What does the Spring Budget Mean for UK Tech?

17 March 2023 | Eleanor Lightbody

This week, the Chancellor announced the Spring Budget in which he reaffirmed the government’s ambition to make the UK a “science and technology superpower”. As part of a wide range of initiatives designed to strengthen the UK’s tech ecosystem, the government will be investing £100 million in “high potential innovation clusters” across the country, allocating a further £2.5 billion towards quantum computing research and £900 million for building a supercomputer system, and awarding a £1m annual prize for ground-breaking work in AI.

As a Cambridge-born company with fundamental technology at our core, we welcome the government’s renewed commitment to strengthening the UK’s position as a global tech leader. If AI is going to be the key driver of the global economy in the coming decades, then we must ensure that the UK’s AI ecosystem remains competitive on the international stage. Here, I’m breaking down my key takeaways from this week’s announcement.

Better conditions for R&D?

The government’s partial reversal to the R&D tax credit cuts announced in November is a small but welcome step towards ensuring better support for innovative, early-stage tech companies. At Luminance, we firmly believe that R&D is the foundation of innovation and know that it is key to successfully bringing novel technologies to market. The government must keep working to build an environment where research-intensive companies are incentivised to invest in R&D.

We must bear in mind, however, that not all young tech companies will be able to invest as much as 40% of their overall budget in R&D and qualify for these new tax cuts – not least those who have been impacted by the recent economic downturn. Looking ahead, I hope to see the government extends its support to smaller businesses playing a role in building the UK’s tech-driven economy.

I will also be interested to see whether the enhanced tax relief will incentivise other R&D-intensive start-ups and scale-ups to keep their R&D activity within the UK instead of relocating operations abroad where conditions may appear more favourable. In light of the recent news that one of the UK’s biggest tech giants has chosen to list in New York, it’s clear that we must do more to improve the UK’s overall appeal as a place that tech companies want to stay and grow here in the long-term.

Prioritising emerging technologies

Just this week, we welcomed the UK’s updates to its Future of Compute review, where recommendations were made for strengthening the UK’s tech position - currently ranked only 28th in the world. To get us back alongside the likes of the US, Germany and China, the Spring Budget will allocate £2.5 billion in quantum computing, which will power for supercomputers capable of developing next-generation AI. Tech leaders have long recognised the importance of investment in this field to develop AI research, so this is an exciting step towards keeping the UK competitive on the global stage.

What’s more, the UK is well-placed to take advantage of this fresh investment into the development of emerging technologies. We have a science base which is second to none and are home to 3 of the top 10 research universities in the world. Combining this rich pool of talent with unprecedented research funding could mean unbridled growth for the UK economy – something the country desperately needs right now.

More to be done to build an AI-ready workforce

Despite being billed as one of the most pro-technology budgets in recent years, I, alongside many tech leaders, still feel some of the most pressing challenges facing tech are yet to be addressed. For instance, as the tech sector develops, so too must the workforce, and the growing AI skills gap in the UK will soon become detrimental to the overall growth of the economy.

Though I certainly welcome the government’s support of AI research programmes, sandboxes and R&D hubs, as well as the establishment of AI Centres of Doctoral Training, I still believe more needs to be done to prepare our existing workforce for a future where they will work alongside AI. Re-skilling and up-skilling will be fundamental as AI becomes more prevalent in our day-to-day lives. Without proper training and education opportunities readily available, it’s possible the UK’s digital economy will fall behind.

Familiarity with emerging technology begins with its socialisation, namely by gaining an understanding of what AI actually is. This starts with understanding the basics of concepts that underpin AI, such as probability and how machine learning differs from rules-based technologies. This AI-savviness will be essential when we look to a future in which the majority of the workforce will likely work with it in the context of their day-to-day jobs, whether that’s healthcare, cybersecurity or law.

As a Cambridge-born AI company, Luminance is a shining example of how investment in technology hubs can generate revolutionary AI and we’re excited to be a part of the UK’s push towards securing our place as a science and technology superpower.

To read more from Eleanor, click here.