Phillip Hammond, the chancellor of the exchequer, delivered the Spring Budget outlining a series of measures which will undoubtedly impact UK technology businesses.
Although Hammond failed to make any meaningful mention of Brexit, he stated there was no room for complacency if he was to build on the government’s ambition to make the UK the best place in the world to start and grow a business.
“As we start our negotiations to exit the European Union, this Budget takes forward our plan to prepare Britain for a brighter future,” Hammond said, adding that it would continue the task of “getting Britain back to living within its means”.
“As a business owner and one who is looking to move offices in 2017, I was most interested in any news that might add some more certainty, confidence and maybe even some extra support for UK scaleups. However, there wasn’t much to cheer,” the entrepreneur said.
During his speech, Hammond addressed the fact that business rates raised a total of £25bn per year, all of which would be used to fund local government by 2020. With this in mind, the chancellor said the rates could not be abolished, but he conceded the government should, in the medium-term, find a better way of taxing the digital economy.
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“The business rates debacle wasn’t really given any extra clarity and this seems to penalise scaleups more than anyone else,” Hill commented.
Alluding to the government’s plans to introduce a £1,000 business rate discount for public houses with a rateable value of up to £100,000, Hill said he failed to understand why these types of businesses had been given special treatment over other UK ventures.
“I am fully in favour of supporting the UK high street, not 100% sure why local pubs (as much as I love them) got special attention,” Hill added.
“[Economic] growth is welcome, but what the UK really needs right now is a stronger foundation to drive more certainty.”
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Ed Molyneux, CEO and co-founder of FreeAgent, welcomed the news that digital tax would be delayed for another year, explaining how postponing the change would enable businesses to smoothly switch over to the new system.
Beyond this, however, Molyneux failed to see how the Budget could be considered positive for the UK’s SME sector.
“There is little else in the Budget for the micro-business sector to be positive about. In particular, the decisions to raise National Insurance and to cut the dividend allowance will be potentially devastating for freelancers and contractors across the UK,” he claimed.
Molyneux, whose Edinburgh-based firm floated on AIM in November last year, also condemned the decision to go ahead with changes to the IR35 (a set of tax rules that apply to individuals who work for a client through an intermediary).
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“It’s also disappointing to see that there has been no u-turn over the forthcoming reform to IR35, which as of April 6th will see public sector employers having to deduct tax and national insurance contributions from contractors’ pay at source, rather than allowing them to defer and claim expenses,” the CEO noted.
Overall, Molyneux said he was increasingly worried about the way in which the UK government was targeting self-employed workers.
“It is very unfair to position freelancers and contractors as not being on a level playing field with those who are employed. These business owners have none of the employment rights or the security that employed workers do and there must be some recognition for that – unless they want to cripple this very important and growing part of the UK economy,” he concluded.
Investment in 5G
The chancellor also elaborated on the government’s 5G Strategy, which seeks to set out the steps for the country to become a world leader in mobile technology and will see the government spend a maxium of £16m on a new facility to trial the improved mobile signal network.
Raj Samani, CTO of Intel Security, shared his concerns:
“Exciting as this may be, I’m also extremely concerned. Yes, 5G means we’ll see faster and greater levels of data transferred across networks, but with this comes a great security risk.”
“Security must be built in from the start,” he added.
Stuart Orr, an advisory partner at multinational professional services firm EY, was far more positive about the potential impact the government’s support would have on the country’s technology sector.
“The investment in 5G mobile technology is an important step to ushering in speeds that are up to 12 times faster than 4G, with the key benefit being the reduction of latency times or lag on the network,” he said, highlighting improved connectivity could help driverless cars become ubiquitous.
The unmanned vehicles, Orr added, require high-speed networks and very low latency to enable key decisions and actions to be made rapidly.
“This news will be cheered by investors in that technology. It is also important to remember that for 5G to be a real success key players from across the industry will need to collaborate closely together,” he said.
Stuart Lucas, Co-CEO of Asset Match, an online marketplace for private UK firms, was also disappointed with the Budget.
“The Chancellor made it clear in November last year that he intends for the new Autumn Budget to become the stand-out fiscal statement on the political calendar. When combined with Hammond’s clear desire to not rock the boat too much prior to Brexit negotiations kicking off in the coming weeks and we were left with a largely unremarkable announcement.
“While investments into infrastructure, disruptive technologies and skill-development were positive, I think we can expect a far more expansive range of reforms and policies to be unveiled later in the year, which will hopefully provide additional support to the UK’s world-renowned tech sector,” Lucas added.
Fraser Bell, CRO of global network provider BSO called for more to be done to help UK businesses remain competitive in the global economy.
“From the Internet of Things to the always-on culture, our lives continue to be transformed by technological advancements. However, it is easy to forget that without solid infrastructure and actual fibre cables underpinning this tech innovation – the ecosystem would collapse.
If UK business are to compete with tech leaders such as the US, Japan and Finland, further investment is needed in the digital infrastructure layer on which our modern world is built,” said Bell.
Despite the Budget’s lack of significant focus on Brexit, the UK’s imminent departure from the European Union was on Gordon Harris’ mind.
The partner at international law firm Gowling WLG said: “Obviously any support for innovation is always welcome. The UK can no longer be considered a major manufacturing economy, so if it is to thrive in a post-Brexit world the focus must be on a knowledge and service based economy. Funds to support young innovative business and creative SMEs are a welcome boost.”
But for all of this to happen, Harris said it was important for the financial incentive for innovation to be supported by strong intellectual property protection.