How the Spring 2023 Budget effects South West tech

Yesterday the Chancellor, Jeremy Hunt, announced the Spring Budget 2023, outlining the economic plans for the country in this coming year. The Spring Budget 2023 looks overall promising for the tech sector, with support promised across the board. However, there are some shortfallings. As always, it’s a meaty document, so we’ve done some digging to outline the key policies that are set to impact the South West tech community.

The first notable commitment is to ramp up the rate of investment into tech initiatives that will put the UK at the forefront of global innovation. Presently, the country is behind the likes of the US and China; the current landscape for investment in the UK is not conducive to growth and expansion.

The Spring Budget 2023 announcement sits alongside the publication of Sir Patrick Vallance’s first live report into the regulation of emerging digital technologies. The government has accepted all of its recommendations. 

“The government is awarding £1m a year for ten years to researchers that drive forward AI innovation”

This report highlights that there are areas where the government can further ensure that the UK’s regulatory environment enables innovation and a thriving digital economy. From better regulating the applications of AI, to promoting openness of public data and accelerating legislation to bring forward the future of transport, Sir Patrick’s report presents ambitious ideas to unlock progress.

As a result, the government is awarding £1m a year for ten years to researchers that drive forward AI innovation. Following this, there will also be roughly £900m allocated to building an exascale supercomputer, as well as creating a new AI Research Resource. There was a big emphasis on Quantum too. With The Quantum Strategy, there will be a total of £2.5 billion invested over 10 years to research and innovation in the sector. 

The Chancellor announced several measures to amp up the Government’s action on Net Zero, including £20bn of investment over the next 20 years into carbon capture and low carbon technologies. The goal is to support projects that will store 20 to 30 million tonnes of CO2 annually, creating 50,000 skilled jobs in the process.

Other focus areas included, clarifying IP rules for AI developers, a new ability for the MHRA to fast-track Health Tech approvals – aiming to create the fastest route to market in the world, and re-commitment to lead on Web3/ the metaverse. 

The Government also intends to pursue the transfer of the “£364 billion Local Government Pension Scheme assets into pools to support increased investment in innovative companies and other productive assets.”

The Chancellor outlined that the government would be introducing a higher rate of relief for loss-making R&D intensive SMEs. SME companies for which qualifying R&D expenditure constitutes at least 40% of total expenditure will be able to claim a higher payable credit rate of 14.5% for qualifying R&D expenditure.

On this news, Mark Smith, Partner R&D Incentives and Grants Ayming UK, tells us, “The Government clearly recognises that its decision to cut tax relief for all SMEs in November undermines its ambition to make Britain the next Silicon Valley. In particular, the Government’s new funding for R&D-intensive businesses will allow the UK’s most innovative companies to do what they do best. The structure the Chancellor ran through sounds sensible and clear, with 40% of spend being a straightforward figure and goal for others to work to.

“However, it is a lot more targeted and therefore not as accessible. 40% of spend on R&D is very high, so only a very small portion of UK businesses will be eligible. The government estimates about 8,000 businesses could benefit, which is about 10% of current claimants. All other small businesses that don’t meet the threshold will still see a cliff edge in funding, which will most certainly have an impact on the UK’s innovation as a result.”

The Government published a factsheet accompanying the R&D changes which can be found here.

The 30 free hours a week of childcare currently available for children over the age of 3 will be expanded to children starting at 9 months. At the same time, childcare staffing minimums will be reduced from one to four children to one to five. 

This will have a knock-on effect on the tech sector, enabling more parents to return to work quicker. As Katie Gallagher, chair of the UK Tech Cluster Group and MD of Manchester Digital, highlights, “The increase in funding for childcare for one and two year olds will have additional benefits in helping parents – women in particular – and support greater gender equality in the tech sector.”