UK is the world’s third largest tech economy, so Chancellor of the Exchequer Jeremy Hunt’s spring ‘growth’ budget has generated some reaction
Industry reaction to the 2023 Spring Budget from the Chancellor of the Exchequer Jeremy Hunt has been quick, and mostly positive.
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 notable announcements covering quantum computing and AI, to investment zones and tax initiatives.
But the ‘growth’ budget has also been touted to help turn the UK into “a world leading science superpower.”
Indeed, the UK is said to be the third largest tech economy in the world, and below are some of the industry reactions to the government’s Spring 2023 Budget.
Gerard Grech, CEO of Tech Nation, noted that the budget is a positive indication of the UK Government’s commitment to becoming a Science and Technology Superpower.
“We welcome the measures aimed at supporting the UK tech industry, including the introduction of additional tax support for R&D and the announcements on an AI sandbox and ambitious Quantum investment which will generate investment in new industries, whilst protecting consumers and businesses,” said Grech.
“As a nation uniquely positioned between two economic powerhouses, the US and the EU, we must harness innovative regulation that will enable us to propel ourselves as an international hub and leader for AI, Quantum Computing, and Deep Tech,” said Grech. “This is a critical step towards creating a distinctive, value-driven tech ecosystem in the UK, setting us apart from other tech hubs.”
“We must build on momentum generated and continue to foster a culture of innovation and collaboration that empowers businesses to grow and succeed,” said Grech. “The recent intervention by both the government and the private sector to facilitate the sale of Silicon Valley Bank is a shining example of what can be achieved through collaboration between the private and public sector and a clear vision.
Third largest tech economy
Jason Tooley, VP north EMEA at software development firm Informatica, pointed out that the UK’s growth-focused budget highlighted the UK’s role as the third largest tech economy.
“In a budget focused on delivering growth and boosting the UK’s competitiveness, it’s reassuring that technology featured prominently,” said Tooley. “Technology has a huge role to play in our future. Businesses becoming data-driven and Government using data to enhance services are major trends that will drive productivity and ensure the UK is a market leading digital economy.”
“These are innovation areas that will support data driven decision-making in many areas of our working and personal lives,” said Tooley. “And crucially, will drive growth and new employment opportunities for all generations.”
“We need to get people excited about the future of disruptive technologies to ensure the UK remains at the forefront of innovation and tackle the technology skills shortage that risks hampering progress across all industries,” said Tooley. “Today’s announcements show the UK recognises the value of data and enabling technology and is committed to becoming a digital superpower.”
Tommaso Aquilante, associate director of Economic Research at Dun & Bradstreet, commented on the business impact of the budget.
“Against the backdrop of high inflation and strained public finances, today’s Spring Budget keeps or extends existing energy-related measures, while attempting to tackle structural impediments to productivity, a pre-condition to raise the long-term health of the UK economy,” said Aquilante.
“Whether the announced set of measures will increase or decrease the fiscal burden on businesses, will depend on a myriad of factors, including their size, sector, etc,” said Aquilante. “However, the ‘full expensing’, for the next three years, of investments in IT equipment, plant or machinery is likely to have a positive effect on business sentiment and investment, especially if it will be made permanent.”
“Similarly, the R&D tax incentives to highly innovative SMEs might help investments in the science and technology sectors,” added Aquilante. “Moreover, the AI Sandbox, if set up properly, could help strengthen the country’s innovation ecosystem, as could the12 investment zones, by facilitating partnerships between innovators and universities.”
“However, headwinds remain: although the UK economy is defying the gloomiest predictions, negative growth, though perhaps not a technical recession, is likely in 2023,” said Aquilante. “With business liquidations rising, costs remaining elevated and financial conditions tightening further, competition becomes tougher.”
“To stay productive and competitive, businesses will have to find smart ways to serve customers and spot risks and opportunities,” said Aquilante. “This is precisely when, combined with other things, having quality data insights can provide a competitive edge and support business resilience.”
Russell Gammon, chief solutions officer of tax compliance software, Tax Systems, warns that the corporation tax hike is a backward step in the UK’s quest for economic recovery, but that the government’s focus on innovation and technology means that not all is lost.
“The rise in corporation tax should not be a surprise for businesses, having been on the cards since 2021, however, it is another kick in the teeth when they least need it,” said Russell Gammon. “Giving an extra 6p for every pound of profit to HMRC is a significant rise and yet another cost to add to the growing pile of bills that business owners are faced with.”
“The tax hike will also take away the UK’s position as one of the lowest rate countries in the G20, reducing the flow of inward investment at a time when the economy could really use it,” said Gammon. “While it is unlikely to result in a mass-exodus of businesses from the UK, it may put international businesses off of setting up shop here – a 25 percent tax rate is significantly less enticing than 19 percent. The more attractive we can make our tax regime, the more inward investment we will get in our economy and the quicker we can kickstart economic recovery.”
“However, we do welcome the news that the chancellor is giving our more targeted reliefs to organisations in the technology sector, particularly accelerating the rate at which small business case recover the costs of investments, as well as an increased tax credit of 27p on the pound for those organisations that spend more than 40 percent of expenditure on R&D,” said Gammon. “Along with other changes to the R&D scheme over the last couple of years, it is clear that the government has a real focus on boosting the economy via innovation and technology.”
Steve Metcalfe, CEO of Quantum Exponential, the UK’s only quantum-focused investment fund, noted a number of bullets points on the government’s quantum focused budget.
- For the UK to compete on a global scale we need to achieve greater investment in research and innovation.
- The Government’s commitment to invest a total of £2.5 billion has the potential to significantly accelerate the commercialisation of quantum but a lot more still needs to be done to support startup companies in the sector which are predominantly financed through private equity.
- In order to create a market, what we know at Quantum Exponential is that we need a joined-up approach between the government and the investment community, which includes areas such as pension funds to ensure that there’s the level of start-up investment needed and that ultimately, the UK plays a pivotal role in the acceleration and commercialisation of the industry.
- As an investor in the industry, we share the Chancellor’s vision to make the UK a world-leading quantum-enabled economy by 2033, but believe this will only happen if more is done to support investment in the sector.
“The clear commitment to quantum computing, outlined by Jeremy Hunt, the Chancellor of the Exchequer in yesterday’s Spring Budget is well received,” added Metcalfe.
“Government endorsement and recognition of the potential of quantum will undoubtedly increase investor appetite and encourage UK companies to strive towards Jeremy Hunt’s vision to make the UK a world leading quantum enabled economy.”
Abakar Saidov, the CEO and co-founder of talent management platform, Beamery, said he welcomed the news that the Government is planning to increase investment in AI.
“Rapid advancements in technology and research are vital components to ensure continued economic growth and contribute to the UK becoming a technological and scientific superpower,” said Saidov. “The government’s backing of AI – as well as their rapid action over the weekend in the face of SVB – are clear endorsements of the thriving tech scene that has been curated in the UK.”
“Similarly, the Government’s ambitions to encourage people back into work and help to tackle chronic labour shortage are admirable, particularly on childcare and ‘returnships’ said Saidov.
“It is right that talent, and the future proofing of our nation’s talent pipeline, is front and centre of the Budget – but the investment must be underpinned by effective delivery to ensure people can access the training they need to carve out the roles that are right for them – ultimately to boost the UK’s productivity and economic growth.”
Nick White, Partner at law firm Charles Russell Speechlys said this latest investments underlines how seriously the government is taking its commitment to ensuring the UK is a global science and technology superpower by 2030.
“The UK will be behind the US, the EU and probably China too, in building an exascale machine,” said White. “However, it should be a huge boost to the UK’s ability to support cutting edge research in areas requiring complex modelling and simulations, such as climate change, pharmaceutical development and hi-tech engineering.”
“The establishment of a prize of £1m a year for ten years for researchers to drive innovation in AI is another eyecatching statement of intent,” White added.
“There is perhaps a sense that having recently left the EU, now is the time for the UK to invest significantly in an attempt to build up its credentials as a global tech leader in its own right.”
Emil Gigov, partner at Albion Capital, believes the Chancellor’s new support for the fintech and Quantum sectors will attract greater outside investment and strengthen the UK’s position as a global innovation hub.
“The Chancellor’s new plans to incentivise UK fintech, AI and Quantum computing will ensure the UK remains at the forefront of technological innovation in the coming decade,” said Gigov. “The newly revealed plan to invest £2.5bn in Quantum, including doubling the funding available to researchers, will be instrumental to this.”
“Tax incentives for AI and fintech companies investing in research and development will amount to a discount of 27p to the pound, encouraging businesses to commit greater spending on key research areas and catalyse the growth of these industries,” said Gigov.
“The Chancellor’s financial support, in conjunction with the longstanding strength of our financial services, the deep pool of technical talent produced from our universities and a progressive regulatory environment, offers the business climate needed for tech companies to flourish,” Gigov added. “Government support for these industries sends a powerful message, whilst giving the next generation of tech companies a welcome leg-up in a globally competitive market.”