Jeremy Hunt’s Spring Budget grabbed headlines on childcare.
However in what he termed a ‘Budget for growth’, the Chancellor also announced several measures affecting UK tech.
From a Plan for Quantum to investment zones and tax initiatives, he claims to be removing the barriers that stop businesses investing and intends to turn the UK into a ‘science and technology superpower’.
But what did the tech sector and wider business support landscape make of the government’s fiscal plans?
Quantum computing & AI
Hunt announced £2.5 billion investment in quantum computing. 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.
“The greatly increased investment into quantum computing is very much welcomed, as it will help to build on the world-leading ecosystem that is already established here,” said Ben Clark, director of Future Worlds, a startup accelerator at the University of Southampton.
“However, we must ensure that it not only funds early-stage research, but also has the political engagement of stakeholders across the product and funding life cycles – from venture capital to private equity to IPO – to ensure we can drive world-leading companies at scale.”
The government is also acting on all of Sir Patrick Vallance’s recommendations in the independent Future of Compute Review. This includes establishing an AI sandbox for innovators to try out products before they go to market, clarifying intellectual property rules and building an exascale supercomputer.
Hunt also announced an annual £1m Manchester Prize for the most ground-breaking AI research.
Investment zones
The Budget promised to create 12 investment zones around the UK, with £80m of funding earmarked for each over five years – building on a plan from short-lived Chancellor Kwasi Kwarteng.
These ‘12 potential Canary Wharves’ will be centred around university tech hubs in England, Scotland, Wales and Northern Ireland – with none south of Birmingham – and offer lower national insurance contributions for employers, lower business rates and capital allowances on the purchase of new machinery and equipment.
“London’s success as a FinTech hub should enable it to spread the love – the wealth and jobs – throughout the UK, including to Greater Manchester and to Wales, both areas with a deep pool of tech talent. We’re pleased to see the Chancellor recognise this in his 12 new investment zones,” said Anne Boden, founder and CEO of Starling Bank.
The Liverpool City Region Mayoral Combined Authority is one of the areas set to host an investment zone. Colin Sinclair, CEO of Knowledge Quarter Liverpool, reflected: “We very much hope that the new investment zones will be pivotal to raising aspirations, accelerating R&D and driving inclusive growth, creating skilled jobs for the people of the city, the region and beyond.
“In KQ Liverpool, and at nearby Daresbury, Liverpool City Region has world-leading clusters in health and life sciences, materials chemistry and advanced manufacturing technologies. The funding and powers that investment zones could bring would give the opportunity to better leverage these existing strengths to supercharge economic growth across the City Region.”
Tax
Outside the investment zones, businesses will be eligible for 100% first year capital allowances, which means they can deduct the full cost of equipment from pre-tax profits.
The plan, which includes IT equipment, will last for the next three years and ultimately be made permanent. This is intended to soften the impact of Hunt’s decision to raise corporation tax from 19% to 25% in this new financial year.
“Allowing companies to write off the full cost of qualifying plant and machinery, including IT equipment, will give businesses a significant incentive to invest and will support additional job creation,” said Boden.
Michael Cox, CFO at IRIS Software Group, said of the corporation tax increase: “[Hunt] has avoided increasing the burden for smaller businesses and those generating the lowest profits. For those who are impacted, there will be a cash squeeze from the increased rate but this will likely take time to filter through and materially impact investment decisions.”
Enhanced credit for SMEs that spend on R&D as part of a £1.8bn package of support was also announced and described as “welcome news” by Ben Chaplin, MD at accountant Croner-i.
“It is perhaps the least tax-focused budget we’ve seen in a while, partly because there was so much contained in the Autumn Statement. However, there were still a couple of surprises,” he said.
“An announcement that the super deduction will be replaced with a new scheme allowing businesses to expense their capital expenditure for at least the next three years. This will be at a lower rate than the super deduction, but we presume it will be applicable for more businesses. Good news, but one business owners would surely have preferred more notice on.”
Caroline Plumb, CEO of creative agency Gravita, said it was crucial that the Chancellor promoted productivity and sustained growth for the fast-growing businesses that underpin the economy.
“Importantly, it has reinforced its pledge to make the UK a ‘science superpower’ by introducing an enhanced R&D credit to offset the cuts to the tax credits scheme. In turn, the Chancellor may have prevented innovative, research-intensive businesses from transferring their activities offshore to territories with a more friendly corporate landscape.”
Russ Shaw CBE, founder of Tech London Advocates and Global Tech Advocates, reflected: “One area where the tech community would urge the Chancellor to reconsider is the short-sighted cuts to R&D tax rebates. Today’s introduction of an ‘enhanced’ R&D credit – will simply not suffice.
“R&D is the backbone of innovation and companies working on breakthrough technologies need more support – not less – if the government is serious about a tech-driven recovery for the nation.”
Wider policies
The allowance for 30 hours of free childcare a week will be extended to all children from the age of nine months, beginning in April 2024.
The Chancellor also said benefit claimants must satisfy higher requirements and raised the cap on pension pots.
