The Chancellor’s Growth Plan, what does it mean for the tech sector?
**Please note significant portions of the Growth Plan were reversed on 17 October 2022. This included a majority of the tax annoucments made in the Growth Plan. For further details please see this annoucement from HM Treasury.**
The Chancellor’s Growth Plan is ambitious, the total cost of the policies announced will amount to nearly £45 billion every year by 2026/27 and will be initially financed through increased borrowing.
This comes on top of a significant investment capping the price per unit of energy from October 2022 to March 2023 for UK businesses.
Overall, the combination of the Growth Plan and support for business and consumer energy costs is a significant investment in the short term to attempt to stabilise the economy and to stimulate growth.
However, the lack of an official forecast from the Office for Budget Responsibility (OBR) has raised concerns about how the financial markets will respond to the Statement with potential implications for the value of the Pound Sterling and the UK’s borrowing costs.
The Government will provide a new medium term fiscal plan at the next Budget pledging to focus on reducing debt as a proportion of GDP over the medium term by keeping spending under control and maintaining strong institutions and frameworks.
For the tech sector the Chancellor’s Growth Plan contained a number of short-term interventions that could support increased growth. However, the Statement lacked detail on longer term plans to address the UK’s underlying economic problems such business productivity, infrastructure, regulation and skills and retraining.
Below we set out techUK’s initial reaction as well as detailing some of the key announcements for our members.
You can find the further details on the Growth Plan here.
Responding to the Statement made by the Chancellor of the Exchequer techUK CEO Julian David said:
The tech sector agrees on the need for sustainable growth, which ultimately depends on improving the UK’s productivity.
Given the right incentives the UK tech sector could create 678,000 new high-paying jobs by 2025, adding an extra £41.5 billions to the economy. This requires both long term planning as well as shorter term growth incentives.
The Statement included some key announcements for the tech sector including reforms to the pension regulatory charge cap, a new £500 million competition to invest in technology and science, incentives for start-ups, and the maintenance of the annual investment allowance at £1 million.
New investment zones announced today offer a real opportunity for growth if they can help boost local digital capital by accelerating the deployment of digital infrastructure, building digital skills and giving local businesses and investors the incentives and access to finance they need.
However, the Statement provided limited further details on how the UK will meet its targets to roll out gigabit broadband and 5G across the country, on the direction of key pieces of regulation for the tech sector, or how to boost R&D.
Ultimately, it is long term productivity growth that will get the UK economy back on track. The Government needs to work urgently with industry to flesh out the details of these plans to provide clarity for businesses looking to invest.
Key policy announcements for techUK members included:
Tax:
The Annual Investment Allowance will be held at £1 million: The government will make the temporary £1 million level of the Annual Investment Allowance permanent, instead of letting it fall to £200,000 after 31 March 2023. This means businesses investing between £200,000 and £1 million on plant and machinery will be able to claim a 100% tax deduction.
Repealing off-payroll working reforms: the 2017 and 2021 reforms to the off payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers across the UK providing their services via an intermediary, such as a personal service company, will once again be responsible for determining their employment status and paying the appropriate amount of tax and NICs.
Investment:
Increasing investment in UK Scale-up companies: the government will bring forward draft regulations to remove well-designed performance fees from the pension charge cap. This will enable savers to benefit from higher potential investment returns while providing clarity for institutional investors to invest into the UK’s most innovative businesses and productive assets, such as those in the tech sector. techUK has long called for this change, however the issue of investment is both regulatory and cultural.
We therefore also welcome the creation of the Long-term Investment for Technology & Science (LIFTS) competition which will provide up to £500 million to support new funds designed by institutional investors and fund managers, aiming to crowd private investment into UK science and technology businesses. The LIFTS scheme will open for proposals by the end of the year.
The Government will expand the Seed Enterprise Investment Scheme (SEIS): From April 2023, companies will be able to raise up to £250,000 through the SEIS, a two-thirds increase. To enable more companies to use SEIS, the gross asset limit will be increased to £350,000 and the age limit from 2 to 3 years. To support these increases, the annual investor limit will be doubled to £200,000.
The Company Share Option Plan (CSOP) will be doubled: from April 2023, qualifying companies will be able to issue up to £60,000 of CSOP options to employees, double the current £30,000 limit.
New Investment Zones: The government will work with the devolved administrations and local partners to create Investment Zones across the UK. These investment zones will offer tax and regulatory breaks for businesses operating within them. In England this include a 100% relief from business rates on newly occupied business premises, a 100% first year allowance for companies’ qualifying expenditure on plant and machinery assets, a zero-rate of Employer National Insurance Contributions on salaries of new employees working in the tax site for at least 60% of their time and full Stamp Duty Land Tax relief for land and buildings bought for use or development for commercial purposes.Further information can be found here.
The Government will also provide more details on how investment zones will work in Scotland, Wales and Northern Ireland in due course.
Infrastructure:
Reforming the planning system to accelerate infrastructure delivery: The Growth Plan announces new legislation (the Planning and Infrastructure Bill) to accelerate priority major infrastructure projects across England, by: minimising the burden of environmental assessments; making consultation requirements more proportionate; reforming habitats and species regulation; and increasing flexibility to make changes to a Development Consent Order once it has been submitted.
The Growth Plan also details that amendments to the Product Security and Telecommunications Infrastructure Bill will be brought forward to give telecoms operators easier access to telegraph poles on private land, supporting the delivery of gigabit capable broadband. The Plan also identifies project Gigabit as a priority infrastructure project.
We await further details on these proposals as well as the introduction of the Planning and Infrastructure Bill to Parliament. However these announcements are a positive step.
Regulation:
Plans for regulatory change: While there were limited specific announcements in the Growth Plan the Government has committed to bring forward a set of regulatory changes to support higher economic growth later in the Autumn as well as a new Retained EU Law (Revocation and Reform) Bill. techUK members will be closely watching these plans as well as major pieces of tech legislation such as the Data Protection and Digital Information Bill and Online Safety Bill which been paused for review by the new Government.
As the Government consults on these changes we urge them to work closely with the sector to ensure new regulation for the tech sector such as through the Data Protection and Digital Information Bill, Online Safety Bill, Digital Markets, Competition and Consumer Bill and forthcoming Artificial Intelligence Whitepaper deliver on the objective to increase growth.
Neil Ross
As Associate Director for Policy Neil leads on techUK's public policy work in the UK. In this role he regularly engages with UK and Devolved Government Ministers, senior civil servants and members of the UK’s Parliaments aiming to make the UK the best place to start, scale and develop a tech business.
