The UK’s 2023 Spring Budget has been criticised by start-ups and the wider UK tech industry claiming it “underdelivers for the UK tech sector.”
UK chancellor, Jeremy Hunt, laid out the government’s plans for the UK economy in parliament today (15th March, 2023) which included large investments into the UK’s tech sector. Research and development (R&D) funding and tax support, targeted tech investment into 12 regions of the UK, and an artificial intelligence technology sandbox that aims to boost investment in start-ups, were all unveiled in the chancellor’s plan for the coming year.
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Arne Morteani, partner at UK venture capital firm Kiko Ventures, welcomed the government’s partial reversal of significant cuts to R&D tax credits from last autumn’s statement. “Those companies that spend over 40% on R&D can get back 27p on the pound. As we have said for some time, bringing innovation to existing technology at scale requires a lot of capital and measures like this do help,” says Morteani.
However, while insiders have welcomed more investment into the sector, some have slammed the chancellor’s Spring Budget for its lack of strategy and called for a more focused approach to supporting start-ups.
“This is a muddled budget that underdelivers for the UK tech sector,” Ekaterina Almasque, general partner at venture capital firm OpenOcean, told Verdict.
“The introduction of new R&D tax support is certainly welcome, but many SMEs in the tech sector will still be left out in the cold.
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By GlobalData“Whilst billions in funding for quantum computing and AI will certainly boost research in the area, many SMEs may still struggle to compete with larger corporates for the lion’s share of the benefits.”
Collapse of Tech Nation and Silicon Valley Bank has left start-ups needing reassurance
The collapse of Silicon Valley Bank (SVB), the world’s leading bank for venture capitalists and start-ups, as well as Tech Nation, a government-backed incubator, has created deep uncertainty within the UK start-up community.
“I am disappointed not to see more measures announced to support the UK’s start-up and tech sectors, which are facing multiple challenges and uncertainties in the current climate,” Ahmad Al Khatib, CEO of UK start-up software platform, Qudo, told Verdict.
“One of the biggest shocks for the tech industry was the collapse of SVB, one of the leading banks for start-ups and venture capital firms,” he added.
Khatib says this has created a “sense of insecurity and distrust” among tech businesses and investors – especially those who relied on SVB for their financial needs.
“The government and other banks need to step up their communication and reassurance efforts to restore confidence and stability in the system,” said Khatib.
In addition to the collapse of SVB, the announcement that the UK government has withdrawn funding for non-profit industry organisation, Tech Nation, has left start-ups needing more reassurance and strategy from government.
The government-backed tech incubator was responsible for the development of some of the UK’s biggest companies, including Deliveroo, Monzo, and Ocado.
In January, the government awarded £12m to Barclays Eagle Labs, instead of renewing Tech Nation’s funding. Tech Nation will cease operations at the end of March 2023 due to lack of funding.
“Without Tech Nation’s support, many start-ups may struggle to access funding, talent, mentoring and markets,” Khatib told Verdict.
He continued: “The tech sector is one of the most innovative and dynamic sectors in the UK economy, contributing over $1tn globally.
“The government should recognise this potential and invest more in fostering a vibrant and diverse tech ecosystem.”
GlobalData is the parent company of Verdict and its sister publications.
