4 key channel takeaways from yesterday's budget

Chancellor's Spring package brought hope of higher IT spending in defence but left SMBs feeling short changed

Jeremy Hunt's Spring budget may have been branded a relatively quiet one, but that doesn't mean it won't have implications for the UK IT channel.

Here we round up some of the key takeaways for CRN's audience of vendors, distributors and IT solutions providers (for what Hunt said about tech, specifically, see here)…

IT investment in defence sector could rise

Alongside childcare, defence emerged as the big winner from the Spring Budget as Hunt signalled that MoD spending will rise by £11bn over five years (to hit 2.5 per cent of GDP).

According to GlobalData, ICT spending by the MoD has fallen by 5.8 per cent annually since 2016-17.

But GlobalData service director, Robert Stoneman, said that the measures outlined yesterday "will likely mean a small boost to defence-related ICT investment over the coming years".

SMBs ‘short-changed'

Yesterday's Budget left SMBs in the channel and elsewhere feeling "short-changed", according to non-profit body the Federation for Small Businesses (FSB).

While big business and households were rewarded, the UK's 5.5 million small businesses received a "distinct lack of support", it claimed.

"We've got a Budget that on energy helps households but not small firms," FSB national chair Martin McTague said.

"On business taxes, it spends £27bn extra on big businesses, arguing that small businesses are already catered for. This will leave to a feeling of being left behind instead of being considered equal partners in economic recovery - trickledown economics here simply does not work."

Although there was relief as it emerged the UK will avoid a technical recession this year, small businesses need more ambition and focus, McTague added.

"Action is what counts if we are to reverse the 500,000 small businesses lost over the last two years," he said.

But R&D tax credit concession could help tech sector

Hunt earned the ire of the tech sector in the Autumn when he slashed the R&D tax credits on offer for SMBs.

In yesterday's Budget, the Chancellor softened the blow somewhat by offering R&D-intensive start-ups (ie, those that spend 40 per cent or more of their outgoings on R&D) a 27 per cent tax credit.

This was welcomed by David Ovens, joint managing director of business angel syndicate Archangels (pictured above).

"These credits will continue to play an important role as a source of cash for early stage, often loss-making, companies, particularly in the technology and life science sectors," he said.

"Combined with the government's plan, unveiled last week, to make the UK a beacon of science, technology, and innovation, there are promising signs that our policy makers are beginning to realise the potential of these sectors to our prospects for economic growth."

The FSB's McTague agreed that the enhanced R&D tax credit is a "significant step forwards towards promoting innovation", while noting that a large proportion of SMBs would fall outside the 40 per cent intensity threshold.

UK's tech superpower ambitions welcomed

Tech watchers welcomed Spring Budget measures aimed at supporting the UK tech industry.

This includes a £900m exascale supercomputer, a £1m annual AI prize and quantum investments.

"Today's budget is a positive indication of the UK government's commitment to becoming a Science and Technology Superpower," said Gerard Grech, CEO of tech entrepreneur ‘network' Tech Nation (pictured above).

Grech praised the government's intervention in the sale of Silicon Valley Bank's UK arm earlier this week as "a shining example of what can be achieved through collaboration between the private and public sector and a clear vision".

"As a nation uniquely positioned between two economic powerhouses, the US and the EU, we must harness innovative regulation that will enable us to propel ourselves as an international hub and leader for AI, Quantum Computing, and Deep Tech," he said.

"This is a critical step towards creating a distinctive, value-driven tech ecosystem in the UK, setting us apart from other tech hubs."

Rob Anderson, research director for Central Government and GlobalData, however, branded it a "quiet budget when it comes to digital technology priorities", adding that Hunt's response to Sir Patrick Vallance's 'Pro-Innovation Regulation and Technologies Review' was "light on detail, with few new commitments".