How will the 2020 Budget affect the UK tech sector?

Explanation of immigration

The Brexit referendum was, arguably, fought over two central issues: sovereignty and immigration. It has been a surprise, therefore, that the government has failed to clearly elucidate its plan for the latter.

Some details have become clear: the points-based system will be introduced with varying tiers of skills, and there has been talk of “approved companies” and “appropriate skill levels” being used to review applications.

However, such vague terms will be of little comfort to budding tech entrepreneurs looking to move to the UK. After all, it is highly unlikely that their startup (or business concept) will be registered or approved by the government when they apply for a visa.

Consequently, it is the case that the tech sector is keenly awaiting further clarity on this issue. After all, with nine of the UK’s 14 “unicorn startups” (businesses worth upwards of £770m) owing their success to at least one foreign-born founder, one should not underestimate the importance of international access to the UK’s tech sector.

So, without clear immigration policies, the number of tech sector startups might diminish.

Tax relief for entrepreneurs

Entrepreneurs’ relief is a tax benefit, designed to incentivise people to grow their own business by reducing capital gains tax on all startup business gains up to £10m.

It essentially halves the rate of Capital Gains Tax (CGT) from 20% to 10% on the first £10m of gains from selling a company. However, rumours are rife that the government plans to cut, or worse still, abolish the relief to increase spending on public services.

It is likely that those in the tech sector will be waiting with bated breath for clarity on this subject. Eradicating entrepreneurs’ relief will do nothing to incentivise tech startups to grow in the UK.

It will be hoped, however, that should the worst happen, the chancellor will offer suitable replacements to ensure that entrepreneurial activities in the tech sector don’t grind to a halt.

Digital infrastructure investment

The UK’s digital infrastructure has mixed strengths. While the planned roll-out of 5G got off to a difficult start with China-related controversy, coverage for rural areas is ever-increasing.

The next budget is likely to continue this trend and provide further provisions for rural 4G (a deal has already been struck with EE, Three, and others) and 5G.

For tech startups, this can only be good news. By encouraging all of the UK to become technologically integrated, especially for non-city dwellers, the talent pool for recruitment will be massively increased.

With remote working becoming increasingly the norm, ensuring the entirety of the UK is well-connected must be a priority. What’s more, improving internet access could help to inspire new generations of tech entrepreneurs to start their own organisations outside of London.

Improvements to cyber security

UK tech startups will also be hoping that Boris Johnson prioritises digital safety. More of life than ever before is online, with recent scandals involving big tech firm illustrating the importance of cyber security investment and regulation.

The government has already committed £100m to making hardware more resilient though updating design processes. It is yet to be seen whether this, and other promised investments, will be sufficient to protect the UK at a national level.

The cyber security sector is booming and it now employs close to 50,000 Brits, suggesting that future government action will have to be significantly greater than in previous years.

Greater focus on this area would be very welcomed by the tech sector, thereby ensuring that the industry remains a safe environment to drive innovation.

Tech education

Finally, it will be interesting to see whether the government delivers more funding for tech education to help close the skills gap. The latter will need be tackled from all angles, as ensuring the UK has enough highly skilled domestic talent is vital.

The promised introduction of T-Levels and a National Retraining Scheme, both announced at the Conservative Party Conference and aiming to help make the population more tech adept, is (merely) a positive first step.

It would seem inevitable that, without improvements to tech education, the UK could lose generations of budding entrepreneurs who might have otherwise contributed to the growth of the sector.

The next budget will therefore be a major turning point for the tech sector. Risks from immigration policy changes and cyber security are real, and the skills gap has yet to be tackled head on.

The government has taken steps to settle the nerves of the tech sector, however it is clear that more affirmative action is needed if the industry is to thrive in a post-Brexit world.