Did you know the UK has the most unicorns in Europe? You saw it here first!
Despite Brexit uncertainty and economic fallout from the COVID-19 pandemic, Britain still has the most unicorns in Europe. By why is this? And why are businesses so keen to start up here?
In this article we'll take a look.
What is a ‘unicorn’?
No, we’re not talking mythical white horses with horns here. Although admittedly it is a rather funny terminology to use in relation to business. But a unicorn is actually a private, highly successful start-up business valued at $1 billion or more. They’re called unicorns because of their rarity, with the term first coined in 2013 in California by venture capitalist Aileen Lee.
The fact is millions of start-ups across the globe begin life each year, but only a fraction of them end up being valued at $1 billion. To give it a bit of context, just 0.07% of all software start-ups launched from 2000 until now have obtained unicorn status.
How many unicorns are there in the UK?
As you might expect, the USA leads the way when it comes to unicorns, but according to Forbes a very respectable 91 unicorns are based in the UK - the most in Europe. The Digital Economy Council has also highlighted that for the number of technology start-ups and unicorns created, the UK is ranked fourth worldwide.
Is the number of UK unicorns expected to increase?
If current trends are anything to go by then despite economic uncertainty unicorn numbers are expected to grow further.
Latest data from the end of 2021 shows there are 116 billion-dollar companies in the UK. This is over ten times more than the eight companies we had back in 2010, thanks largely to massive UK investment in tech.
Over the last two years alone, the billion-dollar club has seen new members including Starling Bank, Revolut, Monzo, Octopus Energy and Cazoo. In fact, thirty more unicorns have come along just since the start of the pandemic.
The UK has more unicorns than Germany (56) and France (31) combined, according to an article by CityAM.
What sectors are these unicorns in?
Most of them are fintech companies at around 34% of all unicorns in the UK. 14% are in the healthcare sector, 8% in travel and transport technology, and 4% in gaming.
There are many reasons why businesses in these sectors are thriving. The UK has long been regarded as one of the world’s top locations to do business. In fact, the World Bank Doing Business 2020 report ranked the country 8th for “ease of doing business”. It also comes 53rd in TMF Group’s Global Business Complexity Index 2021 which rates 77 areas in the world according to business environment complexity.
The UK’s 19% Corporation Tax rate is also a big draw, currently one of the lowest in the whole of the G20. This is further reduced by R&D tax relief (which we’ll look at in a minute), plus a favourable 10% tax rate on patents. However, it will be interesting to see what happens when the Corporation Tax rate is raised to 25% from April 2023.
Then of course there's the fact that English is the most widely spoken language in the world, and we’re a well-educated bunch too. In fact, latest data from Statista shows that among UK people aged between 30 and 34, half are educated to a tertiary level. This is one of the largest shares in Europe.
Indeed the UK has now produced almost 217 unicorn executives and rising. This means we have the second highest number of executives working in billion-dollar organisations. Fourteen of the 217 studied at Oxford University. Impressive!
R&D Tax Credits are also a big incentive
The thing about all unicorns is they started off as small start-ups and grew. And what’s the key ingredient for growth?
Without the drive to innovate new products, processes and services, these companies would never have made it to where they are today. It involves grappling with the kinds of technical and scientific challenges that would boggle the minds of even the most competent professionals in the field.
All well and good, but the problem for small companies especially is that the research and development needed to bring innovative ideas to life can be pretty pricey. Luckily however, R&D Tax Credits can cover a substantial part (up to 33.35% in fact) of the costs.
The R&D Tax Credits scheme was launched by the UK government back in the early 2000s and has been one of the most popular and lucrative tax reliefs ever since. Essentially, companies carrying out eligible R&D projects that tackle a technological or scientific uncertainty can usually make a claim. The scope of both projects and costs is mercifully broad, and even small claims can generate tens of thousands of pounds of cash.
The award is administered either as a rebate on a company’s Corporation Tax, or (for loss-making companies) as a cash credit. The resulting funds can be spent on anything the company wants, but many - especially unicorns - typically plough it back in to further experimental projects.
Even for the smallest of companies and projects, average R&D tax relief claims in the UK are around £55,000 and rising. It’s money you won’t want your company to pass by.
Think your company may be due R&D Tax Credits?
Enter a few details into the free, no-obligation Tax Cloud calculator and see what you could claim. Then, once you’re ready to get your claim started, simply use the Tax Cloud portal to put it together step by step.
Tax Cloud was developed by the R&D tax experts at Myriad Associates. Our team will guide you along the way, checking your application thoroughly and answering questions before it’s submitted to HMRC. It’s an easy, great value way to make your claim, comparing favourably against the full advisory service.If you’d like to discuss any aspect of R&D Tax Credits, please do send us a message or call 020 7360 4437.
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