Rishi Sunak’s first budget — delivered just a few weeks after he became Chancellor — was notable for its generosity. His second budget, after a year in charge of the country’s finances and following another wave of Covid-19 infections and deaths was different. While continuing with some generosity, he’s now starting to look at how he will pay the bills.
How has the tech sector reacted to some key announcements? UKTN takes a look:
1. Talent visas
The UK had only introduced a points-based immigration system in January. However, Sunak has already made amendments, reducing the requirements migrants in some fields will need to meet.
Those highly skilled in tech, science and research can now enter the country without a sponsor, while a simplified system will be created for entrepreneurs looking to set up in the UK.
The aim of the reforms is, according to Sunak, to make the UK a “scientific superpower.” Although Brexit has not made it impossible for entrepreneurs to enter the UK market it has created hurdles, and the unstoppable rise of remote working created an additional risk for a Chancellor who needs a successful economy.
Daumantas Dvilinskas, Co-founder of TransferGo, highlighted the fintech sector’s strength, “in the face of adversity, the UK fintech industry has proven its resilience, attracting $4.6bn in VC investment last year despite the challenges and uncertainty caused by the pandemic.” However, he welcomed the fast-track visas, and the benefits they would bring to the UK, “True innovation comes through diversity of thought and background, and as a migrant myself, the budget was missing this final piece: a reassurance to foreign talent that there is a home for them in the UK.”
2. Tax hikes and super deductions
The Chancellor, while claiming the UK will retain a “pro-business tax regime”, also announced a hike in business tax. Businesses with profits exceeding £50,000 will see corporation tax rates increase from 19% to 25% from 2023.
Although Sunak says the increase will not affect 70% of businesses, some critics have suggested that it might discourage growth in businesses just beneath that level.
The increase is offset by the new ‘super deduction’. Running for two years it will allow companies to deduct 130% of the cost of qualifying investment from their tax liability. However, the scheme is focused on physical infrastructure.
Response to the super deduction was mixed. Cas Paton, founder of Onbuy.com, welcomed the initiative. Saying he felt the budget “prioritised growth”, and that the deduction “encourages reinvestment, will help smaller organisations to recover and thrive, and will aid the development of new homegrown British industries.”
Paul Struthers, the managing director of Sage, which supports over a million UK SMEs, felt its focus on physical infrastructure was a negative: “Whilst the ‘super deduction’ is a bold policy, it presents a massive missed opportunity to empower a digitally led recovery.”
3. Help to Grow
The £520 million ‘Help to Grow’ scheme had been all but announced before the budget was delivered. Under the scheme small- and medium-sized businesses will be eligible to access funds to support the provision of staff training and the purchase of software.
While the tech sector is less likely to directly benefit than other sectors — if only because they are likely to have already invested in training and software, or even be the ones developing it — the move will help create a vibrant market for the tech sector.
“The Government’s Help to Grow scheme couldn’t have come at a better time,” Pranav Sood, VP of Small Business at GoCardless, commented. “The widespread adoption of technology will fuel the next wave of growth in this sector and unlock significant gains in productivity.”
Sherry Coutu CBE, the serial entrepreneur who currently heads Digital Boost, the mentorship platform, also welcomed the initiative. “The gap between large and small organisations has been increasing at an alarming rate, and it is more important than ever to start levelling the playing field,” Coutu said, hoping that the “new scheme from the government, along with existing initiatives, will continue to give small businesses the support they need to build back better.”
4. Self Employed Income Support Scheme
Sunak has increased the eligibility for the Self-Employed Income Support Scheme. Although people who started self-employment in 2020/21 are still not covered the scheme will be extended to a further 600,000 people who started self-employment in 2019/20. The scheme will be continued into the summer, with two grants of up to £7,500 each based on turnover and loss of profits.
The scheme is seen as essential for micro-entrepreneurs who have started small businesses.
Paul Struthers highlighted that this has the power to drive “a new generation of entrepreneurs who have emerged, with 50% of micro business founded in the last year coming up with the business idea during lockdown.” Struthers also stressed the need to culture these entrepreneurs, calling on the government to “consider innovative policy that champions these drivers within our economy into the long-term.”
5. Furlough
The furlough scheme has been the centrepiece of government support and was due to end this month. It has now been extended until September, although businesses will be expected to contribute to the costs from July onwards.
Matthew Ryan, the senior market analyst at fintech Ebury, said it was “a very welcome development for employers, especially smaller companies in the hospitality, retail and travel sectors that have been among the hardest hit by the prolonged lockdowns.”
While there was some surprise that the scheme was continuing past the planned end of coronavirus restrictions Ryan pointed out the positives, noting the cautious approach would “prevent a sharp increase in joblessness that could derail a recovery made possible by the UK’s impressive vaccine rollout.”
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