The 2020 Spending Review, what does it mean for the tech sector?
Against the backdrop of difficult economic circumstances the Chancellor of the Exchequer has put jobs, infrastructure, and innovation at the centre of how the Government’s plans to support the initial economic recovery from COVID-19.
Ahead of the spending review the Chancellor asked the Office for Budget Responsibility (OBR) to provide a set of forecasts detailing the balance sheet of the country and an independent assessment of economic growth over the next four years.
The OBR’s analysis set out the full damage that COVID-19 has done to the UK economy which see the economy shrink by 11% this year, the largest drop in over 300 years.
The analysis also sets out a longer and slower recovery. Rather than a V shaped recovery the UK recovery is more likely to resemble a tick, with large increases in growth in 2021 (5.5% growth) and in 2022 (6.6%) but then tailing off in the following years (2.3% in 2023, 1.7% 2024 and 1.8% in 2025).
The UK will also see a very large increase in debt as result of the action taken to support the health service and protect jobs. This year the country will have spent £394 billion more than raised in taxes and the national debt will continue to rise every year between now and at least 2025/26.
What this means is that despite money being invested now to support livelihoods during the pandemic and some further spending to come to help restart the economy, very difficult choices face the Chancellor over the next four years when it comes to the nation’s finances.
This why the Government was focused on jobs, infrastructure and innovation in the Spending Review. As the creation new jobs, better infrastructure and increases in productivity will be vital to growing the economy and repairing the public finances.
For the tech sector there were a number of key announcements, including a number of public/private partnership initiatives driven by a new set of Government institutions and funds:
Supporting rehiring; £4.3bn will be committed reduce unemployment through a new £2.9bn Restart scheme targeted at those at risk of long-term unemployment and £1.4bn to expand the Jobcentre Plus agency.
New British Business Bank funding: this includes £422 million for the Bank’s planned activities in 2021-22, including £56.5 million to fund an expansion of the Bank’s Start-Up Loans scheme and £270 million in new commitments to support innovation and growth finance, regional finance, and the National Security Strategic Investment Fund.
Digital adoption and business skills: £50.7 million delivered via BEIS for business support programmes to improve SME productivity through leadership, management and technology adoption
National Infrastructure Strategy; alongside the Spending Review the Government has also published the long-awaited National Infrastructure Strategy which includes £250m to support the 5G Supply Chain Diversification Strategy, with £50m being delivered next year.
A £4bn Levelling up fund: the fund will invest in local infrastructure that has a visible impact on people and their communities. It will be open to all local areas in England and prioritise bids to drive growth and regeneration in places facing particular challenges, and areas that have received less government investment in recent years. Bids will need local support and additional money will be allocated to the Devolved Government’s as a result of this fund.
A UK Infrastructure bank: the bank will support co-investment with the private sector in projects across the UK. The bank will begin funding new infrastructure projects across the UK in the Spring of 2021.
Gigabit-capable broadband rollout: £1.2 billion of the Government’s £5 billion commitment will be deployed between 2021-22 to 2024-25 to support the rollout of gigabit-capable broadband across the UK.
£200 million for UK-wide digital infrastructure programmes; including the Shared Rural Network for 4G coverage, Local Full Fibre Networks, and the 5G Testbeds and Trials Programme.
DCMS digital and data programmes: £45 million for programmes to drive growth through digital technologies and data, while improving online safety and security.
14.6bn for R&D investment: as part of the Government’s commitment to spend £22bn per year on R&D by 2024-25, 14.6bn will be delivered next year. £11.1bn of this will be managed by BEIS, including an uplift of over £400 million per year until 2023-24 for UK Research and Innovation (UKRI) and at least £490 million in 2021-22 for Innovate UK core programmes and infrastructure to support ground-breaking technologies and businesses.
Last mile of Innovation unit: £17 million will be committed in 2021-22 to support the exploitation of government owned intangible assets through a new unit and fund to scout for and develop government ‘knowledge assets’ (IP, data, R&D, tech and other intangibles).
£50 million for high-risk, high payoff research; BEIS will deliver the first £50 million of an £800 million investment in high-risk, high-payoff research, sometimes refered to as a UK ARPA.
Delivery of the £200 million Shared Outcomes Fund; a fund to pilot projects to test innovative ways of working across the public sector. The first round of the Shared Outcomes Fund will fund a wide range of projects of interest to members in 2020-21 and 2022-23. These include:
- Data improvement £9.6 million to improve the cross-departmental evidence base and use of data to inform policy decisions and service delivery for children and young people.
- An open regulation platform £4.6 million to test processing and enriching business regulation into machine readable data, and making it publicly available to enable third parties to develop tools that help businesses identify and comply with regulation.
- Small cell 5G development £7.0 million to increase 5G network capacity by working with local authorities to purchase multi-use ‘street furniture’
- Online harms £2.7 million to test innovative solutions to establish permanent systems to improve data sharing, reducing online harms
- Emerging drone technology £1.6 million of match-funding to UK businesses and other organisations to undertake drone trialling activity and share learning on commercial drone use
The full set of Spending Review Documents can be found here.