The government’s announcement of continued funding for UK tech in the Spring Budget this week has likely been overshadowed by the more attention-grabbing policies of National Insurance cuts and the elimination of ‘non-dom’ status.
However, for Britain’s extensive tech sector – including a vibrant fintech one both in London but also various regional cities – ongoing government investment will of course be welcome news, and in a general election year every vote matters.
Ahead of the budget’s announcement on 6 March, Payment Expert heard opinions from some prominent UK tech stakeholders. Prior to Chancellor Jeremy Hunt’s speech to the House of Commons, hope was high that tech would remain an area of focus.
“The UK government must continue to invest in our high-growth sectors, support start-ups and ensure they have the access to finance which they need to grow and meet demand,” said Laurent Descout, Co-Founder and CEO of Neo.
“One way of doing so would be to bring capital expenditure within the scope of R&D, similarly to Ireland and France, this would help encourage businesses to base their long-term investments in the UK.”
For tech firms like Neo – a cash management and FX risk hedging solutions developer – Hunt’s continued backing of tech may have provided some reassurance, especially against the backdrop of the UK economy being in mild recession.
Hunt, alongside UK PM Rishi Sunak, has repeatedly outlined a belief the UK must attract investment, and in Wednesday’s speech to MPs he remarked that this could be achieved by supporting the country’s ‘most innovative industries’.
However, in a move which was likely disappointing to Neo, Hunt did not map out plans to bring capital expenditure within R&D. Instead, the Chancellor talked extensively about using pension fund capital to invest in tech and encourage firms ‘not just to start here, but to stay here’, including for public listings.
Regardless, for stakeholders at large the details of continued investment in tech was still viewed as a net positive. Hunt and Sunak appear to be hedging their bets heavily on fintech, although not just this alone, to ‘get Britain growing’.
It is certainly true that the sector has been expanding greatly over recent years, and not just in the traditional finance capital of London. Fintech scenes have developed in the capitals of Edinburgh, Cardiff and Belfast and in major English cities like Manchester and Newcastle.
“Unlocking investment for the best and brightest in UK technology can only be seen as a good thing,” said Rich Arundel, Chief Evangelist for Currencycloud and Visa Cross-Border Solutions.
“Making it easier for capital to flow into these businesses will have the triple benefit of helping home-grown success stories to thrive, making the UK a more attractive place to build and list innovative, high-growth firms, whilst also delivering better long-term returns for the UK’s savers.
“As a country, we have a rich history of innovation and entrepreneurship but the devil will be in the detail, and it is now a question of how the Chancellor plans to encourage this increased investment from pension funds.”
As well as investing in tech, Hunt and Sunak aim to foster growth for UK business as a whole, partly by keeping tax rates low to keep the country ‘the most attractive investment tax regime’ of any large European nation.
It is important to note, however, the key fact referenced in the introduction to this article – 2024 is going to be an election year, and after 14 years in government the Conservative Party is unpopular with the electorate, with most polls indicating just 20-25% support for the government, compared to around 40-45% support for the Labour Party..
Hunt and Sunak may hope that the Conservatives can win back popular support by reducing tax rates for both businesses and consumers – in the case of the latter the National Insurance rate was cut by 2p in the pound, saving £450 a year for the average worker according to some estimates.
Scott Dawson, Head of Sales and Strategic Partnerships at DECTA, said: “Everyone should look at this budget in the context of the upcoming election: we have an unpopular incumbent party, 20 points behind in the polls, who have overseen a period of weak-to-no growth and now the beginning of a recession.
“They’re going to want to offer the electorate a big, populist hand-out to get at least some of them on-side.
“So, what does this mean for the UK’s businesses? We’d hope that a sweeping tax cut or something similar would put more money in people’s pockets and spur more spending, but this seems unlikely to happen.”
In DECTA’s view, the tax cuts will have a ‘limited impact on businesses’ and the government’s track record on business growth since taking office in 2010 has not been exemplary.
Dawson continued: “Instead of looking for a government with one foot out of the door for answers, companies in the UK need to be looking at themselves and each other to see whether they have what it takes to make it through a recession – addressing real needs and creating businesses that can turn a profit even during a downturn will be the way ahead.”
So with an election year ahead, what can we expect? Should the Conservatives budget turn out the way the party hopes and consumers get more money in their pockets and businesses – particularly tech and fintech ones – drive the economy forward, they may be able to secure re-election.
In the event this occurs, we can expect a continuation of the government’s investment in tech and a heavy emphasis placed on finance and fintech as core segments of the UK economy.
AI has been a particularly big talking point for the government, having been referenced by Hunt in last year’s Autumn Budget and this year’s Spring Budget. In the latter, Hunt asserted that ‘we’re on track to become the world’s next Silicon Valley’ due to AI and other tech investments.
However, the Labour Party has also mapped out its own fintech ambitions. The opposition party, which was unsurprisingly unimpressed with Hunt’s budget on Wednesday, is also betting on AI development, but also Open Banking, to keep British finance growing.
In the aftermath of the Spring Budget and with economic performance front and centre in the minds of many voters, fintech looks set to be one of the many political battlegrounds in the 2024 election.
