The Autumn Statement and the technology sector
Kit Burden, partner and Global Co-Head of Technology Sector at DLA Piper, examines the impact of the chancellor's recent Autumn Statement
The Chancellor's Autumn Statement garnered many column inches in the press, but one particular theme that caught the eye was a commitment to a series of investments which could be of direct relevance to the technology sector in the UK. So, what has he done, and will it make any difference?
The Promised Investments
The Autumn Statement contained at least three key pledges with a technology "theme", namely:
- A £390 million investment in future transport technology, most particularly to include £100m in testing infrastructure for driverless cars;
- £1 billion to invest in full fibre broadband and trialling 5G networks, including 100% business rates relief for new full fibre infrastructure across a 5 year period
- £2 billion more per year in research and development (R&D) funding by 2020-21, spread across both universities and the private sector, with the intention of promoting innovation and research in areas such as robotics, AI and industrial bio technology.
The latter of these investments is not only the largest but also the one of widest potential application. So it's worth digging down into it in a bit more detail to judge what it may mean in practice.
Research and Development Funding
There is (understandably enough) not too much detail in the Autumn Statement as to where the new funds will be directed, but the detailed report which followed from HM Treasury gave some further indications, as follows:
- A Industrial Strategy Challenge Fund will be created to help support collaborations between business and academia (on a grant basis)
- Additional funding will be provided to "increase research capacity and business innovation"
- Tax credits will be considered for R&D related spending
- An additional £100 million will be provided to incentivise university collaboration in tech transfer and working in conjunction with the private sector.
So will technology-related researchers and businesses be awash with cash to fund a new tech boom?
The Wider Context
The answer is.....not quite.
Firstly, one should remember that this is not cash which is purely on top of what exists at the moment. It will have to "make good" the shortfall in equivalent funding that was previously available via the EU, and which will be lost in the light of Brexit. University sources have already begun to report a drop off in funding and approvals of grants in the light of the referendum decision, and estimates have put EU-related funding to the UK university sector at circa £1 billion per annum. So there is a hole to be filled before any "extra goodness" can be expected to develop.
Second, one should remember that whilst £2 billion certainly sounds like a big number, there are a lot of potential mouths that it will need to feed, and not all of the initiatives it goes to will actually succeed or pay off in the longer run. By contrast, a buoyant technology sector which is generating success independent of Government stimulus could be anticipated to generate R&D related spending far in excess of the investments now envisaged from the Autumn Statement. So, if the post Brexit predictions of a stronger, more vibrant UK economy freed from the shackles of EU regulation prove to be true, one may hope that the Government funding will be a smaller part of an upsurge in innovation. If the converse proves to be true, then it may be a drop in the ocean compared to the impact that Brexit will have had.
What the technology sector therefore needs is a recognition of what drives innovation and growth for technology related businesses. These certainly include:
- Strong collaboration between private and public sector
- A benign regulatory framework, backed by legal certainty on the protection of IP and technology innovation
- The ability to access and employ the best human capital
- A taxation regime which supports research and fast growing companies
Some but by no means all of the above can be taken from the Autumn Statement. It will be interesting to see how much more is forthcoming in the months to come.
Kit Burden is partner and Global Co-Head of Technology Sector at DLA Piper