The Government has been talking about making the UK a super-charged tech economy for some time now, so the tech industry was eagerly awaiting this Budget (March 15). It’s certainly interesting times for the sector and the UK economy. Last month, we saw the launch of the new Department for Science, Innovation and Technology and in the last couple of weeks, the collapse of Silicon Valley Bank and rescue of the UK arm by the Government facilitating a private sale to HSBC.
We’ve highlighted some key announcements and how they affect tech ecosystems across the UK.
The Chancellor announced ‘Trailblazer’ deals for Greater Manchester and the West Midlands; which includes a single funding settlement and more powers and responsibilities for post-16 technical education. Other Combined Authorities have also expressed a willingness to take on these powers when available to them.
Katie Gallagher, chair of the UK Tech Cluster Group, said: “We welcome news around Trailblazer powers for Combined Authorities in Greater Manchester and the West Midlands. More local control of resources and responsibilities for skills funding presents a huge opportunity to harness the potential of learners and better align skills and talent to the needs of employers in growing and fast-moving sectors like tech.
“Given how important tech is to the future of the economy and the potential impact on regional economies, whatever mechanism is used to devolve funding into the regions it must make provision for expert and specialist support from regional tech clusters who understand the maturity of their clusters and where there are gaps that need funded interventions.”
The Government committed as expected to funding Investment Zones, an idea which was refined by the current Chancellor at his Autumn Statement and now describes ‘’12 high-potential-knowledge-intensive growth clusters across the UK’’.
There will be four across Scotland, Wales and Northern Ireland; with eight in England. These areas are all in the North or the Midlands and include: the West Midlands, Greater Manchester, the North-East, South Yorkshire, West Yorkshire, East Midlands, Teesside, and Liverpool.
Each English Investment Zone ‘’will have access to interventions worth £80m’’ and will be tasked with driving growth of at least one of green industries; digital technologies; life sciences; creative industries and advanced manufacturing.
Timescales are yet to be finalised, though the Government is keen to agree the first proposals by the summer and all Investment Zone proposals agreed by the end of the financial year, with funding expected to commence from April 2024.
Katie added, “Today’s announcement around Investment Zones has the potential to better enable collaboration between tech firms, industry and academic partners. We hope the design of these programmes will support innovative SMEs to collaborate and accelerate R&D.”
R&D Tax Credits
In the Autumn Statement, the Chancellor announced cuts to R&D tax credits used by tech startups. Since then, the industry has called for this to be reversed, as it would have a negative impact on the tech industry, particularly for early-stage and research-heavy startups. A survey by COADEC found that startups expected to lose 30-40% of what they currently receive.
In his speech, the Chancellor partially reversed the reduction in R&D tax credits by making provision for an enhanced credit for firms spending over 40% on R&D to be able to receive 27% relief. There is a further relief for some firms in Life sciences and creative industries of 34% – 39%.
Katie added, “The tech industry as a whole was hoping for more than a partial reversal of the previous reduction of R&D tax credits incentives to encourage SME innovation in a difficult economic climate. It’s of vital importance to allow early-stage startups and innovators to flourish and grow their companies.”
AI and Quantum
A new AI competition, called ‘The Manchester Prize’, will offer £1 million for innovation in AI and a National Quantum Strategy is designed to direct £2.5 billion of investments over 10 years with the aim of driving R&D application of Quantum technologies in the UK.
In conclusion, while it is good to see funding available for place-based initiatives such as Investment Zones and Levelling-Up Partnerships, it is crucial that their design provides a mechanism to crowd-in innovative SMEs who underpin R&D and local growth, and invest in the ecosystem relationships which ensure long-term benefits for businesses and communities.
Tech Clusters operate as a ‘connective tissue’ within regional ecosystems driving and supporting innovation. This helps to make ‘Levelling Up’ a reality – creating opportunities, jobs and growth for people across the UK. It is crucial that devolved funding drives grassroots innovation, and that future fiscal events and central government policy are developed with the growth and development potential of our tech clusters in mind.