Innovation will suffer without investment


Innovation will suffer without investment

The 2010 Budget was perhaps the most crucial and eagerly anticipated of our generation, writes Daniel Lowe, founder and managing director, UKSolutions. Yet, as the economy remains disappointingly sluggish following its lowest ebb in almost a century, the Chancellor failed to instil confidence among small IT businesses that investment in innovation is high on the government's agenda.

It is no secret that a catalyst to economic prosperity is investment in enterprise, in particular small businesses in growing industries such as technology. A recent report by Capgemini found that small businesses represent 99% of all companies in Europe, offering important employment stimulus and contributing to economic growth.

In the UK, what our IT companies and SMEs need is support to help them develop new technologies, such as green IT and better business solutions. Failure to do to this, and to capture a share of the global market for clean technologies and renewable energy, will cost the UK billions of pounds in lost revenue.

IT start-ups are self-sufficient and don't need the regular handouts or subsidies that other areas of industry rely on. Unfortunately, the Growth Capital Fund, which was relayed in the Budget, will not practically provide this help for at least another year.

Green tax

The new Carbon Reduction Commitment (CRC), which came into effect at the start of April, imposes yet another tax burden that further threatens the prosperity of IT companies.

The government estimates that 5,000 of the largest companies will be affected by the CRC, but reports in the Financial Times suggest this could be more like 30,000 - undoubtedly impacting on SMEs. The way this sector can meet these new regulations is by outsourcing their IT infrastructures to state-of-the-art, energy-efficient datacentres.

Yet the datacentre suppliers, many of which are small companies, will naturally consume more power and automatically qualifying for the government's new CRC tax from the consumption of others. The cost incurred will go directly back to the many small IT businesses, hampering their growth and negating the benefits of outsourcing and employing cloud computing services.

Put simply, this is a tax imposed on datacentre providers for increasing their growth and helping businesses to reduce their energy output. Ironically, the CRC will put them on a blacklist of poor energy performers, yet without the high-tech efficiency of their equipment, businesses would continue to squander energy on poorly performing infrastructures, ultimately defeating the purpose and crippling many financially.

The recent Budget has proved less than inspiring for the UK technology and SME sector. It remains to be seen whether these initiatives will encourage developers to prosper in the immediate post-recession period. For the UK to reinvigorate its economy, investment is surely the key. The government needs to empower high-tech companies and small businesses with sufficient capital and fairness on taxation to be competitive and agile in a local and global market.

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This was first published in April 2010


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