Private sector IT buyers will see a long-term boost to their budgets after the Chancellor of the Exchequer, Jeremy Hunt, announced that a policy allowing the cost of IT equipment to be written off against tax will be made permanent.
The so-called “full expensing” policy was first announced as a short-term incentive in the Budget in March, but Hunt said in his autumn statement it will now be made a permanent measure. It means money spent on IT equipment, plant or machinery can be deducted from taxable profits for any organisation that pays corporation tax.
The UK IT sector is likely to benefit from a number of other announcements revealed by Hunt today (22 November).
Changes to research and development (R&D) tax credits will see more companies eligible to make claims supporting innovation. Two existing schemes, the current R&D Expenditure Credit and SME schemes will be merged from April 2024 onwards, and the government estimates that around 5,000 extra small businesses will qualify for an enhanced rate of relief. The changes are expected to offer £280m additional relief per year by 2028-29 to help drive innovation in the UK.
In support of previously announced moves to encourage UK pension funds to invest more in tech startups, the government will commit £250m to two successful bidders in the Long-term Investment for Technology and Science initiative. According to HM Treasury, “This will create new investment vehicles tailored to the needs of pension funds, generating over a billion pounds of investment from pension funds and other sources into UK science and technology companies.”
Two existing startup support schemes, the Enterprise Investment Scheme and Venture Capital Trusts, will also be extended to 2035.
To support the government’s ambitions in establishing the UK as a leader in artificial intelligence (AI), Hunt announced a further £500m over the next two years to help establish two more compute innovation centres, bringing total investment to more than £1.5bn. “These investments will allow researchers and SMEs to develop new foundation models and maximise the UK’s potential in AI, enabling, for example, the discovery of new drugs,” according to the Treasury’s full autumn statement report.
In support of the National Quantum Strategy, announced in March, the government has identified five “quantum missions” intended to achieve a series of specific outcomes to encourage further UK developments in this emerging technology area.
These missions aim to establish UK-based quantum computers supporting one trillion operations, by 2035; the world’s “most advanced quantum network”, also by 2035; and by 2030 allowing every NHS Trust to benefit from “quantum sensing-enabled solutions”; quantum navigation systems to be deployed on aircraft; and mobile, networked quantum sensors that can “unlock new situational awareness capabilities” in the transport, telecoms, energy and defence sectors.
“Creating the UK’s own quantum computing infrastructure is key to our future on the world stage,” said Rashik Parmar, chief executive of BCS, The Chartered Institute for IT. “Quantum computing needs to be embedded across businesses and driven forward by many more highly skilled computing graduates and apprentices.”
To boost skills, Hunt also announced funding of £50m over the next two years to pilot ways to increase the number of apprentices in engineering and other key growth sectors. He also revealed three additional investment zones – in addition to the 12 announced in March – focused on advanced manufacturing in the West Midlands, East Midlands and Greater Manchester.
“Together, local partners expect these will help catalyse over £3.4bn of private investment and 65,000 new jobs,” said Hunt.
The government has accepted the recommendations of a review by its chief scientific adviser, professor Angela McLean, to encourage pro-innovation regulation so that industry regulators, such as communications watchdog Ofcom, can “adapt to enable the safe and rapid introduction of beneficial emerging technologies” more easily.
A consultation has been launched to evaluate methods for “smarter regulation” by Ofcom and other industry regulators such as Ofgem and Ofwat, aiming to reduce the regulatory burden on businesses and encourage investment and innovation.
The government also published its Future of payments review report alongside the autumn statement, which looks to build on developments in open banking and the UK’s leadership in the fintech sector to improve the use of digital payments. The report calls for a National Payments Vision and Strategy to create a “world-leading payments environment”.
A £960m Green Industries Growth Accelerator fund will look to support emerging technologies in clean energy and the transition to net-zero.
“The best universities, the cleverest scientists and the smartest entrepreneurs have given us Europe’s most innovative economy,” said Hunt in his speech to the House of Commons.
“This autumn statement for growth will attract £20bn of additional business investment a year in the next decade, bring tens of thousands more people into work and support our fastest-growing industries.”
Responding to the chancellor’s statement, Julian David, CEO of trade body TechUK, said the package of measures relating to the tech sector was “bigger than many expected”.
“This statement has significant potential to boost investment from the tech sector. However, with low growth forecasts, there is no room for mistakes and no time to lose. The government needs to work at pace alongside the tech sector to put these policies into action and get growth going,” said David.