Industry broadly positive about tech-focused budget, but Brexit remains a concern

SUMMARY:

The Chancellor of the Exchequer delivered his annual budget yesterday and industry has been giving its feedback on the good and the bad.

Chancellor of the Exchequer, Philip Hammond, announced his annual budget yesterday to the House of Commons, outlining Britain’s investment plans for the year ahead. Unlike many of the budgets in recent years, Hammond’s Autumn Statement focused heavily on the UK’s technology capabilities – claiming that they will help support the country’s growth as it exits the European Union.

The budget outlined plans to invest in new technologies – including AI, 5G and broadband – promised further capital for R&D, and made plans to boost digital skills across the UK. It also made promises to tackle the tax affairs of the US-based internet giants that route revenues through low-tax regions in the EU, effectively paying very little in the UK. For a full breakdown of the announcements, read our story here.

However, since Hammond addressed MPs, industry has been responding to the key points, with many broadly supportive of the technology focus and the drive to upskill the UK for a digital future. But it’s also clear that concerns over the impact of Brexit – despite the Chancellor allocating an additional £3 billion of funding to deal with the exit from the EU – are far from being allayed.

Below are some of the more interesting comments received (out of the hundreds that came through).

techUK

UK technology trade association, techUK, whilst positive about the technology focus of the budget, also raised concerns about the amount of funding being allocated. It also raised real concerns about the likely impact the funding will have once Brexit kicks in. techUK Deputy CEO, Antony Walker, said:

This is definitely a fitness-boosting tech Budget but many will question if it’s enough to prepare the UK for the long uphill road ahead.

While the Chancellor has identified the right priorities, the overall economic forecast and tight spending constraints means that the amount of funding available is small relative to the growth potential of the sector.”

The OBR forecasts show the real impact of continuing failure to crack the UK’s productivity problem.  techUK would have liked to have seen more demand side measures to boost productivity.  Supporting small businesses across the country to digitise and take advantage new technologies is the best way to increase their productivity.  That means real work to rebalance the tax system to support those purchasing subscription software and helping educate non-tech businesses on the values of digital tools to reduce costs.”

The reality for many UK tech businesses is that the Budget measures announced today will not make up for the uncertainty created by Brexit.  To really be ‘fit for the future’, tech businesses need to know what that future holds.

Putting money aside for a hard Brexit is pragmatic, but does not deflect from the urgent need for progress in the Brexit negotiations, including securing a transition deal on which businesses can make future investment decisions.  This may not be in the Chancellor’s hands, but will determine whether the UK thrives or falters in the global, tech-led future, on the horizon.

Tech City UK

Backed by the government in the early days of the growing technology scene in east London, Tech City UK has continued to receive investment to help start-up and scale technology businesses through programmes, research and events.

Gerard Grech, Chief Executive of Tech City UK, welcomed the R&D capital investments in the budget, but raised concerns about the potential fall in European Investment Fund (EIF) money post-Brexit. He said:

Several constructive growth and funding initiatives as well as measures were announced by the Chancellor of the Exchequer in this year’s Budget – a lot of it based on direct feedback from businesses. We welcome the UK Government’s commitment to increasing its R&D to 2.4% of GDP over the next ten years, with the intention of increasing its global science and tech standing.

“While we welcome the Chancellor’s reassurance that the Government will replace EIF funding where necessary, the Government needs to try to resolve this situation quickly. EIF funding is essential to many transactions right across the early stage tech sector and without it deals could seize up – although today’s commitments by the British Business bank will go far to prepare the ground as the UK plans to exit the EU.

Deloitte

No major introductions needed for Deloitte, but as one of the largest consultancies in the UK, which still does a great deal with government – both in Whitehall and at a local level – its take on the budget is always an interesting one.

David Sproul, senior partner and chief executive of Deloitte UK, welcomed the skills element of the budget, stating that it’s a common concern heard amongst businesses across the country. He said:

With the OBR downgrading the outlook for UK productivity, the Chancellor is hoping improving digital and construction skills will provide a much-needed boost.

The announcement of a National Retraining Scheme (NRP), in partnership with the TUC and CBI, is a great example of how collaboration between government and business can help address some of the country’s most critical economic and social issues.

Our research has shown that businesses need more people with digital know-how, with a third of UK business leaders expecting AI to disrupt their industries. Yet businesses also told us they need workers with skills such as complex problem solving, creativity and emotional intelligence – AI will have the greatest impact when it is seen as a complement to human skills, not a replacement for them.

The surest antidote to low productivity is investment in the skills of the future. Today’s focus on training is good step on the road to a high growth, high wage economy.

PwC

Another major consultancy in the UK, PwC also welcomed the skills announcements from the Chancellor, but also warned that if the UK wants to be a leader in new technologies, such as AI, then it will need to increase its investments further over the coming years.

Jon Andrews, head of technology and investments at PwC, said:

It’s encouraging to see the government investing in emerging technology like artificial intelligence (AI). This is a good start, but when compared to the potential AI prize, which PwC research shows could add £232bn to the UK economy by 2030, this investment will need to be scaled over time to establish the UK in a leading position. AI is one of the biggest commercial opportunities of our time and could produce extra spending power per household of up to £2,300 a year by 2030, equivalent to a 10% boost to UK GDP.

Government investment in AI needs to focus on three main areas across the UK: standards and ethics, trusted data, and skills. It’s vital that the UK positions itself as the world leader in the responsible adoption of AI, establishing the frameworks to ensure that everyone can reap the benefits of this emerging technology. Building public trust in the use of their data in AI systems will be key to accelerating innovation and driving growth nationwide.

The focus on investment in skills and lifelong learning comes at a vital time to broaden access to the high quality and high paid jobs of the future. It’s great to see the government investing in an additional 8,000 computer science teachers, but the wider school curriculum needs to reflect the fact that technology will touch every aspect of people’s lives and won’t just be confined to the more technical aspects. To create a thriving and diverse pool of future tech talent, it’s vital that these teachers can inspire the next generation about technology and get the message across that technology jobs are wide-ranging and for everyone.

BCS

The Chartered Institute for IT, BCS, has long been a household name in the UK technology landscape. David Evans, Director of Policy, BCS, was positive about some of the digital investment announcements, but also painted a gloomy picture regarding Brexit. Evans said:

We welcome news of investment in the digital infrastructure, but given the situation around Brexit, we feel that more is needed to ensure that all parts of the UK can benefit from increased access to better digital infrastructure. This is especially the case as it’s not sufficient or as widely reaching as is needed. Digital infrastructure policies will become more important to the UK outside the EU since, to a greater extent than it is now, our capability will be benchmarked against other countries across the globe.

The European Commission’s Digital Economy and Society Index 2017 ranks the UK as seventh, slipping down one position from 2016. The UK is rated as part of a group of countries that are ‘lagging ahead’, scoring above the EU average, but whose development is now very slow, and as such is lagging in comparison to the progress of the EU as a whole.

Federation of Small Businesses (FSB)

The FSB offers not for profit small business advice, financial expertise, support, and has a strong voice within the halls of Whitehall. Mike Cherry, Federation of Small Businesses (FSB) National Chairman, welcomed many of the productivity investments, but also warned that more clarity was needed on the UK’s exit from the EU. Cherry said:

Extending the national productivity investment fund for a further year and upping R&D investment is clearly needed given today’s revised OBR forecasts. However today’s announcements will largely be to the benefit of large rather than small firms and we need to ensure that smaller business can also benefit from R&D investment. Equally, simplification of R&D tax credits is long overdue.

It’s encouraging to see the Government making a meaningful investment in upskilling our workforce. Particularly welcome is the announcement of £30 million for digital skills and long-distance learning.

£3 billion of Brexit contingency planning and a promise to step-in to replace EIF funding provides some reassurance. Of course what we really need is the swift agreement of a time-limited interim period. Only then can small firms start to plan again for the future.

UKCloud

UKCloud is one of the IaaS technology providers that has grown significantly off the back of government investment, largely via the Digital Marketplace and G-Cloud framework. It has long had a strong voice in the direction of government digital policy, not shying away from being vocal about protecting the interests of UK businesses. Chief executive of UKCloud, Simon Hansford, welcomed the investment commitments made in the budget, but also urged the government to make sure it followed through on its promise to tackle tax loopholes that are being taken advantage of by large US-based Internet companies. Hansford said:

We welcome the Chancellor’s commitment to growing the UK’s technology sector through the injection of significant  funding. Government needs to ensure that this money is spent with UK companies, not US or foreign companies, whether directly or through the supply chain. This will maximise the economic impact and ensure that UK gets a fair return on the investment. Government needs to support its tech industry by buying from it, which is common practice in many other governments, including the US.

We also think it is right that government should recoup tax from digital companies that transfer royalties overseas, but hope the detailed proposals are sufficiently watertight to prevent loopholes and ensure a fair deal for the UK, and a level playing field for UK companies.

Microsoft

We noted yesterday that Microsoft and the government have had an increasingly close relationship in recent months and years – and that its lengthy response to the budget, as soon as it was announced, with plenty of details, suggests it may have been pre-briefed on the details in advance. Unsurprisingly, Microsoft welcomed the Autumn Statement.

Cindy Rose, UK CEO, Microsoft Ltd, said:

We welcome the announcement by the Chancellor to triple the number of fully-qualified computer science teachers from 4,000 to 12,000. There is an urgent need for the UK to tackle its digital skills gap and use technology to nurture the creativity already present in the next generation.

Teachers across the country need more support to deliver the plans laid out today in the Budget. They need the skills to pass on to their students, the tools to enable them to engage young minds, the freedom to experiment in class and find the best way to engage youngsters, and the professional support to ensure they can get help if they need it.

Microsoft is working to ensure everyone can benefit from the Fourth Industrial Revolution, and has launched a programme to help people across the UK improve their digital skills to ensure the country remains one of the global leaders in cloud computing, AI and other next-generation technologies. The UK’s future is bright if we empower teachers to do what they do best – teach.

Sage

Finally, Sage, one of the long-standing ‘success’ stories of the UK technology industry – one of the few scaled businesses that hasn’t been sold to a foreign investor – welcomed the additional funding for the productivity fund. But added that the forthcoming Industrial Strategy should underpin the UK’s future productivity goals.

Alan Laing, Managing Director, United Kingdom and Ireland at Sage, said:

We’re pleased to hear the Chancellor acknowledge that productivity is at the heart of the Treasury’s focus – and welcome news of the extension to the productivity fund. The UK’s productivity levels for small and medium businesses, the backbone of our economy, have become a postcode lottery – and that has been echoed by the OBR today. Our research shows the most productive local authority is now four times more productive than the least. It also demonstrate that if productivity was increased by just 5% an extra £33.9 billion would be added to Britain’s GDP per year.

Despite creating 73% of all new jobs since 2010, our entrepreneurs simply aren’t being given the level playing field that they require to flourish, meaning a fundamental refresh to the government’s current one size fits all approach is required – from White Hall to Town Hall.

We hope Monday’s publication of the Industrial Strategy White Paper will be the vehicle to achieve this – bringing with it a heightened focus on a flattening productivity, which will be critical to the Chancellor’s vision of a Global Britain.

Image credit - Image sourced via Twitter.

Disclosure - UKCloud is a diginomica/government premier partner at time of writing.

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