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In today’s autumn statement (23 November 2016), chancellor of the Exchequer Phillip Hammond announced a range of initiatives to boost Britain’s tech industry.
Hammond promised that £400m will be made available to “innovative small businesses” through venture capital funds to ensure startups stay and grow in Britain.
“I am taking a first step to tackle the long-standing problem of our fastest growing technology firms being snapped up by bigger companies, rather than growing to scale,” said Hammond.
“[This will be done] by injecting an additional £400m into venture capital funds through the British Business Bank, unlocking £1bn of new finance for growing firms.”
The Department for International Trade (DIT) will also provide £500,000 a year for finanical technology (fintech) specialists.
Lawrence Jones, digital entrepreneur and CEO of the startup Manchester technology brand UKFast, said the investment in tech startups is a positive move.
“The venture capital fund for UK tech startups is an important step. There is a huge amount of pressure on startups to carve up their businesses and give away percentages of their business at an early stage,” he said.
“It’s not a level playing field when those buying them up are global giants, able to operate without paying their share of tax.”
Hammond also announced plans for £390m to go to future transport technology, including a £100m investment in “testing infrastructure for driverless cars”. He added that £450m would go on trailing “digital signaling on our railways”.
Reconfirmed R&D funding
The chancellor also confirmed prime minister Theresa May’s recent promise that the government would pump £2bn a year into research and development (R&D) by 2021.
Some of the R&D investment will come through an industrial strategy challenge fund, which will be overseen by UK Research and Innovation. May said the fund would support innovative technology, such as robotics and artificial intelligence.
“As the pace of technology advances and competition from the rest of the world increases, we must build on our strengths in science and tech innovation to ensure the next generation of discoveries is made, developed and produced in Britain,” said Hammond.
He also announced a £23bn national productivity investment fund, which will be spent on innovation and infrastructure in sectors such as housing, transport, digital communications and research over the next five years.
TechUK’s policy director Charlotte Holloway said the chancellor’s “focus on tech and unleashing a new wave of productivity is exactly the vision needed for an uncertain period ahead”.
“Building on the UK’s competitive edge in science and tech, plans to invest £100m to develop autonomous vehicles, as well as greater support for UK fintech abroad, will help play to UK strengths and reputation internationally,” she said.
From April 2017, the government will also introduce 100% business rates relief for a five-year period on new fibre infrastructure.
Skills gap ‘overlooked’
Despite the investment in tech and innovation, Russ Shaw, founder of Tech London Advocates, said the government isn’t doing enough to keep the country’s “impressive track record” and pointed out that the issue of the skills gap in the tech sector was completely overlooked.
“The measures introduced by the government today miss half of the picture. They will not be a silver bullet, and crucially do not address the tech sector’s number one issue – access to talent,” said Shaw.
“The prime minister must take positive steps to safeguard our tech talent pipeline and allow companies to access workers with the right skills.
“This requires a more functional immigration policy to attract world-class talent, and an investment in digital skills to train up our existing home-grown talent. Financial incentives can only be successful if we have skilled workers that can use them to innovate and create value.”
IR35 crack down
The chancellor also announced plans to crack down on tax avoidance by amending the IR35 legislation.
The IR35 aims to tackle tax evasion, however, regulations currently mean that IT contractors, for example, have to make higher national insurance payments and have no right to claim tax relief for training or other business expenses, unless they can prove they fall outside the IR35 category.
The reform of the legislation has been a touchy subject ever since it was announced by the then-chancellor George Osborne in the spring budget.
“At the budget, we committed to removing the tax benefits of disguised earnings for employees, and I am now going to do the same for the self-employed and employers, raising a further £630 million over the forecast period,” said Hammond.
Commenting on the move, Geoff Smith, managing director, Experis UK and Ireland, said he was concerned that the change in regulation would have an adverse impact on the IT sector.
“In an industry where organisations are already struggling to find the right talent, there is a serious risk of ‘brain drain’, whereby projects could be ground to a halt until they find individuals willing and able to work under the new regulations,” he said.
“In fact, we wouldn’t be surprised to see how such a change might encourage existing IT professionals to set their sights abroad to countries courting their talent in a post-Brexit world.”
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