Spending Review 2025 - techUK's representation
techUK welcomed the opportunity to feed into Phase 2 of the Government’s multi-year Spending Review.
2025 represents a pivotal moment for the United Kingdom and its economy. The decisions made during this multi-year Spending Review will shape the course for the rest of this Parliament and the decade. By doubling down on digitisation of the economy, this is a crucial opportunity to achieve productivity gains, drive higher business investment and growth, and secure the UK’s position as a leader in emerging domestic tech markets.
There are reasons to be optimistic. As outlined in our Growth Plan, and response to the Industrial Strategy, the Government can harness the potential of tech and digitisation to achieve its five missions, including securing the highest sustained growth in the G7. This is a sector now valued at over $1.1 trillion and already transforming daily lives, businesses, sectors, and public services. The AI Opportunities Action Plan also marked a step in the right direction. The Plan is comprehensive in scope and, if executed, could spark a ‘quiet AI revolution’ in how the Government and business operate.
But there is now a fierce global race over the key technologies that will shape the future. From AI and Quantum to green technologies, competition between governments to attract talent, grow clusters of innovative technology companies, and be the first to deploy revolutionary digital public services has never been greater.
To achieve its aims, the Government must continue to forge a collaborative partnership with the UK tech sector, working together to swiftly address structural barriers that hinder technological development and deployment across the economy and public services. The modern industrial strategy presents an opportunity for this. Such a strategy must ensure ongoing efforts through the cross-Government review of tech adoption, 10-Year infrastructure Strategy and AI Opportunities Action Plan are consistent and make the most use of public finances to deliver return on investment for taxpayers.
techUK's response is framed through the following priority areas:
Digital and tech adoption to support growth sectors: ensuring digital tech can be adopted across all businesses and sectors of the economy. Utilisation of digital tools could save SMEs the equivalent of multiple working weeks annually, and
up to 1.2 hours per week per worker
.
This starts with long-term funding package for practical interventions like the Made Smarter Adoption Programme across the identified growth-driving sectors, creating headroom and certainty for all businesses to adopt digital technology.
Enabling the delivery of effective and efficient public services: leveraging the role of digital and tech adoption, including transformative productivity and efficiency increases, for public services. According to
, if AI is rolled out effectively across public services, it could save the UK’s public sector over £17 billion by 2035 - roughly half of what the UK currently spends on defence each year.
This starts with delivering the AI Opportunities Action Plan and outlining a roadmap and funding for implementing the accepted recommendations, with timelines and metrics for success. Along with allocating adequate funding to address legacy technology across public services.
Creating a pro-business environment: supporting the skills development, infrastructure, tax environment and regulation to underpin the sector to overcome barriers and invest. For instance,
that every £1 of tax forgone through R&D tax relief results in up to £2.70 of additional investment in R&D by UK companies.
This starts with setting out a front-loaded spending profile for R&D to reach 3% of GDP by the end of this Parliament.
Place-based support to create a dynamic tech ecosystem: unlock the potential of all regions of the UK through the transformative effects the tech sector can bring, including by developing tech clusters.
This starts with launching a review into the use of SIC codes to capture the true shape of the digital economy and providing funding certainty to deliver on the modern industrial strategy.
Summary of top techUK recommendations:
Government mission | techUK recommendation | Expected impact and growth benefit over SR period |
Growing the economy | Commit to the ambition for total R&D spending to reach 3% of GDP by the end of Parliament. | £100 million of public R&D investment could be expected on average to yield, in 6 years’ time, an increase in annual private sector productivity worth £40 million. |
Growing the economy and opportunities for all | Provide funding certainty for the UK Shared Prosperity Fund (UKSPF) to support the delivery of the modern Industrial Strategy. | UKSPF enables local authorities to have flexibility to invest across a range of activities that represent the right solutions for their areas. |
Growing the economy and opportunities for all | Ringfence funding to pilot, and rollout, measures for SMEs digitisation. This will shore up UK SMEs to be digitally confident and take advantage of emerging technologies like AI. | The OBR has predicted that the widespread use of AI technology could support raising productivity by half a percentage point by 2028/29. |
Growing the economy | Begin delivering the AI opportunities action plan by outlining a roadmap and funding for implementing the accepted Government recommendations. This should also include timelines and metrics for assessing success. | According to research, if AI is rolled out effectively across public services, it could save the UK’s public sector over £17 billion by 2035. The increasing prevalence of AI in people’s working lives opens up new opportunities rather than just threatens traditional patterns of work. |
Growing the economy | Address legacy technology in critical services, assigning appropriate funding to manage legacy technology and co-ordinate transformation. This is a vital foundation to realise plans to use AI more in public service delivery | Modern systems can be scaled to handle increased demand, ensuring long-term sustainability. |
Growing the economy | Launch a review into the use of SIC codes to capture the true shape of the digital economy. | Government programmes and funding often target specific industries. Updated SIC codes can help ensure that resources are allocated more effectively to the sectors that need them most |
Growing the economy | HMRC resources should be channeled into improving the effectiveness of existing digital services and delivery of flagship digital economy programmes. | Simplifying and digitising the tax system has the potential to significantly boost productivity with some businesses experiencing gains of up to 11.8%. |
Growing the economy and achieving net zero | Extend the Industrial Energy Transformation Fund (IETF) with a funding pot equivalent to current phases until 2030. | The Fund targets existing industrial processes, helping industry to cut energy bills by investing in more efficient technologies and reducing emissions by adopting transformational low carbon technologies. |
techUK, on behalf of our members, look forward to continuing to work with the Government to deliver a modern industrial strategy, placing digital tech at the heart of this. Doing so will enable delivery on the central mission to achieve the highest sustained growth in the G7. This is also a crucial moment to send clear signals that the UK intends to invest in the industries that will define the next decade of the digital economy.
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