With UK predicted to avoid recession, spring budget by Chancellor Jeremy Hunt announces funding injections into tech sector
The UK’s Chancellor of the Exchequer Jeremy Hunt’s spring budget has announced a number of measures that will impact the tech sector.
The 2023 budget made headlines for its focus on childcare costs, extending the energy price guarantee until June, and support for small modular nuclear reactors to bolster the UK’s energy system, yet it also included announcements covering quantum computing and AI, to investment zones and tax initiatives.
Introducing the ‘budget for growth’, the Chancellor said he intended to remove barriers that stop businesses investing, and that “the UK is on track to become a world leading science superpower, supported by the newly established Department for Science, Innovation and Technology.”
Budget for tech
Nestled among the budget was the promise to create 12 investment zones or “growth clusters” around the UK, with $80 million earmarked for each English zone over five years.
These 12 investment zones will be centred around university tech hubs in England, Scotland, Wales and Northern Ireland. They will offer lower national insurance contributions for employers, lower business rates and capital allowances on the purchase of new machinery and equipment.
On the tax side outside of these investment zones, for three years (potentially permanently) businesses will be eligible for 100 percent first year capital allowances, which essentially means they can deduct the full cost of equipment (including IT equipment) from pre-tax profits.
“The UK has one of the most competitive business tax regimes in the world, with the headline rate of Corporation Tax continuing to be the lowest among G7 economies,” said the government.
But at the same time the Chancellor has raised corporation tax from 19 to 25 percent in this new financial year, but the government noted “at 25 percent, the UK will still have the lowest rate of Corporation Tax in the G7.”
The 2023 Budget also pledged a whopping £20bn investment into carbon capture and storage projects around the UK.
But perhaps the most noteworthy budget promise from a tech sector perspective, was the Chancellor’s announcement of a £2.5 billion investment in quantum computing over ten years.
“Further investment is needed in infrastructure for research and innovation,” said the government. “Powerful computing capability is an essential component of being a global hub for innovation and achieving the UK’s ambition to be a science superpower. Compute is also essential to progress in Artificial Intelligence research.”
The government said that a review had found the UK’s most powerful computer ranks just 28th in the world.
“In line with two of the key recommendations of the Future of Compute Review, the government will invest, subject to the usual business case processes, in the region of £900 million to build an exascale supercomputer and to establish a new AI Research Resource, with initial investments starting this year,” said the government.
“Recent developments in AI, such as the launch of ChatGPT and the announcement of Google Bard, have shown the powerful potential for technologies which are based upon foundation models, including large language models,” said the government. “As announced alongside the refresh of the Integrated Review, government will establish a taskforce to advance UK sovereign capability in foundation models, including large language models, and provide direct advice to ministers, to ensure that the UK is at the forefront of this technology.”
“The government will award a £1 million prize every year for the next 10 years to researchers that drive progress in critical areas of AI,” it added.
The government also noted that quantum technologies are “expected to have transformative and wide-ranging impacts, through the development of new types of computers, secure communications, and wider improvements to sensing, imaging and timing.”
Specifically the government’s £2.5bn “Quantum Strategy sets out a new and ambitious quantum research and innovation programme.
It will focus on four goals: ensuring the UK is home to world-leading quantum science and engineering; supporting businesses through innovation funding opportunities and by providing access to world-leading R&D facilities; driving the use of quantum technologies in the UK; and creating a national and international regulatory framework.
The government said it has also allocated £100 million funding for the Innovation Accelerators programme to 26 transformative R&D projects.
This will accelerate the growth of three high-potential innovation clusters and support Levelling Up. This includes the Manchester Turing Innovation Hub led by the University of Manchester, 2 quantum projects in Glasgow led by the University of Glasgow and M-Squared Lasers Limited, and a project to accelerate new health and medical technologies led by the University of Birmingham.
The Plan for Quantum is a 10-year programme which takes over from the current £1bn National Quantum Technologies Programme.
It will create training schemes for scientists, engineers and technicians in the next-generation discipline, while aiming to boost the number of quantum firms based in the UK and attract others from overseas.
Coming up: industry reaction to the government’s 2023 Spring Budget.