Jeremy Hunt labelled his 2023 spring budget as one for “long-term sustainable healthy growth” that aims to make the UK a “science and technology superpower”. Since Kwasi Kwarteng‘s mini-budget left the country reeling in September 2022, the economic landscape has not been kind to businesses across the UK. The latest budget represents an opportunity to support struggling businesses and encourage greater investment and innovation in the technology industry to get the country back on track.
Annual tax-free pension allowances raised, tax cuts on draught pints, frozen fuel duty, utilising ‘environmentally sustainable’ nuclear power to reduce energy costs and avoiding a 2023 recession all featured in the Chancellor of the Exchequer’s budget.
While much of the country welcomes measures to address rising interest rates, and rising energy and living costs, many also recognised that significantly enhanced support and investment are required to help SMEs and encourage innovation.
The technology industry hasn’t enjoyed the most secure plans for the future in recent months. The closure of Tech Nation was proceeded by Hunt revealing how the UK can become the “world’s next Silicon Valley”. Perhaps fittingly, the government recently facilitated the sale of Silicon Valley Bank UK for £1 to HSBC. So soon after it stepped in to help save so many startups, now could be the perfect time to step up and bolster the fintech industry.
Business support and investment
Hunt revealed plans to deliver 12 new investment zones, across England and at least one in each of Scotland, Wales and Northern Ireland. West Midland, Greater Manchester, the Northeast, South Yorkshire, West Yorkshire, Teesside and Liverpool were all identified as areas that could host one of the new zones.
If the application of a zone is successful, “they’ll have access to £80million of support for a range of interventions including skills, infrastructure, tax reliefs and business rates retention”, Hunt explained.
Significant country-wide investment is undoubtedly popular, as the midlands and northern areas of England continue have received less investment than London and the southeast for some time.
James Forrester, managing director of Stripe Property Group, discussed the development: “As it stands, the North West has seen a substantial amount of investment, while the North East has been largely ignored.
“The news that the region will benefit from the next round of investment is, of course, positive for the regional economy, along with the economies of the other areas earmarked to benefit.
“However, we can be forgiven for holding our breath until we know for sure just how the latest £80billion has been allocated and which areas of the nation will see the largest boost.”
Missing the mark?
Although 12 new investment zones have encouraged optimism across the UK, more is needed if the budget can truly serve all of its industries.
Marco Forgione, director general of The Institute of Export & International Trade, appears to mirror the thoughts of Forrester. Forgione explains how the introduction of the investment zones is a positive move, although the budget needs to deliver on more areas than it currently delivers on.
“The 12 new investment zones will also accelerate much-needed research and development in the UK’s ‘most budding industries’ and this is essential to ensure the UK remains competitive in trade in services.
“Over 50 per cent of our members are in the manufacturing industry and they will be looking closely at what opportunities these investment zones will mean for them.
“We also look forward to providing insights and feedback to the government, in the coming months, in relation to their announced package of measures intended to simplify customs import and export processes for traders,” he said.
“However, despite many positives in the budget, we hoped to see more specific support for MSMEs. A targeted industrial strategy which brings together a clearly defined import and export strategy is essential to this and the recent formation of the Department for Business and Trade should be an opportune moment to make this happen. We will continue to make representations to the government to make this a reality and to discuss the formation of a specific government taskforce which considers the needs of MSME exporters in particular,” Forgione continued.
Research and development credits
The budget also increased smaller businesses’ investment allowances to £1million. This will enable “99 per cent” of companies to deduct the full value of their investment from that year’s taxable profits.
If qualifying small or medium-sized businesses spend 40 per cent or more of their total expenditure on research and development (R&D), they can now claim a credit worth £27 for every £100 they spent. The £1.8billion package of support could support around 20,000 companies, potentially turning Britain into a “science superpower,” Hunt claimed.
Yoko Spirig is co-founder and CEO of Ledgy, a Swiss-based automated equity company with an office and clients in London. Spirig explains how the economic plans keep the UK attractive for tech firms: “In recent months, there have been some concerning developments such as the closure of Tech Nation and planned cuts to the R&D tax credit scheme.
“Today’s announcement of an enhanced R&D tax credit scheme for SMEs is positive for the tech ecosystem. This reversal, coupled with the UK government’s intervention to support tech businesses through the weekend’s Silicon Valley Bank crisis, shows the UK is still an attractive place for tech firms and will help ensure it stays out in front as a positive example for other European markets.”
Strengthening the UK’s position in artificial intelligence
Hunt used the latest budget to outline the publication of a new “quantum strategy”, including a £2.5billion investment into quantum computing by 2030. This initiative aims to support the UK’s artificial intelligence (AI) ecosystem.
He also revealed plans for a new AI sandbox, which will trial faster approaches to help innovators get “cutting-edge products” to market. Hunt also explained that the government could work with the Intellectual Property Office to “provide clarity” on rules, so AI companies can access the materials they need.
To further encourage world-leading AI research to take place in the UK, plans to award a £1million prize every year for the next 10 years to the person, or team, that does the “most groundbreaking” British AI research.
Matthew Hodgson, CEO of Mosaic Smart Data, explained the importance of the move for the fintech industry: “It’s great to see the government committing to the future of technology and innovation in the UK, putting its money where its mouth is and recognising the role AI technology will play in continuing to drive evolution in sectors like capital markets.
“An annual £1million prize for AI research will go a long way in boosting the government’s pledge to make Britain the next ‘Silicon Valley’ and is a positive move in the UK’s ongoing quest to become a science and technology superpower.
“AI, if applied correctly, after the appropriate groundwork, can help banks unlock efficiency, productivity and profitability – and more and more firms are recognising the urgent need to harness its potential. Continued support from the government is critical if the UK is to retain its reputation as a hub for innovation in fintech.”
Establishing dominance in AI
David Mirfield, director of product management at Provenir AI, commented: “The move incentives innovation, spurring companies to solve new problems in the best possible way, as opposed to merely solving problems in the most established way. This provides stimulus for AI and ML innovation to galvanise businesses in the UK.
“We will see the application of AI go well beyond mere automation and process improvement. It will radically transform jobs and sectors, fueling a wave of businesses that people haven’t even dreamed of. It will provide a completely different experience, reinventing sectors such as insurance that have been basically operating the same for the past 50 years.”
David Murray, chief business officer at data science and machine learning platform Devron, also discussed enhanced support for the AI sector:
“The Chancellor’s announcement of an AI sandbox, significant incentives for AI and quantum computing research and development, and streamlined IP processes provide a bold vision for the UK and a great example of how to promote innovation in an area that will likely have a significant impact on nearly all aspects of life for years to come as well as being vital to security, defence, and geopolitical relevance.
“The details of the program will no doubt dictate its effectiveness. Among those details and enabling technologies is federated learning, which could be a catalyst for Hunt’s efforts by allowing for faster innovation through access to distributed data.”
The focus on AI highlights the emphasis on innovation the government continues to place as it plans for the future. If the UK can become the next Silicon Valley, investment and support for innovation will be key to attracting the best and brightest minds here.