What tech recruiters need to know about the Spring 2023 Budget

On the 15^th March 2023, the UK Government announced its new Spring Budget, which included a boost in investment into high-growth industries such as tech.

According to the UK Government’s most recent economic estimates, the digital sector contributes the most revenue (£150.6 billion) to the UK economy each year, and employs over 1.7 million people. Figures also suggest that the sector could create a further 678,000 jobs by 2025, contributing an additional £41.5 billion.

Needless to say, the tech industry is essential to the growth of the UK’s economy. And on the one hand, it’s encouraging that the Government has accepted all the recommendations outlined in the Sir Patrick Vallance Review, which looks at the regulation of emerging technologies.

However, the budget also brings about concerns, such as cuts to research and development (R&D) tax credit amounts and a lack of updates on the long-awaited semiconductor strategy – a high-growth area for UK tech.

Let’s take a closer look at what the new budget means for the UK tech industry:

Investment in cloud computing and artificial intelligence

One of the most significant announcements is a £900 million investment in computing capabilities to develop a supercomputer and to establish a new AI Research Resource.

The Government also plans to establish the Manchester prize, an AI challenge that will award £1 million every year to researchers, for the next 10 years.

A new National Quantum Strategy

To ensure the UK becomes a global leader in quantum science and engineering, the Government announced a new National Quantum Strategy, with a ten-year, £2.5 billion package for quantum research and innovation.

The package aims to provide businesses with funding opportunities and access to research and development facilities. It will also help establish a regulatory framework for quantum science globally.

A higher R&D tax credit rate for tech startups

Despite some promising investments, a higher research and development (R&D) tax rate is set to be applied to small-and-medium-sized businesses.

Although there are no clear definitions or updates on what constitutes research and development, this announcement could see many tech startups face financial challenges.

According to an analysis from BDO, support for loss-making companies will drop from a 33.4% subsidy to an 18.6% subsidy.

Likewise, a study by the Coalition for a Digital Economy (Coadec) found that the R&D tax rate change could see companies worse off by an average of £100,000.

A lack of updates on the UK’s semiconductor strategy

The UK’s semiconductor industry has grown rapidly over the last decade, with global revenue increasing by 95% between 2012 and 2021. In recent years, the UK has established itself as an innovator in chip design, research and compound semiconductors.

However, in the budget plan, there was no mention of the UK’s long-awaited semiconductor strategy. For the UK to reach its full potential as a leader in semiconductor research, a strategy is needed to build on its strengths.

TechUK has previously highlighted the need for such an update and has published a proposal called Plan for Chips in an effort to encourage investment in the industry sub-sector.

How tech recruiters can navigate the budget announcements

With the increased investment in cloud computing and artificial intelligence, recruiters would do well to develop a strategy for attracting candidates with specialist tech skills.

In a candidate-driven market, employers need to meet the expectations of tech talent, and that means paying a competitive salary, offering flexibility, and career development opportunities.

Non-monetary incentives like mental health and wellbeing support, a positive company culture, and rewards and recognition are also important in engaging passive candidates who may not be actively looking to change employers.

With small companies expected to be worse off due to R&D tax credit changes, and with a lack of updates on the semiconductor strategy, there remains an element of uncertainty for tech companies.

Moving forward, we’d expect to see a number of companies futureproofing their businesses by focusing on upskilling their existing workforce and attracting entry-level talent.

To stay ahead of the competition, companies need to invest in learning and development programmes to ensure employees have the skills that will be required in the near-future. Customised learning is key to retaining top talent and companies need to invest in ongoing training to inspire commitment.

Likewise, nurturing relationships with schools, colleges, and universities can help companies develop a secure talent pipeline, particularly for skills related to emerging technologies like AI.

For more advice on how to attract and retain top tech talent, take a look at CWJobs’ recruiter resources, which include user guides, reports, podcasts, and webinars.