Spring Budget 2024: Focus on Technology and Media

The Chancellor set out his plans to make the UK the “world’s next Silicon Valley” with greater investment into innovative and creative industries.

Innovative industries

In addition to the £280 million package to simplify and improve Research and Development (R&D) tax credits announced in the Autumn Statement last year, the Chancellor said he would also:

• make it easier for pension funds to invest in UK growth opportunities, with greater transparency on where and how they generate their returns
• create a New British Savings Bond with a three year guaranteed return and a new British ISA, giving savers an extra £5,000 allowance for investments into UK equities
• commit an extra £120 million for Green Industries Growth Accelerator (GIGA) to stimulate private investment in clean energy supply chains, especially in the offshore wind sector, taking its total funding above £1 billion
• provide a further £270 million for innovative new automotive and aerospace R&D projects, focused on zero emission vehicle and clean aviation technology (as previously announced) so the UK can ‘lead the global race in developing nuclear technologies’
• extend the Recovery Loan Scheme (RLS) by 21 months (from July 2024 to March 2026) by transitioning it to the new ‘Growth Guarantee Scheme’, with £200 million allocated to the new scheme.

Creative industries

Further tax reliefs were announced for our creative industries with film and touring productions receiving the most focus through:

• changes to reliefs under the Audio-Visual Expenditure Credit (AVEC) rules announced earlier this year, with a 5% increase in the rate of tax credit for video games, film and high-end TV to 39% (in line with animation and children’s TV) before corporation tax
• the removal of the 80% cap for visual effects costs under AVEC
• the announcement of the UK Independent Film Tax Credit (IFTC), under which eligible films will be able to opt-in to claim enhanced AVEC at a rate of 53% (before corporation tax) on their qualifying expenditure, capped at a budget of £15 million
• eligible film studios in England being able to receive 40% relief on their gross business rates until 2034
• tax reliefs that were introduced during the pandemic and due to end in March 2025 being made permanent at 45% for touring and orchestral productions and 40% for non-touring productions.

Digital technology and Artificial Intelligence (AI)

While much was made of the size of the UK’s tech economy and its status as a leading innovator in AI, the Spring Budget produced relatively little by way of investment or incentives. The headlines were:

• a further £50 million (over five years, taking the total to £100 million) of funding for the Alan Turing Institute, the UK's national institute for data science and AI. The adoption of generative AI is expected to be critical in improving the UK’s productivity and economic prospects.
• a new £7.4 million AI upskilling fund will be launched to encourage the adoption of AI across the private sector
• the announcement of a plan to be published later this year setting out how the government will manage access to the UK’s public AI compute facilities
• £5 million of UK Research and Innovation (UKRI) funding announced for four pilot projects to test collaboration and data sharing for research innovation.

NHS productivity plan

While not direct investment into the UK technology sector, the Chancellor also confirmed £3.4 billion for the NHS’s technological and digital transformation, to include:

• the roll out of universal electronic patient records
• using AI to automate back-office functions and reduce form filling by doctors
• digitising operating theatre processes
• transforming the NHS App
• setting up a new NHS Staff App.

In summary

With public sector productivity being not just a political imperative, but a fiscal one too, vendors and service providers operating within the public sector are likely to continue to drive growth and opportunity in the technology sector. Green industries continue to receive significant funding into secure and sustainable energy and creative industries have received a much needed boost to their fortunes through enhanced tax credits. However, given the prevalence of data leaks and cyber attacks affecting UK businesses and our critical infrastructure, we were surprised at the lack of focus on cybersecurity in the Chancellor’s Budget. Encouraging wider investment into UK equities is clearly aimed at stimulating economic growth across the board, but we would expect UK technology and media companies to remain at the forefront. Finally, further investment in tech clusters is welcome, such as the health tech cluster in Canary Wharf or the funding settlement to the development of Cambridge.