The March 2021 Budget provides an opportunity for the chancellor not only to continue to support those sectors hard hit by the pandemic, but also set out a plan for growth.
The tech sector has played a key role throughout the pandemic, from enabling office workers to transition quickly to remote working, to helping small businesses across the UK reach their customers when shops were closed. The tech sector will also be vital for economic recovery. Digital technology and innovation will be essential to drive the needed economic growth and productivity gains.
The best way to ensure a strong economic recovery is to prioritise tech-led growth across the whole of the UK.
Enabling tech-led growth means supporting the deployment of products and services from the UK’s digital sector across all businesses to increase productivity, resilience and adaptability. The road to rebalancing the nation’s finances – creating high-wage, high-skilled jobs and driving sectoral innovation – runs through encouraging productivity growth, for which technology adoption is history’s greatest tool.
As we saw during the pandemic, businesses that were able to use digital technology adapted to trading within social distancing restrictions more easily, growing eight times more than less digitally agile businesses. A strong focus on tech-led growth empowers the adoption of digital technologies, services and innovations by all sectors of the economy. This will be key as we seek to build a more resilient, productive and inclusive economy in a post-Covid-19 world.
But this kind of growth will not happen on its own. In this week’s Budget, chancellor Rishi Sunak can help deliver the benefits of tech-led growth by focusing on three key areas.
In the most recent spending review, the chancellor laid out his plans for a National Infrastructure Bank, which would help co-fund local infrastructure investments. It is essential that the bank must also invest in digital infrastructure, such as 5G and full-fibre broadband, or risk the UK falling behind on 5G, which could lead to a loss of more than £173bn of growth over the next decade.
Developing tech ecosystems outside of London and the South-East will be critical to the success of the “levelling-up” agenda. However, more than 70% of all current tech investment goes to London and the South-East.
At TechUK, we spoke with more than 260 business leaders from Scotland, Wales, Northern Ireland and four English regions to understand how tech can help with the recovery from the Covid-19 pandemic. We identified eight core needs for the development of local tech ecosystems: digital skills, digital adoption, data ecosystems, digital infrastructure, collaboration and coordination, finance and investment, research and development, and trade support. These eight needs describe the “local digital capital” needed to help grow tech ecosystems across the country.
Local digital capital
We will work closely with government to boost local digital capital across the country. However, two immediate actions that the chancellor can take to help tech ecosystems outside of London grow and flourish are to pioneer a GREAT-style campaign of UK investment roadshows to bring investors to see the tech hubs outside of London, and to review the UK’s funding system to provide more support to regional funding organisations and drive investment into ecosystems outside of London and the South-East.
Brexit presents many new opportunities, but it comes at the cost of increased trade barriers with key markets. As we move to conducting 100% of our trade through UK-negotiated free trade agreements and global rules, regtech is a key tool for many small companies to help them navigate trade barriers.
Businesses that have used online platforms to sell saw exports grow by more than 25% in the five years up to 2018-2019. A competitive market for regtech and trading platforms can therefore be a major asset to UK exporters.
However, we need to strike deals between our regulators and those of key markets, expand how we use sandboxes to help the development of new regtech products, and provide financial support for small businesses to drive up demand in the regtech market.
By doing these things as well as taking other targeted actions set out in our submission to the Treasury to encourage tech-led growth, the chancellor can achieve his aims of supporting the economy to continue to weather the storm of the pandemic, while also setting out a pathway to future prosperity.