Spring Budget 2021: Innovation and Digital reactions

This was a Budget that set its sights on a recovery enabled by innovation. The Chancellor set out how innovation will be essential to make progress with vital issues like net zero and vaccines. He also backed business investment with the Help to Grow scheme and stronger tax allowances via an investment super-deduction. A consultation on modernising the R&D tax credit is also welcome. 

Adoption

Help to Grow vouchers 

Government has committed to a new £520m ‘Help to Grow’ package that will offer SMEs discounts of up to 50% on productivity-enhancing software, as well as routes to free expert training through a new website. This represents a significant win for the CBI and reflects a key recommendation from our latest Tech Tracker report which called on the government to tackle the cash and capacity constraints of firms by funding a voucher scheme to improve access to technologies coupled with practical business advice. This announcement is an example of the positive impact member insight can have on shaping policy, and the CBI will continue to work with Treasury, and stakeholders such as Be the Business and the Knowledge Transfer Network, to ensure the initiative is impactful.

Superdeduction

Prior to Corporation Tax raising and starting at the beginning of April 2021, the Chancellor announced 130% super-deduction tax incentives. This incentive will allow companies to cut their taxes by up to 25p for every pound they invest. The CBI called for this focus on incentives to increase investment and it is a positive move for the UK, but there is a significant challenge in 2023 for the UK’s international competitiveness when this incentive comes to an end and corporation tax increases.

R&D 

R&D tax credit consultation 

A consultation reviewing R&D tax reliefs has been published alongside the Budget which the CBI will respond to. It will explore the nature of private-sector R&D investment in the UK, how that is supported or otherwise impacted by the R&D relief schemes, and where changes may be appropriate. Also published was a summary of responses from its 2020 consultation from which the government will consider bringing data and cloud computing costs into the scope of relief something CBI highlighted the need for in its Changing Nature of R&D report. 

Freeports and the levelling up fund 

The Chancellor announced eight new English freeports in the East Midlands Airport, Felixstowe and Harwich, The Humber, Liverpool City Region, Plymouth, Solent, the Thames, and Teesside. This announcement, alongside funds to support levelling up, were pitched, in part, as a means to ‘develop hubs of innovation in every part of the UK.’ Achieving this holistic approach to innovation would bring benefits to local businesses and help the UK wider economy.

Horizon Europe 

As part of the Brexit deal, the UK will continue to have access to Horizon Europe, the EU's headline programme for research and innovation, but the budget provided no detail on how Horizon Europe participation will be funded. Given that this budget has rightly recognised innovation will be critical for recovery, we hope it will not be at the expense of other domestic R&D schemes. 

Future Fund: Breakthrough

The government has committed to £375m to introduce Future Fund: Breakthrough, a new direct co-investment product to support the scale-up of the most innovative, R&D-intensive businesses. The British Business Bank will take equity in funding rounds of over £20m led by private investors to ensure these companies can access the capital they need to grow and bring prosperity to communities across the UK. 

Other Innovation announcements 

• As part of ongoing coronavirus investment and protection, Budget announced £733m for the UK Vaccines Taskforce in 2021-22 to purchase successful vaccines and £128m for research and development and vaccines manufacturing
• The government announced £92m as part of the its £1bn+ net zero innovation portfolio to accelerate near-to-market low-carbon energy innovation
• Global Centre for Rail Excellence –up to £30m to support innovation in the UK’s rail industry, including the testing of cutting-edge, green technology.

Talent and skills

There will be a consultation on enterprise management incentives (EMI) to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme. 

Also, on talent, the Chancellor announced visa reforms aimed at highly skilled migrants with a focus on supporting science, research, and technology. This included the introduction, by March 2022, of an elite points-based visa with a ’scaleup’ stream, reform of the Global Talent visa, and a review of the Innovator visa. Making the process of obtaining and maintaining a sponsor license easier is welcome and something the CBI has been calling for. Changes will be particularly welcome for SMEs who have not previously engaged with the points-based system. The CBI will consult with members to inform the government’s reform process.

Response to Lord Hill’s review on UK listings

The government has welcomed Lord Hill ‘s review which looks at how to make the UK an attractive option for high growth, innovative companies to publicly list. The Financial Conduct Authority will shortly bring forward consultations on changes to their rules on issues raised by the review. The CBI echoes this support for the review and the importance of a flexible, and proportionate, regulatory approach that maintains a global horizon to encourage deeper capital markets and greater investment.

Build Back better: our plan for growth 

The government has also published today ‘Build Back Better: our plan for growth’. The document highlights announcements made in the Budget and how they fit alongside existing schemes such as digital boot camps, investment in infrastructure and commitments to a National Data Strategy and provides a more detailed picture of how government views UK recovery. This further clarity will be welcomed by business.