In a Budget statement front-loaded with a focus on technology and innovation, the chancellor clearly has one eye on battling productivity, often seen as the biggest issue in the UK economy.
It therefore comes as no surprise that technology was a priority for the chancellor, especially given the noises he was making in the lead up to his Budget announcement. Progressing artificial intelligence, introducing driverless and electric cars, and establishing 5G across Britain were all expected and addressed.
In order to deliver on his promise of a new dawn for tech start-ups, there first needs to be an environment conducive to such growth. The tech sector, as we know, is reliant on access to the right talent, which has proved a real bottleneck over the past five years.
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In a clear piece of bias on my part (my daughter studies maths and computer science at university) I welcome the chancellor’s vision to create skills from the ground up by promising the biggest increase in science and innovation funding in schools for decades. There will be a training fund for maths teachers, a £600 "maths premium" for schools linked to the number of pupils taking maths, and proposals for new maths schools in England. It was also positive to hear the promise of increased funding of innovation in universities, including commitment to replace European funding if necessary.
On the other side of the talent coin we have today’s workforce who need to be reskilled. To cover this there was mention of a new National Centre for Computing & initiatives for digital skills retraining, which clearly harks back to recommendations put forward by techUK.
Nurturing the talent pipeline aside, the government also needed to help finance growth. It has announced an action plan to unlock over £20 billion of patient capital investment to finance growth in innovative firms over 10 years by establishing a new £2.5bn Investment Fund to encourage scale ups.
This doubles the annual allowance for people investing in knowledge-intensive companies through Enterprise Investment Schemes (EIS) and backing overseas investment in UK venture capital through the Department for International Trade.
I also welcome the planned increase in research and development expenditure credits (RDEC) for large companies. Mr Hammond has promised to allocate a further £2.3 billion for investment in R&D and will increase RDEC from 11% to 12%. The next step, it appears, is to make everyone aware of it!
He’s also proposing to introduce measures in 2019 to apply withholding tax on royalties and similar payments to a “low tax jurisdiction”. It will be interesting to see how these proposals are set out in detail and how they will interact with existing double tax treaties. This will have a significant impact on cross border tax structuring even where significant substance, activity and risk is undertaken to support such payments from a transfer pricing perspective.
The world is "on the brink of a technological revolution" exclaimed Mr Hammond, and the UK needs to be at the forefront.
A great budget announcement for the UK tech sector was then capped off by a great gag at Jeremy Clarkson’s expense. What more could we possibly want?
One born every 20 minutes, perhaps?
Jason Mitchell is a partner at MHA MacIntyre Hudson