Technology wins, entrepreneurship loses in UK budget

Brid-Aine Parnell

Monday 15 May 2017

UK chancellor announces millions for 5G, robotics, artificial intelligence, biotech and developing research talent, but the government is looking for ways to tax self-starters and the digital economy.

The UK government’s recent budget announced millions in funding for “disruptive technologies” and future innovations, but did little to encourage entrepreneurship.

While the headlines were dominated by UK Chancellor Philip Hammond’s decision to raise National Insurance (NI) Contributions for the self-employed – and his embarrassing U-turn on that point a few days later – the 2017 Spring Budget contained some pleasant reading for the tech industry.

Top of the government’s list is research funding to boost disruptive new technologies like robotics, artificial intelligence, driverless cars and biotech, closely followed by an injection of cash to get Britain on the road to a 5G network and investment in STEM talent.

DARPA UK

The Industrial Strategy Challenge Fund (ISCF) was first announced in the UK’s Autumn Statement last year, but no figures were given. The fund has been likened to a British version of the US’s DARPA (Defense Advanced Research Projects Agency), with a similar aim of pushing the frontiers of science and technology.

Hammond has allocated an initial investment of £270m to get things started and, after consultation with academics and industry, is aiming for all the big tech challenges out there.

The fund will develop new medicine manufacturing technologies and build batteries that can power electric cars, as well as focus on “cutting-edge artificial intelligence and robotics systems that will operate in extreme and hazardous environments, including offshore energy, nuclear energy, space and deep mining”.

Going full fibre

The government is also devoting hundreds of millions to improving network infrastructure in the country. A relatively small £16m pot will go towards an innovation hub that’s going to start testing 5G ideas in a public-private partnership, with more money promised down the road.

In the meantime, the Digital Infrastructure Investment Fund will be launched shortly, with government investment of £400m to be at least matched by private sector investors, aimed at deploying full-fibre networks across the country.

Coming down the pipeline

Finally, there’s some good news for employers worried about the tech pipeline. A £250m portion of the National Productivity Investment Fund has been set aside to create homegrown research talent. In practice, that will mean £90m for an extra 1000 PhD places “in areas aligned with the industrial strategy”, which translates to mostly STEM subjects. And £160m for new fellowships for early and mid-career researchers in the same fields.

For obvious reasons, the budget didn’t directly reference fears about the potential loss of European tech talent in the wake of the recently started Brexit process, but it did promise money towards attracting “the brightest minds to the UK”.

Over four years, Britain will invest £100m, half towards fellowship programmes to attract global talent and the other half for fellowships specifically aimed at researchers from emerging research powerhouses like India, China, Brazil and Mexico.

Taxing entrepreneurship

However, despite appearing to cheer on the digital economy, the budget also sought ways to tax it further. The so-called ‘digital tax’ has been postponed for another year, but Hammond has said that the government needs to find a better way of taxing the digital economy than business rates.

The announced NIC raise for the self-employed would have affected a wide range of industries, including tech, but was so roundly criticised, the government has since given up on it. However, plans are going ahead for IR35 changes, which will force employers using contractors to deduct tax and National Insurance at source.

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