What the UK tech industry can expect from the Budget 2020

The new Chancellor of the Exchequer Rishi Sunak has announced an extra £5 billion investment increasing broadband capabilities and mobile network reach as part of his proposed Budget 2020.

The £5 billion investment is intended to help the roll-out of faster broadband across the UK by 2025. £510 million has been allocated by the Budget to boost 4G coverage, especially benefiting Scotland, Northern Ireland and Wales as part of the shared rural phone network.

The funding aims to impact more than five million homes and hopes to increase speeds of what the government is calling ‘Gigabit broadband’, which is 40 times faster than standard broadband.

The broadband has been promised to reach the hardest to reach 20% of the country, which will support more rural-based businesses.

Commenting on this part of the Budget 2020, Martin Rudd — CTO at Telesoft — said: “Investments such as this by the UK government can only be beneficial for business and individuals alike with an anticipated extra coverage reaching 280,000 premises. But, at the same time, the risk of cyber threats will also grow; new businesses are less likely to have sufficient cyber security in place and as the threat landscape widens, there will no doubt be malicious actors ready to exploit it. As such, in future budgets, there should be funds ring-fenced for cyber security, helping ensure there is consistent awareness of the type of threats faced and how they naturally proliferate in line with any additional investments into the country’s digital infrastructure.”

Maziar Nekovee, professor of Telecoms and Mobile Technologies and head of Centre for Advanced Communications, Mobile Technology and Internet-of-Things at the University of Sussex, believes that getting the four operators to work together to improve rural coverage is a very sensible approach.

But, he is disappointed “that instead of pushing operators to take advantage of this arrangement to bring 5G to the whole country, the government is focussing on 4G coverage. The danger is that we will see a new digital divide emerging with cities benefiting from 5G’s higher speeds and other benefits that 5G offers for health and care, agriculture, autonomous driving, while rural areas are stuck with 4G, with no incentive from operators to upgrade to 5G and also little room for regional companies to fill in the gap. In short the result could be that while the 4G not spots will disappear, they will simply become 5G not spots instead.”

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The Chancellor says he looks to invest in ideas, he has promised £22 billion for Research and Development — more than double previous government investment.

This plan includes £1.4 billion for science research at Weybridge, which is analysing samples of coronavirus, £900 million for space research nuclear fusion and electric vehicles, and £800 million for new blue-skies funding agency.

Sunak looks to promote electrical energy by increasing taxes on pollution and notably ending the red diesel scheme for vehicles ‘in most sectors’ over a two-year timeframe.

He also committed £800 million to create two more carbon capture clusters, creating up to 6,000 low carbon jobs in the English regions and Scotland, which he said is precisely the exciting tech Britain needs to develop.

VAT will also be scrapped for digital publications, including newspapers, books and academic journals from December.

A focus on innovation and R&D

The Chancellor’s budget is to be commended for its decision to increase R&D investment from £18 billion to a record £22 billion a year, according to Adrian Overall, CEO, CloudStratex.

He said: “The UK is currently fighting through a global economic slowdown and the uncertainty of a post-Brexit world. UK plc is not on the backfoot yet but the outlook for business remains precarious. As the government strikes trade deals with new markets and renegotiates old ones, we will face increased competition from abroad. Innovation investment will be key to our future success.

“The government’s commitment to its target of 2.4% of GDP invested in UK R&D will be welcomed by many British companies, especially in our technology and science sectors. R&D plays a key role in the creation of pioneering goods and services, increasing productivity and attracting skilled employees. Therefore such investment will be essential for the competitiveness and success of any UK business in a post-Brexit world.”

Budget 2020: a productivity gap

“Today’s Spring Statement confirms there’s still a significant productivity gap in the UK. The Chancellor discussed productivity being a major issue and, as a nation, we must invest in tech if we are to address this,” said Jasmit Sagoo, senior director and head of technology UK and Ireland at Veritas Technologies.

“Our Value of Data study unearthed just how deep the productivity crisis runs. On average, UK employees are now losing two hours a day searching for data, resulting in a 16% drop in workforce efficiency. In fact, UK businesses estimate that they lose over £1.2 million a year due to data management challenges. Employees are wasting precious time searching for useful and potentially business-critical data trapped in fragmented IT environments.

“Through the deployment of centralised data management platforms, employees can benefit from both complete visibility and control over their data. This is a sure-fire way to improve productivity and ensure economic growth.”

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Budget alterations: reform of IR35

Changes to IR35 received a hostile response by some business leaders. One of them who was particularly unhappy with the rule changes is Qdos CEO, Seb Maley, who commented: “IR35 reform is a needless, short-sighted tax grab from the Government. Given the alarming threat Coronavirus poses to the economy, this is not the time to introduce reform that has the potential to irreversibly damage the UK’s contractor workforce. But while these reforms are disruptive, complex and unfair, they can be managed. And the reality is they will be enforced in a matter of weeks. Businesses need to be prepared, pragmatic and ready to make well-informed IR35 decisions.”

Nicole Forbes, deputy general counsel, Globalization Partners embodied this pragmatism by responding with a list of advice for businesses that might be affected by the changes.

“Hiring a contractor through a limited company (PSC) in the UK will not protect your business from legal and financial responsibility. While past IR35 rules either did not apply to your company or the responsibility did not fall on your shoulders, the regulatory environment has changed.

“You must act now to evaluate your working relationship with contractors who work via a PSC. With a spotlight on all businesses who work with contractors via PSC in the UK, it is imperative to act quickly and proactively reduce the risk of non-compliance before rule changes take effect.

“You can easily and quickly alter the status of a UK contractor to full-time employee by hiring through an Employer of Record, protecting your business from the impact of IR35 rule changes. If you wish to retain your contractors who work via PSC in the UK, you must have an entity established in order to run payroll and offer a compliant benefits package. To set this up requires significant time, money, and expertise.”

Entrepreneur relief

Another controversial change to the Budget introduced with the lowering of the entrepreneur relief fund’s lifetime allowance from £10m to £1m.

Martin Taylor, deputy CEO, Content Guru bemoaned this decision, particularly concerned with the reduction in the current economic climate.

“Eyes were on the new Chancellor, Rishi Sunak, to see how he approached the Government’s intention to ‘review and reform’ entrepreneurs’ relief in this Budget.  At a time when the UK economy is under huge pressure, reducing entrepreneurs’ relief doesn’t send a strong signal to businesses and the individuals behind them that they have the Government’s full support.

“It’s dangerous to put a ceiling on entrepreneurs’ ambitions.  Yes, most businesses are small and in the sub-millions range, but the ones we really need in Britain are the mid-to-large businesses.  We need to be creating as many entrepreneurs as possible in the hope that many of them will go on to become the next British businesses success story.  It’s these companies that will have the most significant impact on Britain’s economy in the coming years.”

Seb Maley is not entirely satisfied with the decision either, he sees the Budget as not delivering enough for independent workers and contractors.

“Not scrapping Entrepreneur’s Relief and increasing the National Insurance threshold doesn’t paper over the cracks. Given IR35 reform will go ahead, this Budget doesn’t work for freelancers and contractors who will be asking if this Government will ever deliver for the independent workforce.”

Information Age comment

There was also a lot less in the Budget than expected about certain crucial topics. There was no mention, for instance, of 5G and its nationwide roll out. Businesses might also be disappointed by the Budget’s lack of consideration for digital training schemes or coverage of emerging technologies such as AI.

On the subject of 5G, several commentators have expressed frustration at the Chancellor’s decision to focus on expanding 4G capabilities rather than looking forward to the future. Richard Baker, CEO, GeoSpock highlights the crucial nature of 5G infrastructure for the development of the UK economy

“Just as we are creating a national infrastructure strategy and a national infrastructure bank, we also need to create a national infrastructure for data.

“With the advent of 5G, connected devices and Internet of Things (IoT), UK businesses and governments will have a unique opportunity to understand patterns in citizens’ behaviour. This insight can then be used to optimise urban spaces and physical infrastructures.

“Data on everything from traffic volumes and congestion hotspots to peak travel times and delivery traffic patterns could be analysed to support road planning, reduce emissions and improve air quality levels. However, in order to translate complex connections into meaningful insights at speed, a new approach to data fusion is required.

“With the pace at which the technology industry is moving and the digital advancements we’re seeing, the amount of data being created is only getting bigger and faster. To level-up and unlock prosperity, the UK needs to be prepared. We need to go beyond being a nation of inventors and think more carefully about how we use the very technology that we’re creating.

“To remain competitive on a global stage, it’s key to bring together different sectors and create an efficient system in which data is not only shared but also used to benefit society.”

Beyond the beneficial aspects of 5G involving many of the problems facing the economy, Nekovee expresses the first post-Brexit Budget should have more to do with the UK not falling behind Europe.

“The massive investment to upgrade to ultrafast and fibre broadband is also laudable but as the UK currently has one of the lowest fibre penetration in Europe, this money [£5 billion investment in Gigabroadband] will only help us to catch up with the rest of Europe.”

There was also no news in the 2020 Budget about enhancements to digital training. This seems to ignore concerns highlighted by Matt Eckersall, regional director, EMEA North, Suse.

“With the nature of work undergoing a fundamental shift, it is important that the government helps businesses to re-skill workers so that they can participate in the digital economy. If the government were to extend the Apprenticeship Levy further so as to incentivise the learning of new technology skills, this would be a great step in the right direction.

“The issue of reskilling the UK’s workforce is not only one of economic importance. Failure to enfranchise people in the global digital economy is going to deepen the societal divides the UK government has pledged to close. The diversity and strength of the open source community demonstrates that people from all backgrounds can find fulfilment in the technology sector, and we hope to see this success replicated across the UK economy with the support of the government.”