The decision that will “change the course of Britain’s history” - aka the Brexit vote - underpinned UK Chancellor of the Exchequer Philip Hammond’s Autumn budget statement.
According to Hammond:
It has thrown into sharp relief the fundamental strengths of the British economy that will ensure our future success: the global reach of our services industries; the strength of our science and high-tech manufacturing base; And the cutting-edge British businesses that are leading the world in disruptive technologies.
Much of what Hammond had to say had been pre-announced by Prime Minister Theresa May on Monday at the CBI Annual Conference or leaked in advance by the Treasury to get attention. It was perhaps as well that this happened as the scale the national debt by 2020 - £1.945 trillion - and the casting aside of borrowing limits might otherwise have stolen the headlines tomorrow.
But Hammond dutifully affirmed May’s announcement of an extra £2 billion a year by 2020 for R&D, stating:
We do not invest enough in research, development and innovation.
As the pace of technology advances and competition from the rest of the world increases, we must build on our strengths in science and tech innovation to ensure the next generation of discoveries is made, developed and produced in Britain.
Then was the £1 billion to go on digital infrastructure in the form of investment in fiber rollout and 5G network trials:
Our future transport, business and lifestyle needs will require world class digital infrastructure to underpin them. So my ambition is for the UK to be a world leader in 5G. That means a full-fibre network; a step-change in speed, security and reliability.
One rare surprise was the announcement of 100% business rates relief for a 5 year period on new fibre infrastructure, from April next year, to support further rollout of fiber to homes and businesses. Hammond said:
We have chosen to borrow to kick-start a transformation in infrastructure and innovation investment.
Come spend with us
With life after Brexit in mind, Hammond also put in place steps to encourage inward investment, confirming that UK corporation tax would fall to 17%, the lowest in the G20 countries - or that is to say, the lowest for now unless President Elect Trump decides that one of the pre-election promises that he will stick to is to cut US rates to 15%.
But for now Hammond reiterated the “Britain is open for business” mantra of the past few months and cited tech investment by the likes of Google and Apple and the acquisition of ARM by Softbank as evidence that this is paying off:
My priority as Chancellor is to ensure that Britain remains the number one destination for business – creating the investment, the jobs and the prosperity to protect our long-term future.
From a ‘grow your own’ perspective, Hammond committed £400 million for “innovative small businesses” through venture capital funds, while the Department for International Trade (DIT) is to spend £500,000 a year for fintech specialists abroad:
I am taking a first step to tackle the long-standing problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale…by injecting an additional £400 million into venture capital funds through the British Business Bank, unlocking £1 billion of new finance for growing firms.
Tech industry reaction to the announcements was on the whole positive. Charlotte Holloway, Policy Director at UK technology firm lobbyists techUK, stated:
A Match-fit Britain must be a Tech-fit Britain, and today the Chancellor gives UK tech a series of welcome announcements. The Chancellor’s focus on backing tech and unleashing a new wave of productivity is exactly the vision needed for an uncertain period ahead.
Investment in innovation is absolutely critical for driving tech-led growth and productivity, and it’s great to see the £2 billion extra investment in R&D for new technologies by 2021 and a £23 billion National Productivity Investment Fund to give a focal point to the level of the UK’s national ambition. Similarly, £1 billon to boost the UK’s leadership in 5G and fibre networks can help ensure the UK connectivity credentials shift from good to great, aided by a welcome rates relief for new fibre network rollout.
But Holloway pointed out that nothing had been done in the Chancellor’s statement to address the ongoing issue of the digital skills deficit in the UK:
There was a real gap when it came to additional support for boosting the UK’s digital skills. Similarly, there was a missed opportunity to ensure that the benefits of digital are at the heart of the Government’s devolution ambitions. We will be looking to the Government to reconsider these areas in the next Budget.
Carolyn Fairbairn, director-general of the CBI, said that the Statement was a "welcome down payment on future productivity" through pledges such as the £23 billion investment fund, but cautioned that the promises must now become practice:
The Chancellor has prioritised a pragmatic down payment on future productivity growth. His emphasis on R&D, housing and local infrastructure will help businesses in all corners of the UK to invest with greater confidence for the long-term, during turbulent times. This will be warmly welcomed.
These measures must now be translated into action. That means tarmac, tracks and telecoms being laid, and clear, deliverable timetables for major projects – only then will they act as a catalyst for investment, jobs and growth.
Meanwhile the Internet Services Providers Association (ISPA) UK said of the broadband/5G plans :
While this extra investment is very welcome, as is the news that new infrastructure will be exempt from business rates, the Government needs to make sure it compliments planned investments and look at additional steps to remove barriers and help deliver digital infrastructure. For example, wayleaves reform, planning rules and excessive street works regulation can be significant barriers to investment.
The lack of attention to digital education and skills is glaringly obvious and hugely regrettable. There's an aching pursuit of modernity in spending on programs like autonomous connected cars and a lack of practical reality in ensuring that welfare beneficiaries have the necessary skills able to access services digitally, let alone growing a national workforce that's fit for the digital age.
Away from the detail announced today, two rogue factors remain. The first is Brexit and the success or otherwise on the negotiations around the UK's withdrawal from the European Union. The second is the rise of Donald Trump as US President. Until it becomes clear what policies will fall into place from the new White House, particularly around international trade and taxation, there could be some unexpected bumps in the road ahead.