March 2021 Budget – A significant budget for the UK’s digital economy
The Chancellor began the March 2021 Budget by laying out his three primary aims:
- To protect people and jobs,
- To fix public finances once the economy is on the way to recovery,
- To begin the work of building the future economy.
These aims come against a difficult but improving economic background. The Office for Budget Responsibility (OBR) latest forecast predicted that the UK’s economy will return to pre-COVID-19 levels by the middle of 2022, significantly faster their previous forecast from November 2020.
The budget contained some key announcements for the UK’s tech sector that are very welcome. Including many initiatives that techUK has been calling for.
A ‘Help to Grow’ scheme, announced shortly before the budget, the scheme has two components – one focusing on helping SMEs adopt digital tech and services and use them effectively, and the other aimed at providing SMEs with MBA-style training to boost innovation and future growth. The scheme is due to start in the autumn. You can see further details from techUK details—here and from the Government here, including an option for SMEs register interest in the scheme.
There were announcements on new fast-track visa schemes for top talent, the expansion of existing visa programmes to encourage scale-ups and entrepreneurs, and the significant increases in financial support for apprenticeships and traineeships, all of which are very welcome.
The government is providing an additional £126 million in England for high-quality traineeships for 16–24-year-olds in the 2021/2022 academic year – employers who provide work experience will be funded at a rate of £1,000 per trainee. The government has also extended the apprenticeship scheme and increased the payments for employers who hire new apprentices. Those who hire new apprentices between 1 April 2021 and 30 September 2021 will get £3,000 per new hire, double the amount previously. The government is also introducing a £7 million fund to help employers in England set up and expand portable apprenticeships, to help those who may need to work across multiple projects with different employers.
Incentives for investment the National Infrastructure Bank, with a specific digital remit; a broader review of R&D tax credits; a new ‘Future Fund Breakthrough’, and the newly announced “super deduction” will do much to drive further investment.
Data centre operators will be relieved to see techUK's suggestions about the management of red diesel adopted by the Chancellor in the Budget.
There were also some very important announcements that will affect the wider UK economy, including (among many more):
- The extension of the furlough scheme and existing support for the self-employed and those on universal credit until the end of September 2021.
- The rise of corporation tax from 19% to 25%, taking effect in April 2023 with progressive rates for companies with profits less than £50,000 paying the lower 19% rate, tapering up to the full 25% once profits exceed £250,000.
- New recovery loan schemes accessible to businesses of all sizes, with loans ranging from £25,000 to £10 million, with the government providing an 80% guarantee to lenders.
- Extension of the business rates holiday until the end of June, with a discount until the end of the year; an extension of the VAT rate reduction for hospitality and tourism for the next six months; cancelled rise in fuel and alcohol duties; and the continuation of the stamp duty nil rate band until the end of June.
Responding to the Budget, techUK Julian David said:
“Today’s Budget is a significant intervention from the Chancellor that not only includes further support for sectors hard hit by the impact of COVID-19 but also addresses the urgent need to drive business investment which will be critical for rebuilding the UK economy in the aftermath of COVID-19.
techUK particularly welcomes the creation of ‘Help to Grow: Digital’; this scheme, which we called for, will help thousands of SMEs to upgrade their capabilities and create new highly skilled jobs across the UK. Research by techUK and our members have shown that this kind of support is in high demand and we stand ready to do our part to ensure this scheme is delivered successfully.
The Chancellor has also listened to calls from the tech sector to enable the best and brightest talent to come to the UK through a new fast track visa scheme as well as supporting domestic retraining with additional financial support for both apprenticeships and traineeships.
The creation of a National Infrastructure Bank with a specific remit to support digital, a review of R&D tax reliefs and the new Super-Deduction will also help increase investment across the UK. However, we would strongly encourage, that these schemes, including the Super-Deduction, are applicable to the needs of modern businesses who increasingly rely on intangible digital investments in cloud-computing, data, and AI tools to boost growth.”
The budget documents can be found online here.
techUK's submission to the budget can be found here.