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London Tech Week

UK spring budget 2023: what it means for tech

Simon Walker / No 10 Downing Street / Flickr
Picture Credits: Simon Walker / No 10 Downing Street / Flickr

After talk of making the UK a ‘science and technology superpower’, how has the tech sector welcomed Jeremy Hunt’s first budget? So far, despite talk of falling living standards, tax rises, and an economy that would shrink while, technically, avoiding recession, it seems to have received a cautious welcome.

Perhaps the worst news was the expected confirmation of cuts to the research and development tax credit scheme. However, this was offset by new support for eligible research-intensive startups. The Chancellor also announced twelve new investment zones, a new ‘AI sandbox’ to empower innovators and give more clarity on intellectual property rules, and a £2.5 billion fund for quantum computing.

Here are some of the reactions from the tech sector.

The new R&D tax credit

Although there was unanimity that cutting the R&D tax credit scheme would harm the sector, the new scheme was welcomed. ACF Investors’ Managing Partner Tim Mills said, “with the government’s sights set on creating the next Silicon Valley here in the UK, the nation’s early-stage businesses are at the heart of that effort. Incentives like this are critical to enabling them to develop the new and innovative technologies that will make this vision a reality.”

Gravita’s CEO, Caroline Plumb noted, “the Chancellor may have prevented innovative, research-intensive businesses from transferring their activities offshore to territories with a more friendly corporate landscape.”

Stuart Grant, CEO at Advanced Research Clusters echoed the view. “The value of R&D cannot be overstated. We’re delighted to see the government act in response to the many science and innovation-based companies that rely on the existence of the R&D tax credits scheme.” He continued, “we can see this as well as the quantum computing strategy and AI Sandbox commitments as hugely positive moves in the right direction for our sector.”

Twelve new investment zones

The Chancellor announced the creation of new investment zones, clustered around universities. Each benefiting from around £80 million of funding, they are intended to help boost business growth in key areas.

Aman Behzad, the founder and managing partner of Royal Park Partners, saw this as a key part of the government’s nationwide strategy. “Sustainable and long-term economic growth will only work if opportunities to accelerate research and development are shared between regions across the UK,” he said. “The Chancellor’s plans for 12 new investment zones to ‘supercharge’ growth in hi-tech industries is one of the punchier developments to come from today’s announcement. Although there is a long way to go, this is one step towards making the UK a tech superpower.”

However, there were some concerns. Ben Clark, the director of the University of Southampton’s Future World’s startup accelerator, praised the intent, if not the execution. “The creation of 12 new investment zones is a great step towards achieving a ‘founder first’ mentality — specifically, moving beyond a narrow focus on the ‘Golden Triangle’ of London, Oxford, and Cambridge that has for so long been at the forefront of investment, especially in science and deeptech.” However, he noted that it still excluded areas like Southampton, despite their track record in innovation, and called for the policy to be further extended. “We need these investment incentives to work beyond a university institutional level but to directly engage and release brilliant scientists and engineers to do what they do best — problem-solving, solution-building, and driving the UK’s innovation economy.”

Taxes and capital investment

Businesses were not exempt from the overall rises in taxation the budget announced, but among the various measures that were announced that offset this were increases in how much businesses can offset their capital investment against their tax bill. “The new policy around ‘full capital expensing’ will go some way to reducing concerns over the increases to corporation tax,” said Gravita’s Plumb. “Smaller businesses will also be grateful to see the increase of the Annual Investment Allowance to £1m, allowing them to deduct the full value of all their investment from taxable profits.”

Claire Trachet, CEO of business advisory firm Trachet, noted that while businesses should pay their share of tax, “the implementation of ‘full expensing’ are critical for growth in curbing the impacts of this. This will help to support businesses, particularly in the tech sector, where investment in equipment and infrastructure is critical to growth and innovation.”

£2.5 billion for quantum and an AI sandbox

Perhaps predictably, the announcements of funding for quantum computing and an AI sandbox were headline-grabbing.

Octopus Ventures Investor, Zoe Reich, welcomed both moves. “They are doing the right thing again by putting investment behind the UK’s ambitions to be centre stage in quantum computing,” she said. “It’s an area where we have a world-leading research base, progress is being made towards commercialisation, we have hugely promising business, and there’s an emerging appetite from private investors to be involved, that government backing can accelerate.”

However, Reich also highlighted that being a tech superpower isn’t just about the money, but also about the policy, saying, “I’d encourage the government to focus work around AI on ethics and bias, where regulation will be more important than funding.” She continued it was also important, “to look at how we encourage transparency around things like training data and biases, and create a world leading regulatory regime for AI to support a world-leading industry.

Will it make the UK a tech superpower?

However, despite welcoming specific policies, the tech sector still wants to see consistent delivery from the government.

Aman Behzad perhaps summed up the general mood. “This week the government proved its commitment to supporting UK tech businesses, with a speedy resolution to the SBV UK crisis, yet a more long-term show of support is needed.” The Chancellor may be relaxing after delivering one of politics’ set-pieces, but already people are looking for what’s next, says Behzad. “All eyes are now on the newly created Department for Science, Innovation and Technology to see what role it will play in empowering our nation of ambitious entrepreneurs, and giving them the tools, funding and backing they need to flourish.”

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