The 2023 Spring Budget, announced in Parliament today, detailed pending developments across the UK economy, amidst ongoing economic uncertainty. According to Chancellor Jeremy Hunt, the country will not enter a recession this year, with financial predictions said to be going to plan.
In Chancellor Hunt’s first budget announcement, there were plans laid out around how the country will look to half inflation, as well as grow the economy and reduce national debt.
Inflation, according to Hunt (referencing OBR data), is set to fall by more than half to 2.9 per cent by the end of the year.
In terms of national debt meanwhile, the country is on course to be 3 percentage points less of GDP than in the Autumn, with underlying debt to be 92.4 per cent of GDP, and falling every year after until 2027-28.
Areas of the economic landscape covered included childcare, work incentives, pension rules and business tax. Along with this, the UK Government aims to make the country a tech superpower by 2030.
Here is what today’s Spring Budget for 2023 will mean for the UK tech industry, going forward.
R&D funding and tax developments
“Full expensing” was introduced by the Chancellor, providing an incentive for purchasing of new tech. According to today’s budget announcement, over the next three years, every pound that a company invests in IT can be deducted in full and immediately from taxable profits. For smaller businesses, the Annual Investment Allowance has been increased to £1m.
Tax adjustments were also declared for life sciences, with companies in the space being able to get £27 back for every £100 invested in R&D. This could bolster development of new drug treatments, which is increasingly utilising drug discovery technologies such as AI.
However, tech start-ups across the UK have been calling for a reversal of R&D tax rebates for SMEs, warning a possible “seismic impact” on the national start-up ecosystem that would cost small companies around £100,000 annually, as well as entailing possible layoffs of staff.
Smith said: “The chancellor himself has said that turning the UK into the next Silicon Valley relies on the innovation of small businesses. It is therefore very counterintuitive to cut the SME scheme. These credits provide thousands of SMEs with funding which they need to invest in R&D.
“The primary driver of these cuts is the fraud and abuse of the scheme. But instead of cutting vital innovation funding, the Government should use technology to solve the fraud problem.
“The Treasury should provide HMRC with a simple, intelligent portal for applications. This would improve HMRC’s ability to detect fraud and streamline application processes for businesses. It gets to the root of the problem.”
New tech hubs
As part of the governmental ‘levelling up’ strategy, the budget also detailed plans for 12 new investment zones across the UK to “supercharge” growth across the country. In total, this investment scheme will be worth £80m in support.
Criteria for this initiative entails demonstration of strong potential for growth. As well as England, there is set to also be at least one zone in Scotland, Wales and Northern Ireland. Areas identified as examples by Chancellor Hunt include the North East, West Midlands, Manchester and Liverpool.
“The Chancellor’s move to create new tech hubs around universities in England can help turbo-charge innovation and be a catalyst for more equal economic regional growth across the country,” said Clay Van DorenCEO of Northern and Central Europe, and APAC at Atos.
“Digitally driven progress has the potential to transform the delivery of public and private organisations, bringing with it skilled jobs and other positive societal benefits. Each region faces its own unique barriers to growth.
AI, and The Plan for Quantum
An AI sandbox is also being launched, to boost innovation for start-ups. Funding is being dedicated to exascale computing worth £800m. Along with this, a research competition scheme has been introduced to find the next ‘Manchester Baby’, leading to the programme being named ‘The Manchester Prize’. The winner of this competition will be granted £1m, with the scheme set to be carried out on an annual basis over the past 10 years.
Additionally, the Government has also announced a new funding scheme dedicated to quantum computing developments. Titled The Plan for Quantum, the 10-year initiative is worth £2.5bn, and aims to distribute innovation resource with the technology, nationally.
“The UK is becoming a low risk place to undertake high risk ventures, largely as a result of world leading research supported by government and successfully spun out of universities,” said James Palles-DimmockCEO of Quantum Motion.
“The next phase, with an increased budget of £2.5bn, will put us at the forefront globally for governmental investment into quantum technologies, after some significant support from the US, Germany and China to their respective national programs. It is a big signal that the UK wants to build on the ‘unfair advantage’ that we have thanks to the work of the NQTP and our world leading universities and that we have a desire to see quantum technologies through to commercialisation.
“While the UK does have a large advantage in this area it is important that we still have the capacity to work collaboratively across borders. Manufacturing and talent are two key areas where the gains to be made from collaborative working significantly outweigh the risks and I will be keen to see how we can continue to welcome the best of world’s talent to the UK to allow us to continue to accelerate the realisation of these enabling technologies.”