Recent headlines have painted a challenging picture for Britain’s entrepreneurs. With the government’s recent changes to Business Asset Disposal Relief, raising the Capital Gains Tax rate from 10% to 14%, and soon to 18%, many founders are understandably concerned about the future of wealth creation in the UK. As I shared in a recent interview with The Telegraph, we’ve seen an “avalanche of deals” at Palladium Digital, with a 30% increase in founder-led businesses seeking institutional investment and a 20% rise in due diligence requests as private equity buyers race to close deals before the new tax regime takes effect.
While these changes have fuelled fears of an exodus of innovative companies and a wave of opportunistic acquisitions by overseas investors, I believe there is a more important story to tell one of opportunity, resilience, and the power of technology to drive outsized returns for the next generation of entrepreneurs.
The Headwinds: Legacy Businesses Struggle, Entrepreneurs Surge Ahead
The current environment presents significant challenges, rising taxes, higher costs of capital, and increased operational expenses. However, it is the UK’s large, listed companies (PLCs) that are most exposed to these headwinds. Many PLCs are struggling to adapt to the rapid pace of technological change. Their size, entrenched bureaucracy, and complex decision-making processes make it difficult to innovate quickly or respond to market shifts. As I observed in my recent interview, “Technology innovation is incredibly difficult for UK PLCs… the layers of sign-off before things get moving is quite extraordinary.”
This inertia creates a distinct advantage for founder- and entrepreneur-led businesses. Unlike their corporate counterparts, these businesses are inherently more agile and adaptable. They can:
- Move quickly: Entrepreneurs can make decisions and implement changes without being bogged down by red tape.
- Embrace innovation: Smaller teams are better positioned to experiment with and adopt new technologies, including AI and automation.
- Scale efficiently: Technology-enabled businesses can achieve rapid, profitable growth by leveraging digital platforms and scalable infrastructure.
While PLCs wrestle with legacy systems and slow transformation, founder-led businesses are seizing the opportunity to outpace the competition. Their ability to innovate, adapt, and scale positions them to thrive even in a challenging economic climate.
The Silver Lining: Technology as the Great Equaliser
Yet, amid these headwinds, there is a silver lining. The very factors that make legacy businesses vulnerable, bureaucracy, inefficiency, and slow adoption of new technologies, create a fertile ground for agile, technology-enabled challengers. Private equity buyers and international investors are seeking businesses with strong fundamentals that can be streamlined, optimised, and transformed through technology.
The Future Belongs to Tech-Enabled Entrepreneurs
Here’s where the real opportunity lies. Technology adoption, particularly in AI, automation, and data-driven decision-making offers founders the chance to build leaner, more resilient, and higher-margin businesses. Unlike their larger, slower-moving counterparts, entrepreneurial businesses can:
- Innovate rapidly: Small teams can test, iterate, and deploy new technologies without the drag of corporate red tape.
- Leverage AI for efficiency: From automating back-office functions to enhancing customer experience, AI can drive significant cost savings and unlock new revenue streams.
- Scale globally: Cloud infrastructure and digital platforms allow even the smallest startups to access international markets and talent.
- Attract premium valuations: Investors are increasingly willing to pay a premium for businesses with scalable, tech-enabled models and defensible intellectual property.
Outperforming Historic Valuations
While rising taxes may eat into headline returns, technology-enabled businesses have the potential to outperform historic valuations by delivering faster growth, higher margins, and greater resilience. The market is rewarding founders who can demonstrate not just a great product or service, but a clear path to operational excellence and digital transformation.
Advice for Founders: Seize the Moment
For founders considering their next move, my advice is clear:
- Invest in technology now: Don’t wait for the perfect moment. The sooner you embed technology and AI into your business, the greater your competitive advantage.
- Focus on operational excellence: Streamline processes, cut out bureaucracy, and build a culture of continuous improvement.
- Tell your digital story: When seeking investment or planning an exit, articulate how technology underpins your growth and resilience.
- Think global: Use digital tools to access new markets, customers, and talent pools.
- Partner wisely: Work with investors and advisors who understand the value of technology and can help you accelerate your digital journey.
Conclusion: A New Era for British Entrepreneurship
The coming years will be defined not by the challenges of today, but by the opportunities seized by those willing to innovate. Britain’s entrepreneurs have always thrived in adversity and with the right focus on technology and AI, I am confident that the next wave of founders will not only weather the storm, but build businesses that outperform and endure.
