The 2021 March budget should prioritise tech-led growth to ensure a strong economic recovery
The March 2021 Budget is an opportunity for the Chancellor to lay out his plans for future economic growth and recovery, while also continuing to support the sectors of the economy hit hard by the COVID-19 pandemic.
The tech sector has played a key role in supporting the economy throughout the pandemic, from helping many small businesses keep the lights on despite social distancing requirements, to enabling office workers to transition to remote working. The tech sector will be equally vital to the economic recovery effort, as the benefits of digital technology and innovation will be needed to drive the increases in productivity and economic growth to ensure a strong recovery.
Unlocking these benefits means prioritising tech-led growth. Tech-led growth means supporting the deployment of the UK’s world-leading digital services sector across the whole economy, to solve the UK’s longstanding productivity problem, while also increasing the resilience and agility of businesses.
Focusing on tech-led growth will require businesses in all sectors of the economy to adopt digital technologies, services, and innovations. Enabling the adoption of digital technologies by small businesses could deliver £325 billion in additional revenue, increase economic output by £145 billion due to improved productivity, and support 2.7 million jobs.
In the 2021 Budget, the Treasury needs to begin this national mission to achieve tech-led growth. This will not be done in one fiscal statement, but the Treasury has a unique role for setting the agenda across Government and driving delivery through subsequent departmental strategies in a plan for growth.
In our submission to the March 2021 Budget, we and our members set out detailed proposals to enable this longer-term transformation. However, as a first step the Treasury could begin its plan for growth with three key announcements:
- Ensuring the National Infrastructure Bank can invest in digital infrastructure
- Allowing tech to play a key role in supporting post-Brexit trade
- Supporting the development of tech ecosystems by boosting Local Digital Capital across the UK
Ensuring the National Infrastructure Bank can invest in digital infrastructure: in the most recent spending review, the Chancellor laid out plans for a National Infrastructure Bank, which would co-fund local infrastructure investments. It will be vital for the bank to invest in digital infrastructure such as full-fibre broadband and 5G, or the UK will risk falling behind, which could potentially lead to the loss of more than £173 billion of growth over the next decade.
Allowing tech to play a key role in supporting post-Brexit trade: Brexit presents new opportunities, but at the cost of increased trade barriers with key markets. As the UK moves to trading through free trade agreements and global rules, RegTech will be a key tool for many small companies to navigate those trade barriers. Businesses selling through online platforms have seen exports grow by more than 25% in the five years leading up to 2018-2019, and a competitive RegTech market will be an asset to UK exporters. However, financial support for small businesses will be needed to drive up demand in the RegTech market, along with regulatory deals with key markets, and the expansion of the use of sandboxes to help develop RegTech.
Supporting the development of tech ecosystems by boosting Local Digital Capital across the UK: the development of tech ecosystems outside of London and South East England will be critical to both the economic recovery and the Levelling Up agenda. Currently, more than 70% of all investment in tech goes to London and the South East. Over the past year, we at techUK spoke to more than 260 business leaders from Scotland, Wales, Northern Ireland, and four English regions to better understand how tech can help their nation or region with the economic recovery from the pandemic. Based on those conversations, we saw eight core needs:
- Digital skills
- Digital adoption
- Data ecosystems
- Digital infrastructure
- Finance and investment
- Research and innovation
- Trade support
- Collaboration and coordination
techUK is committed to working governments at all levels to build Local Digital Capital across the UK. Two immediate actions the Chancellor can take to help are to pioneer a GREAT-style campaign of investment roadshows to bring investors to tech hubs outside of London; and to review the UK’s funding system driving investment into ecosystems across the UK’s nations and regions.
By taking these actions now while also laying the foundations for a longer-term plan based around enabling tech-led growth, the Treasury can set the UK off on a clear course for a strong economic recovery. One that not only helps the country rebound from the impacts of COVID-19, but to build back better with an economy set on stronger foundations than before.