Today Chancellor of the Exchequer Rishi Sunak announced the 2020 Spring Budget, the first for the new UK government.
Addressing the House of Commons, Sunak, who has been chancellor since last month, repeated the Conservative party’s election slogan of “getting it done”.
Unsurprisingly the current COVID-19, or novel coronavirus, outbreak dominated the budget, with Sunak announcing “A £30bn “fiscal stimulus” to help support businesses and individuals. This comes after warning that coronavirus will have a “significant impact on the UK economy, but it will be temporary”.
However, the budget also included several plans affecting the tech sector along the theme of “investing in ideas”.
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The budget offered a boost for business, creating a “dynamic low-tax economy”, with business rates cut for small businesses ahead of a review of the future of business rates in the autumn.
Sunak announced “£130m of new funding to extend startup loans, £200m for the British business bank to invest in scaleups, another £200m for life sciences and more money for growth hubs”.
He also promised investment of £22bn a year in research and development (R&D) “higher than the US, China, France and Japan” relative to GDP.
Ritam Gandhi, Founder and Director of Studio Graphene, said:
“Boxed in by the ensuing Covid-19 public health crisis, today’s Spring Budget was less an economic policy overhaul in the wake of Brexit, and more a holding operation as the government scrambles to lay out a crisis prevention strategy. But while the announcement might have been less punchy than expected, it was nonetheless reassuring to see that small businesses haven’t been overlooked in the government’s contingency plans; Sunak has offered his commitment to help businesses manage their cash flow as they deal with any financial fallouts experienced from Covid-19.
“Tax commitments that were contained in the Conservative Party’s manifesto have also been given the nod. Entrepreneurs’ Relief, which has been criticised for disproportionately benefitting wealthier entrepreneurs and failing to deliver on its objective – to incentivise people to create new businesses – is set to be revamped. I believe tax breaks are incredibly valuable for business leaders, but we must ensure that they serve to benefit everyday entrepreneurs and not just a select few. The EIS and SEIS should be used as inspiration for policies introduced further down the line.”
£900m will also be invested in nuclear fusion, space and electric vehicles in order to “lead the next generation of high-productivity industries we also need to invest now in the technologies of the future.”
Sunak also announced the creation of a “new blue skies funding agency”, similar to ARPA in the US, in which the government will invest £800m.
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In order to create “high-skill, high-wage, low-carbon jobs of the future” the chancellor promised a “Comprehensive package of tax and spend reforms to make it cheaper to buy zero or low-emission cars” including investing £500m in the rollout of rapid charging hubs for electric vehicles.
More than £600bn is set to be invested in infrastructure, including broadband, with £5bn spending on gigabit broadband, £510m of new investment in the shared rural mobile phone network and 4G coverage to be in 95% of the country.
The government also today announced that from 1 April 2020, a new 2% tax on the revenues of search engines, social media services and online marketplaces which derive value from UK users will be introduced.
Innovation investment welcomed
Andrew Duncan, Partner and UK Head, Infosys Consulting said:
“It’s a relief to see the Chancellor investing in innovation – particularly in wake of Coronavirus demanding a big portion of the government’s cash. Huge investment in UK R&D, and the promise of £5 billion for next-generation broadband and extending 4G coverage, shows that the government is putting its money where its mouth is and is set on seeing Britain become a digital leader. Many recent announcements – an AI and automation-enabled NHS or millions for AI and digital skills – were criticised for being ‘pie in the sky’. Now, they seem more possible.
“Even in such turbulent times, UK executives all agree that we are seeing robust demand for investment in a tech-driven future. This is where companies are placing their own big bets for the future, as they realise competitive advantage is at stake. With the UK leading the investment charge, this is a powerful and positive signal to businesses here today – and that may relocate here in the future.
“From education institutions to manufacturers, all of the UK’s major employers should be willing to invest in innovation. Whether automating the finance department’s manual tasks with RPA, creating customer-facing technologies like AI-enabled chatbots, or enabling Industry 4.0 with IoT in smart factories, one thing is for sure: technophobes have no future in a digital-first UK.
“Support for businesses particularly badly hit by the impact of coronavirus, like the hospitality industry and small businesses, is also welcome. Providing these businesses with a way to tackle cashflow in these difficult times should keep the wheels of the economy turning. One crucial success of this Budget was taking steps to restore confidence for businesses, who are once again struggling amid huge uncertainty.”