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Spending Review should lay the bedrock for a tech led recovery

Investing in digital adoption, R&D, skills and the smarter state can position the UK to build back better.

While we look forward to the day when the Coronavirus is defeated, taking action now to help businesses adapt and prepare for what comes next will be vital to underpin the UK’s economic recovery and renewal.

To do this the Spending Review must take action, not just to support business models adapt to a socially distanced economy in the near term, but also encourage them to take advantage of the emerging consumer trends that will continue in the long term, even after the crisis is over.

For example, in the early stages of the pandemic, online grocery shopping doubled its market share, digital-only banking saw a 165% increase since 2019 and the proportion of retail sales made online increased by one third between January and July 2020.

Businesses themselves are ready for this opportunity. Polling by techUK has found that 71% of managers and decision makers across the country believe that they will become more dependent on digital technologies as a result of the pandemic.

There is a lot to be gained from supporting businesses to realise their ambitions to invest in tech. Research by Cisco has shown that the most digitally able firms have been more resilient during the pandemic and that by improving SME digital capabilities we could add £155bn to UK GDP. This presents an opportunity not just to protect livlihoods in the near term, but to lay the groundwork for new job growth underpinned by increased technology use.

However, the economic impacts of COVID-19 could see this moment lost and the opportunity missed.

Polling by Sage has found that due to severe and ongoing cash constraints 1 in 2 SMEs report that they have no cash to invest and that of those who do just 41% say they will be able to make the tech investments they think they need. This is despite 71% of SMEs saying that investment in tech will help boost their profitability and create more jobs.

Throughout the pandemic the Government has taken swift and welcome action to support buisnesses facing hardship, however we must now also look to business and economic transformation to be ready for what comes next.

In our submission to the spending review techUK has called on the Government to seize this moment to enable businesses to drive foward the UK's digital transformation by taking action to reduce barriers to digital adoption through the expansion of the financial support available for SMEs to adopt the technologies they themselves believe are vital.

The Government should support SMEs by expanding the ‘back on track’ scheme to help reduce the costs of adopting digital technologies as part of the COVID recovery. The Government should also examine how the UK Shared Prosperity Fund can be used to drive and accelerate digital adoption across the UK.

Government should also explore the creation of a Chief Digital Officer Credit, a redeemable tax credit against advice and support for SME leaders to gain new skills in their use of business technology, potentially increasing the annual revenue of individual SMEs by £262,000.

Preparing the ground for the economic recovery:

While the Spending Review has been cut to one year we cannot miss this opportunity to help business and the wider economy move from mitigation, to adaption, to transformation.

As well as supporting SMEs to adopt new technologies the Spending Review should also begin laying the bedrock for the wider economic recovery by taking action to put the UK on course to become a science and innovation superpower, develop the skills needed for the jobs of the future and build the smarter state. This will help prepare the ground for growth that can then be accelerated in next year’s Budget and a future Comprehensive Spending Review.

In our submission techUK has also called on the Government to aim to:

Make the UK a science and innovation superpower; by supporting investment in Open RAN technologies to regain UK leadership in 5G technologies, guaranteeing funding for the Centre for Data Ethics and Innovation, expanding the R&D tax credit to cover investments in data, facilities and machinery and by seeking to establish an international centre for AI and climate change at the COP26 conference in Glasgow next year.

Prepare the UK for the jobs of the future; by building a digital skills platform to support people find and train for new digital jobs, reform the apprenticeship levy and supporting a great digital catchup, by providing £130 million to support the Good Things Foundation proposal to boost digital inclusion.

Build the Smarter State; through upgrades to the capabilities of Government by replacing legacy IT that will help improve public services and reduce legacy costs to Government of up to £2.5bn per annum. Invest in data driven public services underpinned by technologies such as Digital ID and continue support for the MHCLG Local Digital Collaboration Unit and Local Digital Fund to grow local digital economies and help local authorities achieve £14.7bn in savings through the greater digitisation of local services. 

You can read our full submission to the Spending Review here.



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