What does UK tech want from the 2023 Autumn Statement?
On Wednesday the chancellor will deliver the 2023 Autumn Statement. The UK tech sector will be watching closely for measures supporting business growth following a year of challenging economic headwinds.
Many tech-focused budget details have already been revealed. They include new funding for quantum computing, the publication of the spinouts review, a US-inspired tech VC fellowship scheme, and action on pension reforms.
But what else does UK tech want Jeremy Hunt to announce in this year’s Autumn Statement?
Fixing R&D tax credits
The overwhelming message from tech startups is for the Treasury to fix the R&D tax credits scheme. The scheme, which was first introduced in 2000, allows startups to offset some of the costs for research and development by claiming some of that expenditure back in tax relief.
However, the chancellor slashed the effective rate of that tax relief in last year’s Autumn Statement, with the new regime taking effect from April. The Treasury says the new scheme is designed to crackdown on fraudulent claims, but startups say they could lose out by an average of £100,000 per year.
“We strongly urge the government to consider a permanent tax break for R&D-heavy businesses,” said Priya Oberoi, general partner at investment firm Goddess Gaia Ventures.
“This is particularly critical for health tech companies where the road to commercialisation is long. The UK is a great place to start a healthcare business because of its favourable regulatory environment but these businesses need sustaining through the early years and tax breaks are one of the most helpful and impactful ways to do that.”
Andriy Dovbenko, principal and founder of UK-Ukraine TechExchange, said R&D is the “core pillar of any tech company”.
He added: “Many startups have groundbreaking ideas but need more funding to help them get up and running and scale. Greater investment, particularly for R&D, and more programmes that focus on governmental support for startups are always welcomed – especially when this can be utilised by defence tech companies.”
Writing for UKTN, Dom Hallas, executive director of lobby group the Startup Coalition, said there are options to fix the scheme.
According to Hallas, lowering the threshold for R&D intensity – a measure introduced in response to previous pushback – would “allow more scaling businesses to access the extra support they need”.
Ralph Rogge, CEO and founder, Crezco, said: “Increasing R&D tax relief, or expanding the scope of qualifying expenditure, should be top of the agenda. If the UK hopes to become a science and tech ‘superpower’, businesses need to be able to properly invest in technology and innovation.”
Sunset clause extension for EIS and VCTs
Last year, Hunt extended the Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS) to 2025.
Both are government-backed schemes that give tax breaks to startups and investors during the early-stage of a venture.
The so-called ‘sunset clause’ survived the ill-fated Liz Truss mini-budget, but some want to see it extended again – or removed altogether.
“For almost three decades, VCTs and EIS have been instrumental in funding UK growth,” said Seb Wallace, investment director at Triple Point Ventures. “We need to see an extension of the ‘sunset clause’, or a removal of the clause altogether, in the upcoming Autumn Statement.
“By doing so, we’ll ensure the UK continues to attract the best and brightest entrepreneurs, and remains at the forefront of global innovation, for years to come.”
Pension fund reform
Earlier this year, the chancellor announced the Mansion House reforms, a plan to channel more money from pension funds into high-growth tech companies.
The move was well received by the UK tech sector and on Tuesday a fresh wave of VC firms signed up to the compact.
Hunt is expected to share more details on the pension reforms in the 2023 Autumn Statement.
“UK pensions are a source of untapped wealth, and using this capital for investment could fund AI companies,” said Dr James Clough, CTO and co-founder of Robin AI. “These successes would in turn generate better returns for the country’s ageing population.”
Climate commitments
In September, Prime Minister Rishi Sunak controversially pushed back a ban on new petrol and diesel vehicles to 2035 in a slew of changes that investors have said will “undermine” the UK’s net zero targets.
Some quarters of the UK tech sector would like to see measures in the 2023 Autumn Statement that show a commitment to tackling the climate emergency.
“We’d love to see a significant shift in the government’s understanding of the long-term economic benefits of addressing the climate emergency,” said Diane Gilpin, CEO of Smart Green Shipping.
“Particularly in maritime where we’ve got tangible legacy – domestic skills together with the greening of the global fleet is a massive wealth-generating opportunity for the UK.”
Sebastian Peck, managing partner of KOMPAS VC, suggested the UK adopt regulations similar to the CO2 targets for new buildings adopted by Denmark.
“It forces the industry to be creative and invent new construction methods and materials to work within the constraints thus set.”