Since becoming Chancellor, Jeremy Hunt has trumpeted his ambition to ‘turn Britain into the world’s next Silicon Valley’. Given the recent ‘headaches’ with the bank of the same name – and not wanting to gift sketch writers any easy gags – references to the Californian tech cluster were understandably scrubbed from his Budget speech. But even if the language was pared back, there were still reasons for Britain’s startup community to be happy with how today unfolded.
For the most research-intensive businesses – those defined as firms for which R&D spending constitutes 40% or more of total expenditure – they will be able to benefit from a new higher rate of tax relief. For eligible businesses, this will return 27p in the pound on all R&D investment. Before the Budget many of Britain’s innovative startups, which plough their budgets into R&D, feared having the rug pulled from underneath them on R&D Tax Credits – so this will be an extremely welcome relief. (It must be noted, however, that this measure will provide little comfort for founders of companies that just fall short of the eligibility criteria.)
The Chancellor also accepted all nine recommendations made by Sir Patrick Vallance’s review on pro-innovation regulation for digital technologies. Among these were the proposal to introduce a regulatory sandbox for artificial intelligence – which will no doubt provide a more fertile environment for AI firms looking to trial and experiment with such software. Similar sandboxes once helped establish Britain as a genuine world-leader in fintech, so this move should provide grounds for optimism as the world gets to grips with integrating AI into the mainstream economy.
And the good news for AI didn’t end there. Researchers will welcome the £900m to build an Exascale supercomputer, as well as the establishment of the ‘Manchester Prize’ – an annual £1m award which will be awarded to to the person or team that does the most ground-breaking British AI research.
But it wasn’t all sunshine and rainbows. The near one third increase in the headline rate of Corporation Tax (and two thirds increase on what it might have been if Hunt were Prime Minister) is, if we’re being polite, puzzling. The Chancellor began his speech by saying he wants to grow the economy, but this hike signals the precise opposite – further eroding the incentive for entrepreneurs to take risks, invest in their communities, and create the wealth needed to fund public services.
Of course, this was partially offset by the introduction of full expensing – which allows businesses to immediately and entirely deduct any investment in qualifying plant, machinery and IT equipment from their taxable profits. Yet even here, Hunt could only promise to offer this for the next three years.
If the economy is to truly see the levels of investment it needs to break out of its decades-long productivity atrophy, businesses need to know that reliefs such as this will be permanent fixtures, rather than temporary incentives. Otherwise the 12 planned ‘investment zones’ will never even begin to approach being the new wave of Canary Wharfs the Chancellor wishes them to be.
So, how should a tech entrepreneur feel after all of today’s announcements? The answer is probably something close to ‘not much different to how they did beforehand’. One single Budget will never make or break the fortunes of the tech ecosystem, but many will feel the Government could have given them a bit more to be getting on with.
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