What the 2024 Spring Budget means for the UK Tech Industry

Chancellor Jeremy Hunt announced the 2024 Spring Budget on March 6, 2024, affecting different industries, including the tech industry.

Mr Hunt pledged £800 million as part of a technology package.

As part of the reforms, AI will be used to cut NHS scan times by a third and the police will deploy drones to incidents such as traffic collisions.

Mr Hunt also hinted that civil service staff numbers could be cut by tens of thousands.

The Treasury is hoping that the proposed technological reforms will deliver as much as £1.8 billion worth of benefits to public sector productivity by 2029.

But what does the Spring Budget mean for the tech industry?

Incentives to Retain Skilled Tech Workers

Mr Hunt said the UK was on its way to becoming another Silicon Valley for tech development, explaining that the UK’s tech industry was now twice the size of Germany’s and was currently the largest tech ecosystem in Europe.

To support this growth, Mr Hunt the government is committed to retaining skilled UK tech workers through better pensions and investment ISAs.

The government was looking at Edinburgh and Mansion House reforms which would make it easier for pension funds to be invested in the UK tech industry.

This was anticipated to encourage money into the tech industry from retail investors or non-professional investors.

Mr Hunt said: “British ISA which will allow an additional £5,000 annual investment for investments in UK equity with all the tax advantages of other ISAs.

“This will be on top of the existing ISA allowances and ensure that British savers can benefit from the growth of the most promising UK businesses.”

As AI rises, technology skills are now needed across industries, leaving tech companies facing a shortage of job applicants.

Praveen Prabhakaran, chief delivery officer and UK managing director of tech company UST, said:

“Digital skills and development will be crucial to a thriving UK technology sector.

“According to recent statistics, two-thirds of businesses are facing a digital skills gap in their workforce, so our hope is that the government will also continue to focus on investment in this area, supporting education and training initiatives.”

Inflation & Recession

The economy entered a recession in February 2024, creating a potentially unstable environment for UK tech workers and business leaders.

Mr Hunt said the inflation was 4% lower than when Rishi Sunak entered office.

The Chancellor indicated that the OBR (Office for Budget Responsibility) predicts the economy to grow 0.8% by 2025.

He said: “Tackling inflation, while necessary, is painful.”

Throughout 2023, many tech businesses named inflation as the main concern.

Nearly 46% of businesses answered that high inflation had been their top concern throughout the last 12 months in November 2023. 

Srinivas Rao, chief business officer of IT company LTIMindtree, said that in this financial environment, leveraging technology for productivity and efficiency has never been more important for UK businesses.

He said UK businesses are facing great difficulties securing funding within the UK, often needing to turn to foreign markets for this investment.

Rao said: “The UK should continue to encourage a pro-innovation society that allows businesses to engage in digitalisation, effective automation, and the integration of generative AI.

“The UK is changing for the better and so the focus should be on digitising non-digital elements and enhancing existing digital processes.”

He added that the Spring Budget was evident that the UK’s tech industry was finely balanced.

“From VC investment to demand for new digital services the industry is calling for a greater focus on tech to rebuild the UK economy.

“The government should go further and lay out how their new digital adoption taskforce will prioritise science and tech ambitions.”

However, there is concern that the Spring Budget remained London-focused and it was not doing enough to support tech workers outside of the capital.

Technologist and chief operating officer at Payen and ILIXIUM financial services Sarah-Jayne van Greune said the government needed a plan for long-term growth that was equitable across the country.

She said: “The UK industry has many tech and business pioneers spanning the country.

“Ultimately, equality in investment will, in turn, ensure that the Chancellor can put the UK on the path to becoming the next Silicon Valley.”

Nuclear Energy

It is anticipated that nuclear power will account for a quarter of the UK’s energy by 2050.

Mr Hunt confirmed that the UK’s Secretary of Energy Claire Coutinho had pledged £120 million towards the Green Industries Growth Accelerator building wind and carbon capture infrastructure. 

A further £270 million was invested towards manufacturing zero-emissions vehicles and sustainable aviation fuels industries.

The Spring Budget also revealed that a deal between the government and Hitachi had been reached to buy a nuclear power site in Anglesey, North Wales.

Mr Hunt also confirmed that the nuclear energy company Great British Nuclear would advance into the next phase of Small Modular Reactor selection. 

Senior analyst at GlobalData Christopher Papadopoullos said the announcement is in line with the government’s broader climate approach.

He said: “The UK is backing a lot of potentially effective solutions, but the amount of cash the government is putting behind these ideas is not as ambitious as, say, in the US and Europe.

“There’s a growing sense of pessimism around the current level of the UK’s climate investment and whether it will be enough for the UK to meet its 2030 emissions targets.”

The 2024 Spring Budget ushers in a promising era for the UK tech industry, marked by significant investments and policy reforms.

As the UK continues to position itself as a global leader in technology and innovation, businesses and entrepreneurs alike can look forward to seizing the opportunities presented by this budget to thrive and contribute to a vibrant and competitive tech ecosystem.

But challenges such as skills shortages and regulatory uncertainties remain, underscoring the importance of continued collaboration between government, industry and academia to ensure the UK maintains its competitive edge on the global stage.