How the 2021 Chancellor's Budget affects the UK tech industry

Chancellor Rishi Sunak unveiled his budget today, with coronavirus still at top of the agenda. He also pledged to invest in clean tech and help SMBs take advantage of the digital revolution.

As the UK continues to grapple with the coronavirus pandemic, the country faces the worst recession in 300 years. With that backdrop, Chancellor of the Exchequer Rishi Sunak offered up a budget that envisions £1.05 trillion in public sector spending, including about £407 billion to help the nation manage the COVID-19 outbreak and efforts to help small business digital transformation.

Details in the document break down the categories for spending.

UK budget expenditures Office for Budget Responsibility and HM Treasury calculations

The budget envisions a variety of initiatives aimed at the tech industry, including efforts to help small businesses solidify recent digital moves; investments in green technology and other climate change initiatives; and visa changes set for 2022 aimed at boosting the tech sector — especially fintech.

Here's what the government announced, and how it is set to impact the UK technology industry.

The ongoing pandemic response

Not surprisingly, the biggest budget priority is on continued support for people impacted by COVID-19, with Sunak acknowledging “what was originally thought to be a temporary way of life has fundamentally altered it.”

Research has shown that tech jobs have been relatively resilient over the past 12 months, with the ONS reporting in February that more than 100,000 tech jobs have been created since the start of the pandemic. Other industries, including hospitality and events, weren't so fortunate. Sunak said around 700,000 people in the UK have lost their jobs since March 2020.

“The damage coronavirus has had on our economy has been acute,” he said.

The Chancellor’s three-point plan closely mimics the one set out last year, with furlough extended until September and no changes to access. Sunak said that as business start to re-open this summer, companies will be expected to contribute to the scheme alongside the taxpayer, paying in 10% in July and 20% in August and September.

One of the biggest criticisms the government has faced regarding its coronavirus response was that three million self-employed workers were left without financial support. Sunak confirmed that the self-employed support scheme will also be extended, with a fourth grant covering February-April, and a fifth covering August-September. He said that 600,000 self-employed people who had previously been ineligible for the original scheme will now have access to these final two grants.

The £20 a week uplift to Universal Credit will remain in place for the next six months, paid in the form of a one-off £500 payment. Minimum wage will increase to £8.91 an hour from April.

Help for SMBs to grow their digital efforts

“Many businesses have moved online during the pandemic," Sunak said. "It’s been a challenge, but they want to turn it into opportunity.” As a result, the budget envisions a "Help to Grow: Digital" scheme that will offer small businesses free, impartial advice on “how technology can boost their performance through a new online platform.”

Beginning this fall, eligible businesses will be able to get a 50% discount on the purchase of approved software, worth up to £5,000. Software that helps to build customer relationships and increase sales, allows companies to improve their online selling, and manage their accounts and finances digitally, will all be included.

Not everyone believes the effort goes far enough. Kevin Hanegan, chief learning officer at Qlik said that while he welcomes the focus on growing digital skills, providing in-company training to SMBs doesn’t go far enough to solve the skills gap.

“With digital strategies at the forefront of business plans, demand for employees with digital and data skills is only increasing and is changing the face of the labour market,” Hanegan said. “Those that have spent the pandemic on furlough without support to improve their skills in these key areas may find their role has fundamentally changed when they return to work and may struggle to catch up.”

While the budget clearly recognises digital acceleration will be key to the prosperity of many organisations in the post-pandemic economy, the government needs to do more to get businesses to prioritise upskilling employees.

Investing in green industries

In its 2019 manifesto, the Conservative party pledged to make the UK carbon neutral by 2050. There has long been concern from climate campaigners that having left the European Union, a Conversative government would not align its climate change targets with those set out by the EU.

Despite those concerns, green economy provisions do feature in the new budget, with a Net Zero Innovation Fund seen as away to help transition Scotland away from oil and gas.

Sunak said the government has “a real commitment to green growth”, with the newly announced Net Zero Innovation Portfolio of finance totalling £1 billion and funding allocated on a competitive basis to sectors including long-duration energy storage; floating offshore wind; biomass; and regenerative agriculture.

The Chancellor also committed a further £375 million for a new Future Fund: Breakthrough scheme which will work with the private sector to invest in “high-growth, innovative UK firms," including those in clean tech.

Tech talent visa changes

Immigration has long been a hot-button topic for the Conservative party, which pledged to introduce an “Australian-style points-based immigration system” during the 2019 election campaign. (Many tech industry leaders warned that reforming immigration could have serious consequences, especially for businesses that typically recruit workers from both the UK and abroad.)

Today’s budget includes “reforms to the immigration system [to] help ambitious UK businesses attract the brightest and best international talent." Beginning in March 2022, an elite points-based visa will be introduced. It will include a ‘scaleup’ stream, enabling those with a job offer from a recognised UK scale-up to qualify for a fast-track visa. The scheme is recommended in the recent Kalifa Review of UK fintech and although the new visa is aimed at boosting tech generally, the ever-growing UK fintech sector is set to benefit the most.

Applicants will no longer need to obtain a "third-party endorsement" or be backed by a sponsor organisation, simplifying the current rules and making it easier for researchers, engineers, and scientists to come to the UK.

Rafa Plantier, head of UK and Ireland at open banking platform Tink said that the new visa presents a “golden opportunity” for the UK to continue to lead in fintech and keep encouraging “entrepreneurialism, investment and growth.”

“It’s vital that not only should the UK have access to people with the right technical skills, but also to those who have spent time with ambitious, rapid growth businesses from around the world,” he said.

Contactless payment increase

With cash payments rapidly decreasing during the pandemic due to health concerns and with a significant uptake in online shopping, the Treasury has decided to increase the contactless payment limit to £100, a sharp rise from the £30 limit that existed at the start of the pandemic.

Despite the increase, regulators say businesses could still decide for themselves whether to accept the higher limit.

"As we begin to open the UK economy and people return to the High Street, the contactless limit increase will make it easier than ever before for people to pay for their shopping, providing a welcome boost to retail that will protect jobs and drive growth," Sunak said.

Copyright © 2021 IDG Communications, Inc.

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