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Chancellor’s Autumn Statement pledges tax cuts and £500m AI investment

Written by Thu 30 Nov 2023

The Chancellor’s ‘Autumn Statement for Growth’ announced on 22 November focuses on fortifying the UK’s economy through significant tax cuts for working people and businesses.

Central to this plan is the aim to stimulate growth and productivity, including a £20 billion ($25.2 billion) annual boost in business investment, increasing employment, and implementing the most substantial tax cut for workers since the 1980s.

A major highlight of the Statement is a new £500 million ($631.5 million) investment in artificial intelligence (AI) compute. This funding is set to support the UK’s leading scientists and AI researchers, fostering breakthroughs that could benefit the entire society. It also aims to bolster the AI startup ecosystem, positioning the UK as a prime location for developing AI-focused businesses.

This investment in AI and computing is expected to have far-reaching impacts, including advancements in tackling climate change and powering new drug discoveries. The economic growth is further supplemented by societal benefits stemming from these technological advancements.

The Autumn Statement also introduced five new Quantum Missions, designed to drive collaboration among academics, industry leaders, and private investors. These missions focus on achieving significant advancements, such as integrating quantum sensing into the National Health Service (NHS).

In addition to these technological initiatives, the Statement featured measures to aid business scale-ups. This includes the provision of clearer rules for ‘spinout’ companies and the introduction of regulatory sandboxes. These sandboxes will allow for the testing of new products, services, or business models in a controlled environment, encouraging innovation while ensuring safety and regulatory compliance.

Science, Innovation and Technology Secretary, Michelle Donelan, said: “I believe that the UK’s incredible science and tech success story is all about having the skills for the future, investment in scale-up and sensible regulation.

“The Chancellor’s Statement injects even more fuel into our science and tech economy – and will help to realise my vision for a country where more high value British jobs are driving us faster toward amazing discoveries that will help us live longer, healthier, happier, easier lives.”

UK Government Boosts Tech Sector

The £500 million in funding for AI compute, spread over two years and part of the expansion of the AI Research Resource, is set to provide the country’s leading scientists and AI researchers with state-of-the-art computing power.

Claire Trachet, CEO and Founder of business advisory Trachet, said: “[The investment] will enable tech firms to bring cutting-edge products to market faster and ensure that Britain doesn’t lose its spot as a leader in Europe for this sector. Following on from the success of supercomputing centres in Edinburgh and Bristol, the Government are doubling down on their ambition to make the UK an AI powerhouse”.

Essential for processing complex tasks, this investment is expected to lead to groundbreaking discoveries in areas such as climate change, new drug development, and the enhancement of AI applications to improve everyday lives.

Furthermore, this investment aims to bolster the UK’s AI startups and small and medium enterprises (SMEs), providing them access to advanced resources and reinforcing the UK’s position as a prime location for AI innovation.

Tom Whittaker, Senior Associate at independent UK law firm Burges Salmon, said: “The announcements in the budget are welcome for the AI industry. Government recognises much of what industry has been calling for – investment, access to capital, access to computing capability. However, industry is still calling for more – changes to investment schemes, changes to visa systems to attract more global talent, and improving technology education at all levels.

Connected to the Autumn Statement, there remains a split about whether the UK is taking the right approach with AI regulation.

“Some argue that the UK is doing too little, too slowly and that the EU’s proposed AI laws will set the standards in this field. Others argue that the UK is taking the right approach, utilising existing regulators and regulations without burdensome new legislation,” added Whittaker.

Is the AI Investment Enough?

The investment was met with some skepticism. Jonathan Boakes, Managing Director at Infinum, said: “The UK Government’s allocation of £500 million for AI powerhouses and a 25% tax deduction on IT expenditure shows strong support for tech innovation. But, there’s huge concern that this investment might not be used wisely.”

According to Boakes, research shows 78% of UK businesses plan to invest in AI in the next year, but 73% feel unprepared for its integration.

“Success in the AI revolution demands more than just plugging gaps with cash. It requires strategic planning, workforce training, and expert collaboration to maximise the impact and prevent implementing AI for AI’s sake. The rush to embrace AI carries the risk of hasty decisions fueled by FOMO, jeopardising sound judgment,” said Boakes.

Boakes suggested that while the financial boost is appreciated, it must come with clear guidelines and support from the Government to empower businesses in utilising it effectively.

Dr Chris Pedder, Chief Data Scientist at OBRIZUM, said: “Earmarking £500 million over two years to establish innovation centres is a great step in reinforcing the foundations for the UK’s goal of AI leadership. AI has expansive economic potential, and the UK is right to recognise it. However, realising game-changing impact from AI requires understanding it is not a siloed technology, but the ultimate cross-sector innovation enabler.”

Pedder advised that to truly harness AI’s benefits, we must take an integrated policy approach spanning skills, infrastructure, governance and enterprise, ultimately enabling companies to rapidly deploy the technology through incentives and sandboxed pilot programmes.

“With integrated support across talent, industry and academia, combined with progressive policies fit for the algorithmic age, the UK can lead the rise of AI for economic and societal progress,” said Pedder.

Microsoft also recently announced a £2.5 billion ($3.1 billion) investment to build AI data centres in the UK.

The Chancellor Makes a Quantum Leap

Accompanying this initiative, the Chancellor introduced five new Quantum Missions, designed to cement the UK’s leadership in quantum technology.

Underpinned by a £2.5 billion ($3.1 billion) Quantum Strategy, these Missions focus on areas such as computing, healthcare, and navigation.

Quantum technologies, recognised as one of the Government’s five critical technologies, offer capabilities beyond those of traditional binary computers, potentially solving complex problems and opening new possibilities in various fields.

The Quantum Missions set ambitious targets for the coming years, including the development of UK-based quantum computers capable of performing trillions of operations by 2035 and the deployment of the world’s most advanced quantum network.

By 2030, these advances are expected to bring benefits to the NHS through quantum sensing, enhance navigational systems on aircraft, and provide new situational awareness tools in sectors like transport, telecoms, energy, and defence.

In addition to these technological advances, the Autumn Statement announced plans to support the growth of semiconductor manufacturers within the UK.

The Chancellor clarified the role of the UK Infrastructure Bank (UKIB) in this endeavour, highlighting its capacity to invest in essential supply chains, including semiconductor manufacturing.

With a financial capacity of £22 billion ($27.7 billion), the UKIB is actively engaging with the semiconductor sector to explore market opportunities.

The British Industry Supercharger scheme is another significant initiative, aiming to align energy prices for eligible British chip makers with those in major global economies, addressing the high costs and energy demands associated with semiconductor production.

In addition to these investments, the Chancellor has announced a £50 million ($63.1 million) investment for developing the UK’s battery capabilities, from R&D to industrialisation, and an additional £11 million ($13.8 million) for collaborative R&D in battery development, incorporating AI technologies.

Propelling UK Enterprise and Innovation

The Chancellor’s Autumn Statement introduced significant measures to encourage enterprise creation and scale-up in the UK, marking a pivotal shift in the Government’s approach to fostering business and technological growth.

A key feature of the Statement is the introduction of full expensing, a 100% first-year allowance for main rate expenditure, along with a 50% first-year allowance for special rate expenditure.

This move, aimed to be permanent, represents the largest business tax cut in modern British history. It positions the UK with the lowest headline corporation tax rate and the most generous capital allowances among G7 countries.

The Office for Budget Responsibility projected that these changes will increase annual investment by approximately £3 billion ($3.7 billion), contributing to a total of £14 billion ($17.6 billion) over the forecast period.

The overall impact of these growth measures is expected to boost business investment in the UK economy by around £20 billion ($25.2 billion) a year within a decade, equating to nearly 1% of current GDP levels.

Startups, Scale-ups, and Spin-outs

The Autumn Statement also focused on university spin-out companies, acknowledging their crucial role in the UK economy.

Following an independent review led by Irene Tracey and Andrew Williamson, the Government has accepted all recommendations to foster an innovation-friendly environment for such ventures.

To support this, £20 million ($25.2 million) will be provided to encourage more spin-out companies, with a focus on establishing equitable and efficient equity stakes for universities in life sciences and other sectors.

Arran Dewar, Executive Director of SIS Ventures said: “It is encouraging to see the UK Government prioritising investment into startups, scale-ups and spin-outs. As the Chancellor has rightly said, innovation is the key to our future success as a nation. However, it is vital that the benefit of this investment is felt across the UK, not just within the Golden Triangle.

“Scotland has a rich reputation for innovation, going back generations, but we will only continue to produce world-leading inventions if our entrepreneurs and scientists secure access to the funding they require to translate innovative ideas into game-changing businesses.”

Dewar also said he would like to see further consideration given to prioritising investment for those ideas and businesses which are delivering positive impacts for people and planet, not just profit.

“Given some of the significant social and environmental challenges we are facing in the world today, business and science have a huge role to play in helping to find the solutions. Overall, however, the measures announced today should be received as welcome news for innovation in the UK,” added Dewar.

To enhance the UK’s venture capital industry, a new £3 million ($3.7 million) fellowship programme has been announced. This scheme aims to cultivate a new generation of science and tech venture investors, with a pilot scheme offering training and networking opportunities for up to 20 participants.

This programme is in line with the recommendations from the Prime Minister’s Council for Science and Technology and is expected to complement the globally recognised Kauffman Fellowship in the US.

The Government’s response to Sir Paul Nurse’s Review of the Research, Development and Innovation (RDI) Organisational Landscape sets out a comprehensive strategy to diversify and strengthen the RDI landscape in the UK.

This strategy includes providing £25 million ($31.5 million) for small and medium-scale research infrastructure and establishing world-class Discovery Fellowships. The Government aims to make the UK a leader in philanthropic partnerships, as demonstrated by the new consortium of philanthropic funders for UK Biobank.

UK Government Enhances Focus on Skills, Life Sciences, and Space Technology

In the Autumn Statement, the UK Government also underlined its commitment to enhancing key sectors, including skills development, life sciences, and space technology.

In further support of scientific and technological development, the Chancellor backed the new Faraday Discovery Fellowship with a £250 million ($315.5 million) endowment to the Royal Society.

This investment will support at least 30 mid-career scientists and researchers for up to ten years each, allowing them to conduct innovative research in various STEM fields, including priority areas like Engineering Biology and Quantum.

Highlighting the importance of mathematical skills, the Government also announced its plans to establish a National Academy focused on mathematical sciences.

Recognising the pivotal role of mathematics in various fields, the Government aims to provide sustainable support to this sector. An engagement process with key stakeholders in the mathematical community will be initiated to determine the best approach for this development.

The Government has pledged up to £6 million ($7.5 million) in seed funding over the next three years, subject to the business case, to support this initiative.

Dr Chibeza Agley, CEO and Founder of OBRIZUM, said: “The Government’s commitment in the Autumn Budget Statement to boost numeracy, literacy and apprenticeships is a step in the right direction. However, simply allocating funding is not enough; we need systemic reforms to how we learn in order to truly build the skilled workforce UK businesses need.”

Agley argued that while foundational skills are invaluable, today’s antiquated approach to one-size-fits-all learning fails to accommodate the diverse learning requirements of individuals.

“The budget seemingly overlooks the pressing need for self-paced, adaptive learning platforms that verify skills acquisition. Without modernising dated systems, students are incentivised to shortcut assessments rather than deeply engage. Yes, let’s invest in skills – but through upgraded channels tailored to individual strengths.

“Only by bridging siloed education and employment can we deliver the agile, future-proof workforce to power innovation and productivity. The budget funds are welcome; realising their full potential now depends on the right implementation,” said Agley.

Giving Life to Life Sciences

In the realm of life sciences, the Government is investing significantly to reinforce the UK’s position in this critical sector.

As part of the £4.5 billion ($5.6 billion) allocated for strategic manufacturing sectors, £520 million ($655.6 million) is earmarked for life sciences manufacturing.

This investment is designed to build resilience for future health emergencies and to capitalise on the UK’s leading research and development capabilities.

Furthermore, the Government is investing £10 million ($12.6 million), matched by an additional £10 million from Scottish Enterprise, in the Oligonucleotides Manufacturing Innovation Centre of Excellence. An additional £51 million ($64.3 million) is provided to support Our Future Health, the UK’s largest research study, focusing on developing better methods to prevent, detect, and treat diseases.

Regulation, Regulation, Regulation

Regulation also received significant attention in the Autumn Statement.

The Department of Science, Innovation and Technology (DSIT) has launched regulatory sandboxes in areas such as telecommunications spectrum sharing, engineering biology, and space.

These sandboxes are designed to foster innovation while ensuring safety and compliance with UK standards.

In telecommunications, the focus is on enhancing spectrum sharing to support future network technologies like 6G. In engineering biology, the aim is to commercialise biology-derived products sustainably. For space technology, the Government is undertaking a regulatory review, with a focus on developing guidelines for space missions.

Investments Out of this World

The Autumn Statement also featured substantial investments in space technology. Nearly £47 million ($59.2 million) will be allocated to boost the Earth observation sector, as the UK rejoins the Copernicus programme.

This funding will support businesses and SMEs working with Earth observation data, fostering innovation and contributing to economic growth.

Additionally, £15 million ($18.9 million) is available under the European Space Agency’s programme for developing low-earth orbit satellite communications, which are crucial for enhancing connectivity in remote and rural areas of the UK.

Image Credit: Number 10

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Written by Thu 30 Nov 2023

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