the 17 sectors protected under the NSIA should be handled through three clusters: clean energy, digital and advanced manufacturing. Notably, the paper suggests incentivising British funds and companies to invest in particularly promising British companies, although this is coupled with a suggestion of the need for a clear position on when to use NSIA powers to defend against foreign investment that could pose genuine security risks.

Although this indicates that there is a potentially more protectionist approach under consideration, the paper is clear that Britain will require supply chains deeply connected with trusted partners. Australia, the US, Japan and the EU are mentioned in the report.  

Business taxation

The manifesto sets out Labour's well-trailed plans to raise £565 million a year from closing the carried interest tax "loophole" for private equity managers by treating the payment as income rather than capital gains. However in recent press reports, the shadow chancellor has indicated that capital gains treatment will continue to apply if the manager has invested their own money. 

Labour's manifesto confirms that it will not increase national insurance, the basic, higher or additional rates of income tax, or VAT. Labour has also committed to capping corporation tax at 25 per cent but will act "if tax changes in other countries pose a risk to UK competitiveness". Labour will retain full expensing for capital investment and the annual investment allowance for small business. 

Continuing the theme of stability, Labour says it will only have one major fiscal event a year (in the autumn at least four months before the end of the tax year in April) and will publish a roadmap for business taxation for the next parliament which, it says, will allow businesses to plan investments with confidence. 

Of particular interest is what Labour has not said. The manifesto does not mention CGT (other than closing "loopholes"). There has been little mention of changes in allowances, reliefs or exemptions. The shadow chancellor has previously said she would look into "every single tax break" – and it is possible that reliefs of particular relevance to the venture community such as Business Asset Disposal Relief (formerly Entrepreneurs' Relief), EIS and SEIS could be reviewed.

Read our Insight for more about Labour's tax policy.

Skills and workforce

There is potentially significant change for employers ahead. Labour has promised a substantial overhaul of current employment laws and will introduce an Employment Bill in the first 100 days of government. Some of the more relevant proposals for early stage companies include:

• Basic statutory rights to parental leave, sick pay and protection from unfair dismissal from day one of employment.
• Single status of worker removing the distinction between employees and workers, so the only classifications will be worker or self-employed. It is not known whether corresponding changes to the tax system will be made.
• Ban on zero-hour contracts, and workers will need reasonable notice of any changes in shifts and working time
   

Labour also intends to link immigration and skills policy and has promised a reform of the points-based system, but it has not provided further details.  

Read our Insight for more on Labour's policy on employment law, pensions and business immigration.

Osborne Clarke comment

It remains unclear what a Labour government would mean in practice for the venture capital community. The manifesto has been commended for being "pro-business" in various respects, and includes a number of significant spending pledges (including in infrastructure and the green economy) which would be welcomed by early-stage companies and investors.

The Labour Party has also indicated in very general terms its intention to support university spinouts and ensure start-ups have access to finance. However, the manifesto is noticeably silent in areas such as CGT, and with respect to the various allowances, reliefs and exemptions which are key to the venture community (for example, S/EIS). It will therefore be important to see what direction a Labour government takes in such areas, and what specific policies are put in place, were it to win a mandate on 4 July.

If you would like help navigating the issues raised in this Insight, please contact our experts.

Joshua Kelly, vacation scheme participant, contributed to this Insight.