Will the Budget turn Britain into the "technology hub of Europe"?

We ask the IT industry if there is weight behind chancellor George Osborne’s budget ambition to turn the UK into “the tech hub of Europe” or if it was just political rhetoric

Chancellor George Osborne said in his 2012 budget that the government's ambition is to turn the UK into “the technology hub of Europe”. But does the budget back up this goal, or was it just political rhetoric?

Kate Craig-Wood, managing director of hosting company Memset, the type of SME supplier that Osborne hopes to support, is broadly positive about the chancellor's intention to stimulate the technology sector. 

“There’s not a lot of substance, but the aspiration is in the right place. I do believe IT has the potential to be the new engine of growth for the UK," she said.

“It’s a fantastic aspiration to make the UK the tech hub of Europe, as I really believe we could be the California of Europe. One thing that will help is the cut in corporation tax. As a company it seems bonkers that we pay corporation tax when that is money that we would have just put back into the business.”  

However, she said it was not start-ups that needed support so much as successful small to mid-sized companies that are finding it difficult to get investment. “I don’t think the issue is starting businesses, but around middle-growth businesses with a proven model. More should be done to help them if the government wants IT to be an engine of growth,” she said.

“The other thing that is positive for technology is that we need a faster broadband infrastructure, because we are lagging behind in innovation.”

But technology advisor Peter Chadha believes there was little in the budget to provide a real opportunity for the tech sector.

“I think the government is missing a huge trick. There’s a seismic change going on in IT, which is the cloud. We need to push the cloud agenda to make the UK a hub of cloud technology. Geographically we are ideally placed to attract global electronic business. There should be more tax breaks for businesses who want to host cloud-based applications,” he said.

“It’s a wasted opportunity if we just talk about it and don’t articulate it into pounds and pence.  We have to outpace everyone in Europe by embracing the digital age. When it comes to the cloud they really just don’t get it.”

He added: “The things I’m happy about are the tax allowance being raised to £9,000 because if we put money in the hands of normal folk they tend to spend it, and from a macro-economic perspective that would create more buoyancy and eventually lead to investment in more IT.”

Nic Scott, CEO of cloud HR provider Fairsail, said the budget failed to cut red tape for technology SMEs. 

“Osborne pledged to provide tax relief for the video gaming, animation and television production industries, but where is the help for the less glamorous and just as profitable B2B software makers and developers? Osborne should note Silicon Valley was not built on the gaming industry - it was built on enterprise software,” he said.

The reduction of corporation tax and enhanced capital allowances for enterprise zones are good moves for the technology sector, said Askar Sheibani, CEO of computer repair company Comtek. But overall it was a disappointing budget, he said.

“The talk about turning the UK into the tech hub of Europe - I’ve heard that being said by governments since I’ve been in business. You’ve got to think of why companies would move to UK; there have to be tangible commercial and business benefits. We have to have high-speed broadband, and we are still behind many other countries with that aspiration. I see for a fact we are behind businesses in Holland and Germany in that regard.”

Tim Kay, technology start-up lead at consultancy KPMG, said the budget should be good for tech start-ups.

“The Chancellor's budget announcement gives the start-up community a lot of reasons to be optimistic. The infrastructure investments are welcome along with the improved R&D tax credits and EMI scheme rules and corporation tax relief for specific sectors. The simplification of the tax calculations for small businesses will help allow them to focus on what they should be doing rather than being tied up in red tape," he said.

“As ever there is likely to be scepticism within the start-up community about how quickly some of these measures will can be translated into practice. This can only be overcome by government trying to take a leaf out of the entrepreneurs’ books and execute quickly on ideas to make sure these benefits make a real difference to the people on the ground.”

Intellect, the technology industry trade association, welcomed the ambition to make the UK a technology hub, but said the objective needs more detail behind it.

"To turn this vision into a reality we will have to go much further than today’s announcements on the creative industries and broadband and take some real action to optimise the full potential of the entire UK tech sector. We have to be world leaders not only in the creation of new technology but also its use and exploitation," said Intellect director general Julian David.

Cisco UK CEO Phil Smith said the government needs to foster the development of the British digital economy to achieve the goal of being a global technology hub.

"Measures outlined by the chancellor such as enterprise finance expansion, investment in ultra-fast broadband and encouraging R&D in the UK play a critical part in this and are a positive sign of long-term thinking," he said.

Many people will be looking forward to seeing the government's plans for "digital by default" public services by 2015, especially considering that the measure of success for this objective will be, according to the Budget statement released on the Treasury website: "From 2014 new online services will only go live if the responsible minister can demonstrate that they themselves can use the service successfully."

If even ministers can make better use of the internet, perhaps the UK might really be set to become a genuine technology hub for Europe.

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