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Spring Budget 2023 – Britain: the world’s next Silicon Valley?

The Backdrop of the Potential Silicon Valley Bank UK Collapse:

Before we summarise the budget’s most note-worthy announcements for UK tech and its ambitions to rival Silicon Valley, it would be remiss to not mention how Silicon Valley nearly derailed this ambition only days before the Spring Budget. Except, this wasn’t Silicon Valley’s tech sector, but rather the Silicon Valley Bank (SVB).

At the start of the weekend, widely-voiced concerns about SVB and a failure to raise more funds causing waves of customer withdrawals, ultimately caused the bank to collapse. Merely hours after this collapse, the Bank of England moved to put SVB UK, the UK arm of the US bank into insolvency. This meant that its 3,300 customers (according to estimates by the FT), many of which were tech startups, couldn’t make payments or withdrawals. 

Ultimately, many businesses that had all their capital in SVB UK, wouldn’t be able to pay their employees, suppliers and put simply, they couldn’t operate. However, the good news for these businesses came on Monday when the Treasury confirmed that SVB UK has been acquired by HSBC, allowing the businesses that use SVB UK to access their capital.

This was a turbulent few days for many tech businesses and the UK tech sector as a whole, as it’s clear the collapse could have been catastrophic. Regardless of whether the founders choose to remain with SVB UK or not going forward, ensuring their money was safe was a huge positive for the ecosystem. The messaging within this Spring Budget for the UK’s tech sector could have quite easily been one of stability and recovery as opposed to growth. So for many in the tech sector, Jeremy Hunt will have been coming into this budget already with a big win under his belt. 

AI, Quantum Computing & The Regulation of Emerging Digital Technologies:

To start our review of the 2023 Spring Budget, we need to first look back to the 2022 Autumn Statement where Sir Patrick Vallance was asked to lead the Pro-innovation Regulation of Technologies Review and from this, he provided nice recommendations. Fast forward back to yesterday’s Budget, the Chancellor confirmed that the government had accepted all nice recommendations, ranging from cyber security,  transport & data sharing to space & satellite technology (the full review can be read here). 

However, two big focuses within this review and the Spring Budget were AI & quantum computing, with the following headline announcements:

  • AI Sandbox: the government will collaborate with regulators to create a sandbox for AI, with Hunt stating “to trial new, faster approaches to help innovators get cutting edge products to market”.
  • Generative AI: the government will release a clear policy position on the relationship between intellectual property law and generative AI. On this point, the Chancellor stated they will “work at pace with the Intellectual Property Office to provide clarity on IP rules so Generative AI companies can access the material they need”.
  • AI Research Resource & Exascale Supercomputer: the government intends to invest roughly £900m to establish a new AI Research Resource and to build an exascale supercomputer, which follows an independent Future of Compute Review that found that the UK’s most powerful computer ranks just 28th in the world. These resources will provide increased capabilities and support to the UK’s scientific and AI community.
  • The Manchester Prize: the government will also be awarding a £1m prize every year for the next 10 years to researchers that drive progress in critical areas of AI. This prize is named the ‘Manchester Prize’ honouring the world’s first stored-program computer built at the University of Manchester in 1948.
  • The Quantum Strategy: this 10-year vision outlines the actions for a new quantum research and innovation programme, with the government intending to invest a total of £2.5 billion over the next decade.

Research & Development (R&D):

Many tech businesses are heavily reliant on R&D tax credit relief, so it wasn’t welcome news when reforms to R&D tax reliefs were announced last year. These reforms impact expenditure on or after 1st April 2023, with the SME deduction decreasing from 130% to 86%, which saw the credit/repayment rate decreasing from 14.5% to 10%. Whilst the Research and Development Credit (RDEC) rate increased from 13% to 20%, this benefits larger businesses. 

Many from the tech industry were calling for these changes to be reversed but whilst it was confirmed these changes will go ahead as planned, there were some welcome changes announced in this budget:

  1. A new enhanced tax credit was announced for “R&D intensive” loss-making SME businesses. The criteria for “R&D intensive” is those SMEs that spend 40% or more of their total expenditure on qualifying R&D. For these companies, they will be able to claim a higher cash repayment of 14.5% for qualifying R&D i.e. the same as the pre-April 2023 credit rate as opposed to the new 10% credit rate.
  2. It was also previously announced that from April 2023, there would be new territorial conditions which effectively meant that subcontracted R&D activity would need to be performed in the UK to be eligible, bar a few exceptions. This was particularly bad news for the tech industry, where developers will often be subcontracted from overseas to undertake R&D activity. However, it was announced in this Spring Budget that this restriction will come into effect from 1st April 2024 instead of April 2023.
  3. Qualifying R&D expenditure will be expanded to include data licences and cloud computing services.

Another significant change is that all new claimants and those who haven’t made a claim in the previous 3 years will be required to inform HMRC of their intention to make a R&D claim within 6 months of the end of the accounting period to which the claim relate.

Finally, the consultation on merging the RDEC & SME schemes closed earlier this week but as yet no decision has been made and is unlikely to be made until a future fiscal event. 


As announced in last year’s Mini Budget, the increases in the limits that investors can invest annually (up to £200k) and companies can raise (up to £250k) under SEIS. Whilst this wasn’t mentioned within the statement, HMRC published a policy paper the same day confirming these changes were legislated within the Spring Finance Bill 2023, so these changes will go ahead from 6th April 2023 as planned. See our tech guide to EIS & SEIS for more details on these schemes.

Enterprise Management Incentives (EMI) Scheme:

Perhaps a little too niche to make it into Jeremy Hunt’s main speech, but something that the majority running a tech startup will be aware of (but if not, here’s a previous blog that explains it here), is the Enterprise Management Incentives (EMI) scheme. However, as always with most budgets, the devil is in the detail and whilst not ground breaking, the full budget outlined some simplifications to the process to grant EMI options, namely:

  • From April 2023:
    • Companies no longer need to declare that employees have signed a working time declaration although the requirement still needs to be met.
    • Companies no longer need to set out details of any share restrictions on the shares to be acquired within the option agreement. 
  • From April 2024, the government will extend the deadline for a company to notify HMRC of the grant of an option from 92 days following the grant, to 6th July following the end of the tax year (i.e. as part of the annual form 40 return).

Other headlines:

Whilst not necessarily tech-specific, the other key tax headlines from the Budget were:

  • The planned Corporation Tax increase to 25% will go ahead on April 2023 as planned. 
  • Whilst the Corporation Tax Super Deduction will end on 31st March 2023, the Chancellor introduced a new 100% First Year Allowance from 1st April 2023 to 31st March 2026. This will allow companies to write off the full cost of qualifying main rate plant and machinery in the initial year. Companies investing in special rate assets will also benefit from a 50% first-year allowance during the same period. 
  • The pension’s annual allowance will increase from £40,000 to £60,000. The lifetime allowance will also be removed (and abolished at a future finance bill). 

For a full summary of the budget announcements, click here. 

Spring Budget 2023: A positive or backwards step for tech?

The increased funding in the tech sector shows a willing to invest in it and develop it, but there will also be disappointment that the planned R&D reform changes will go ahead for those companies that don’t qualify for the new enhanced relief. So has Jeremy Hunt this week helped support the UK in his spoken ambitions for it to become the next tech powerhouse? Time will tell, but when you factor in the turbulence and unrest over the weekend from the potential SVB UK fallout, the economic outlook from many within the UK’s tech sector will be a more positive one today. 

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