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On Wednesday 22 November, chancellor Philip Hammond will give his second Budget statement. If he thought his previous Budget in July was tricky, then this one might look even more daunting.
He faces a dangerous combination of slowing growth, unhelpful revisions on productivity from the Office for Budgetary Responsibility, and a growing chorus against austerity from Conservative backbenchers. Balancing all these priorities will be no mean feat.
One problem looms over all others – how is business preparing for Brexit? Lack of progress in the Brexit negotiations means that many businesses are already planning for a “hard Brexit”.
Some will be preparing contingency plans to move activity overseas as early as the first quarter of 2018. But the problem for the chancellor is that it is very difficult to predict what the scale and impact of these business decisions will be.
Given the growing sense of concern, the chancellor urgently needs to use the Budget to give confidence to businesses, entrepreneurs and sought-after high-skilled workers that there is a long-term vision for the UK economy with technological innovation at its core.
TechUK’s Budget submission set out a number of areas where targeted measures could provide some of the vision and practical progress that tech businesses want.
From support to enable SMEs to digitise, to a clear commitment to helping our world-leading datacentres stay competitive, there are a range of things government can do to show that the UK will remain a great place for tech.
Early signs are encouraging. The announcement of significant additional public funding for research and development (R&D) meets one of TechUK’s most long-standing demands to make the UK a world leader in innovation.
This won’t happen overnight – but a clear roadmap for how the government can reach its target of spending 2.4% of GDP on R&D by 2027 will build confidence that the UK understands how it can drive future growth.
The £2.3bn boost in R&D spending due by 2020/2021 that has been trailed ahead of the Budget marks a positive downpayment towards meeting this crucial manifesto promise. The key will be whether the announcement is enough to reassure businesses that they too should be prepared to unlock R&D spending here in the UK.
Julian David, TechUK
Other early Budget announcements have also hit a number of measures that TechUK has been calling for since long before Theresa May took office.
Providing £100m to train new computer science teachers will help plug an immediate skills gap that is holding back our ability to inspire and train the workforce of the future.
Funding for artificial intelligence, next-generation 5G networks and driverless vehicles all signal an understanding of what the billion-dollar industries of the future will be.
Doing business with Europe
Further big announcements may, of course, be revealed on Budget day itself, and it remains to be seen whether the chancellor will have done enough to bring the roving eyes of tech investors and businesses back to the UK.
It is clear, however, that the government is going to have to work very hard pre- and post-Brexit to demonstrate that it is really committed to making the UK one of the best places in the world to locate, and build a dynamic tech business.
However, while the Budget provides the opportunity for government to give some much-needed certainty to business, the most important financial announcement is one unlikely to come from the chancellor on Wednesday – that is the bill the UK is prepared to pay the European Union (EU) to unlock Brexit talks on our future relationship and trade.
For UK tech businesses desperate to understand the terms on which they will be able to do business with Europe and the rest of the world, the sooner this is determined, the sooner they will have a basis from which they can plan for the future.
Read more about Budget 2017
- The 2017 Budget will include funding for artificial intelligence, driverless cars, 5G, digital skills and more computer science teachers.
- TechUK warns government that this week's Budget could be its last chance to give tech firms confidence in the post-Brexit UK economy.
- Fears over long-term growth and prosperity of UK datacentre market post-Brexit, without urgent government help on rising energy costs.