Chancellor Philip Hammond has just given his Spring Statement to the House of Commons, sandwiched between the ongoing Brexit debate.
He started by cutting growth forecasts for the year to 1.2% but said that borrowing this year it will be 1.1% of GDP, £3bn lower than forecast at the Autumn Budget. He also said that assuming a Brexit deal is agreed and uncertainty lifted, he will launch a “full three-year spending review” before the summer break.
While there won’t be much in the Spring Statement that comes as a surprise for the tech sector, Hammond did comment on the six month review of the sector published today, concluding that tech giants such as Google and Facebook should face greater competition.
He said that initially he will ask the Competition and Markets Authority to undertake a market study of the digital advertising market as soon as possible. “The UK will remain a great place to do digital business… but it will be a place where successful global tech giants pay their fair share… where competition policy works in consumers’ interests… and where the public are protected from online harms,” he said.
Ruth Manielevitch, VP global business development at Taptica, said: “The UK government is under more pressure than ever to control the power of the big tech giants.
“Since GDPR came into force, there has been a number of high profile fines for both Google and Facebook, as concerns grow among consumers over the use of data and their privacy online. With this in mind, there is a growing appetite for regulation of the big tech giants.
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“We’ve seen that self-regulation does not work, and enormous fines can seem redundant when taking into consideration the huge scale of these businesses and their various revenue streams.
“In order to regulate big tech, the UK government should introduce a regulatory watchdog. This could be introduced in the form of an ombudsman, which already exists in the UK for other industries, with the responsibility to protect consumers and keep unfair practices in check.”
The 2018 Budget included additional support for cutting-edge science and technologies that the Chancellor said will transform the economy, create highly skilled jobs, and boost living standards across the UK. Today the Chancellor committed to funding the Joint European Torus programme in Oxfordshire as a wholly UK asset in the event the Commission does not renew the contract, giving the experts working at the facility certainty to continue their ground-breaking fusion energy research.
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He also invested £81m in Extreme Photonics (state-of-the-art laser technology) at the UK’s cutting-edge facility in Oxfordshire; committed £45m for Bioinformatics research in Cambridge; and announced £79m funding for a new supercomputer in Edinburgh – five times faster than existing capabilities – whose processing power will “contribute to discoveries in medicine, climate science and aerospace, and build on previous British breakthroughs including targeted treatments for arthritis and HIV”.
Tim Mills, management director of the Angel CoFund, welcomed this focus on tech. He said: “Regardless of what happens next in the Brexit process, innovation in science and technology has always been a fundamental pillar of the UK economy and is likely to be more important than ever before going forward.
“The funding for scientific research that the Treasury has promised as part of the Industrial Strategy will go towards state-of-the-art laser technology, supercomputers, medical breakthroughs and more. What is important to remember is that each of these is pushing a frontier that British businesses can then capitalise on the create new, cutting-edge products and technologies that will allow the UK to continue complete on the world stage.
“What’s also significant is that these funds are not just localised to London. In the absence of EU funding, it is more important than ever for investment to be evenly spread throughout the UK, to stimulate economic development throughout the country. Increased investment into R&D and measures like exempting PHD positions from visa caps will result in long-term returns for the UK, in terms of productivity, wages and jobs.”
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Peter Finnie, partner at IP law firm Gill Jennings & Every LLP, agreed but said we mustn’t get too far ahead of ourselves. “While the announcement of a £200m government injection into UK innovation appears promising for the science and technology sectors, in the wake of Brexit the funding hasn’t yet been packaged up with all the detail that will encourage R&D,” he said.
“While it’s promising to see the EU Framework Programme funding and grants mirrored by the UK government, we shouldn’t get ahead of ourselves until we see that the existing funding is matched or even exceeded.
“It is important that this cash injection from the Treasury into scientific research is rewarded with a return of investment for the UK economy. For this to happen, some of the funding needs to be directed towards converting pure research into commercial products and new tech enterprises. Joint development with industry should be encouraged to ensure that commercial opportunities are realised as much as possible.”
Of course, nothing could be said without caveats about the impact of Brexit. Djalal Lougouev, CPO and co-founder of Ometria, said: “With MPs yet to agree upon a Brexit deal and the vote to prevent a no deal set for tonight, the technology community, particularly tech startups and SMEs, will continue to be cautious while economic uncertainty is still rife.
“The UK tech sector continues to grow and is currently expanding 2.5 times faster than the overall economy. The UK also remains Europe’s primary investment destination for venture capitalists, showing that even during slow economic periods and uncertainty this country is still a fertile environment for business. However, the government’s proposed ‘digital tax’ on online retail is perplexing.
“The government should focus on encouraging growth rather than punishing the most innovative businesses for offering customers convenient ways of shopping. In a digital world, this only serves to pander to the old standards of bricks and mortar retail that aren’t resonating with consumers like they used to.
“The government’s focus in the Spring Statement today should have been on retaining the UK’s status as a hotbed for innovative tech businesses – especially in AI – so as to continue encouraging investment in the future.
“My real concern though is that Brexit may disrupt how businesses process data. I welcome the Chancellor’s announcement that the government intends to allow consumers to have more control of their data, recognising that there will be a consumer backlash against huge companies owning and controlling that data, but I fear it’s a distraction from the real issues we have at hand.
“I can’t overstate the impact Brexit may have on innovation. Cross-border data flows are the single most important way we as a nation can continue to innovate and compete on a global stage. With 75% of our data flows coming from EU countries and services accounting for 44% of our exports, data is a vital currency for modern business, and without freedom of data movement the UK won’t be the tech hub the government wants the country to be.”
David Blair, global CEO of FITCH, believes the government needs to focus on encouraging business growth and development over the long-term. He said: “With Britain’s exit from the EU just a fortnight away, we’re faced with concern over the economic health of the nation with ‘No-Deal’ still hanging over us. We can blame Brexit all we like for the bleak outlook, but for stable economic growth the government needs to focus on long-term measures which encourage investment and innovation in this country.
“We’ve already seen big brands like Nissan, Dyson and Sony up sticks and move all or parts of their operations out of the UK in order to futureproof their businesses. What is the government doing to create an infrastructure that encourages progress and growth in the UK beyond Brexit?
“The reason companies are moving operations East is because emerging markets provide an inspiring technological framework for forward-thinking businesses to operate in. The government had the option to use Brexit as an opportunity to shape Britain as a global economic powerhouse, with grand ambitions befitting a nation that produced the likes of Isambard Kingdom Brunel. Instead, it opted for the kind of compromise, fear and general incompetence that has become ‘business as usual’ for Western governments.
“When it comes to innovation, emerging markets provide the framework we should be applying for Britain’s emerging brands.”