by Alistair Maughan

The Autumn Statement and the UK technology sector – Can the government use macro-economic industry stimuli to fend off foreign invaders?

Dec 02, 2016
IT Leadership

While the Government’s recent Autumn Statement may have received a mixed response, it did at least contain some position news for the tech sector. Technology businesses can expect £2 billion extra investment in R&D for new technologies by 2021, a £23 billion productivity investment fund, reduced corporate tax and a faster broadband infrastructure.


Britain’s tech industry is a key part of British economy, amounting for 12.4% of Britain’s GDP – which compares very favourably with the average across the G20 countries, where the tech industry typically accounts for 5.3% of GDP. But contrast this with the comparative underinvestment in technology R&D, a key driver of the UK tech industry.

Among developed world countries, Britain ranks amongst the worst performers for spending on new technology and industrial machinery. To address the problem of falling productivity rates caused by insufficient funding, the Autumn Statement revealed plans to invest £2 billion more per year in research and development by 2020-21. This investment will back scientific research and development of robotics, artificial intelligence and industrial biotechnology in the public as well as the private sector.

The tech industry can also expect £390 million of investment in future transport technology. In particular, Chancellor of the Exchequer Philip Hammond mentioned driverless cars, renewable fuels and energy efficient transport. Some £100 million has been allocated for testing infrastructure on driverless cars, £150 million will provide for new electric and hydrogen buses and £80 million will be used to install more charging points for ultra-low emission vehicles.

Unsurprisingly, the government’s appetite for investment in research was widely welcomed by the tech sector. However, the excitement was muted by the concern whether these efforts will offset the negative effects on investment from Brexit. Since the Brexit vote, universities have struggled to obtain European Union grants and the government’s historically low amount of funding in the sector has not particularly future-proofed the tech industry for the up-coming uncertain times.


The government will invest £1 billion in full-fibre broadband and trialling 5G networks. In particular, the investment will support the private sector to roll out these projects. There will be also a £400 million Digital Infrastructure Investment Fund to encourage businesses to install fibre optic by 2020. At this point in time, only 2% of the UK population has access to full-fibre connections.


The Chancellor set out plans to protect British start-ups from buy-outs by providing the finance to innovative small businesses with the potential of growth. For this purpose, £400 million will be invested through the British Business Bank into Venture Capital Funds. Furthermore, the corporate tax rate will be cut to 17% by 2020. The government hopes that this measure should enable start-ups to scale more quickly and attract more talent to set up in the UK.

Start-ups are also expected to benefit from a £23 billion investment in the new National Productivity Investment Fund. This fund will provide major additional spending in transport, digital communications, research, development and housing.

Although the Treasury committed to supporting the UK tech sector in various areas, it might not be enough to outweigh the overall drop in investment and the talent retention problems resulting from Brexit. Some have doubted the effectiveness of having a R&D budget without clarity whether workers from abroad can apply for jobs in the UK. However, we might get more answers when concrete plans for implementation of these measures are introduced.

The effect of the Brexit vote clearly weighs heavily on the government’s mind. Looking back to the post-recession period from 2009 – 2014, British technology businesses became attractive M&A targets for US and Asian acquirors as those parts of the world recovered more quickly than the UK and Europe. That pattern may now be repeated post-Brexit, with the dollar-sterling exchange rate making UK acquisitions potentially good value. The questions is: can the government use macro-economic industry stimuli to fend off foreign invaders?