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March 21, 2013

Expert reaction: UK budget announcement and Tech City

CBR rounds up expert comments on the UK budget announcements and its impact on the tech industry and UK start-ups.

By Tineka Smith

Billy D’Arcy, Managing Director of O2 Public Sector

"The budget highlights the ongoing pressure faced by Government to meet challenging savings targets in public spending. But increasing efficiencies isn’t just about reducing costs – it’s about inspiring change and introducing new ways of doing things that will fundamentally change the way the public sector operates. To turn the Government’s ‘digital by default’ aspiration into reality, there must be a step-change in how we as an industry deliver digital services to government departments.

"Whether it’s policies and devices to empower staff to work more flexibly, or a mobile app that makes it easier for police forces to engage with their local community, Government and businesses need to work more closely together to make sure that Britain’s public services are fit for the digital society of the future."

Sumir Karayi, CEO of IT efficiency company, 1E

"The UK is lagging behind countries like Denmark and Germany, where this investment is apparent. Our technology sector is suffering in particular as a result. There is little or no encouragement towards green technology or IT efficiency, both of which are emerging pillars of this industry. While there is a focus on investment in renewable energy, the Government must understand the difference between this and efficient IT if it has any hope of regaining a positive economic trajectory. Business investment in efficiency initiatives will give us immediate gains, while renewable energy is a long term investment – it takes years to come to fruition. These are years we don’t have to spare.

"Our economy is at a crossroads – while fostering junior talent allows highly skilled workers to emerge for the future, the technology sector has an immediate need for skilled people that can plug today’s increasing skills gap. While the investment in UK infrastructure is welcomed, making our workforce more mobile and accessible, the Government needs to be doing more to encourage talent to come and shine here, rather than let it go elsewhere."

Peter Grant, CEO of CloudApps

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"There are positives to be taken from the chancellor’s budget. His vision for an ‘aspiration nation’ is encouraging and backed up by his decision to reduce corporation tax further, making the UK a more hospitable place for innovative businesses to thrive. The reductions in National Insurance contributions for employers and the abolition of transfer taxes on AIM shares will also do much to encourage SMEs.

However UK business must be careful not to relax. The onus is on business themselves to drive economic renewal in the same vein as the founders of Silicon Valley and ultimately learn from them. This is where the ‘aspiration nation’ comes into its own. Businesses must innovate and this must be driven from within. Individuals should be encouraged to aspire to the next level and take on corporate responsibility at the same time as the business takes responsibility for pushing forward the UK economy. The budget may encourage growth but ultimately it is down to business and each employee to drive the innovation the economy needs."

Jessica Hawkins, Public Sector Technology analyst at Ovum

"The UK is now in its third year of a deficit reduction plan and today’s budget has shown that the hard work continues for the public sector. It faces further budget cuts, expected to release a total of £2.5bn that will be earmarked for capital growth funding. While some budgets are ring-fenced (health, education and overseas investment, with the police and Ministry of Defence (MoD) seeing their budgets frozen) overall most departments now have to face further cuts to their budgets in the region of 1%; those that have under-spent will lose the surplus. Striving to exceed their efficiency targets doesn’t necessarily mean any let up in the pressure to find savings.

"Despite this we expect to see more work in releasing efficiencies resulting in a changing vendor landscape and a continued move away from old guard of suppliers. Despite the significant challenge of budget cuts, in 2012 Ovum’s IT Services Contracts Analytics showed an increase in total contract value (TCV) spend on 2011 of 7%. However, this was still far below levels seen in the halcyon days of the public sector megadeal, between 2003 and 2005. Then, contracts such as IBM at the Department for Environment, Food and Rural Affairs, Capgemini at HM Revenue and Customs and HP at the Department for Work and Pensions and the MoD helped to boost average annual TCV to over $17bn, roughly three times the spend seen last year.

"So while for some a significant reduction/revision in spend has been all too apparent, the market is not entirely flat, and opportunities exist. Expect streamlined and more concentrated spend brought through single supplier registration for procurement, the planned changes in governance beginning with the Government CIO role being scrapped, and a stronger push to becoming a Digital Civil Service."

Tim Patrick-Smith, CIO at ICT services provider Getronics

"Osborne’s announcements around National Insurance and employment allowance are good news for British businesses. Yet it’s disappointing to hear no specific measures around extending technology hubs outside of the capital, so that more start-ups can utilise resources to grow their businesses and fuel IT innovation in the UK. In times of austerity, an encouragement of schemes such as Bring-Your-Own-Device (BYOD) across both private and public sector, through tax breaks on equipment allowances to staff, would have been welcomed to boost efficiencies and streamline processes. Given continued focus on boosting business activity, I would have also liked to see greater cross department strategic IT strategies that ensure technology is used to improve service delivery and provided joined-up services."

Sean Larner, VP international at Xirrus

"It’s promising to hear health budgets will be ring-fenced in 2013, but in the wake of the Stafford scandal there needs to be a greater commitment from Government to help hospitals embrace technology to deliver better patient outcomes. High-speed wireless technology will allow hospitals to introduce bring your own device schemes, which can provide medical staff with paperless access to patient information at the bedside. By pioneering the use of connected devices on wards, hospital staff can improve the overall patient experience through accessing patient records and X-Rays at the bedside, issuing e-prescriptions and ordering tests on the spot rather than waiting until the end of a ward round. At Xirrus, we work with NHS trusts and hospitals across the UK, and hear first-hand their desire to deliver better experiences to patients through the use of technology. We support Mr Osborne’s commitment to protecting NHS funding, but believe more support and guidance should be provided to hospitals so that they can utilise technologies to increase productivity and reduce administrational costs."

Tim Kay of KPMG

"In recent years the technology sector has been well supported by the government through schemes such as Patent Box, Seed Enterprise Investment Scheme (SEIS) and tax credits and this budget continues the trend, as well as attempting to address some of the issues that are seen to be holding back the sector.

"There has been a focus on entrepreneurship for a number of years and to a great extent this has been successful with clusters of early stage companies growing in many parts of the UK. Particularly pleasing in this budget was the focus not only on these early stage companies but also those who are looking to the next stage of their growth and development.

"The Employment Allowance be welcomed, helping companies overcome the hurdle of bringing staff onboard at critical points of their development. Along with the raft of changes and additions to SEIS, Corporation Tax, creative tax reliefs and additional funding, the UK must now be seen as having one of the most supportive sets of public policy in the world if you are a fast growing technology business.

"It was interesting to note the revised targets for government spending with SMEs – this is to be welcomed as technology companies in particular need to look not only to the debt and equity markets for funding but also to customers, whether they are in the public or private sector.

"The High Growth Segment from the London Stock Exchange in conjunction with the removal of Stamp Duty on AIM listed shares continues the drive to keep home grown businesses in the UK as they grow and look for finance.

"The UK was already a great place to create and operate your technology business and on the day that the Chancellor joined twitter, he has demonstrated his commitment to keep them here."

Jacqueline de Rojas, Vice President and General Manager at CA Technologies UKI

"The last year has seen the death of numerous businesses, both large and small. Today’s Budget goes some way to helping businesses survive in a struggling economy, which in turn will help avoid the UK heading towards a triple-dip recession. The planned reduction in corporation tax will ease the strain for UK companies, whilst at the same time making Britain a more attractive option for European businesses. Extra support for SMEs in the form of lending schemes and the reduction in National Insurance fees will also provide additional financial support in order to keep these companies alive.

However, businesses cannot simply rely on the Government to keep them afloat. Government initiatives are important but businesses need to take control of their own destiny. For me innovation is at the heart of this. The organisations that invest in innovation through-out the economic downturn will be the ones to grow and flourish in the future."

Matthew Finnie, CTO of Interoute

"It’s really disappointing that the budget speech included no reference to the tech industry. Last year we were inspired with the promise of incentives to support UK tech investment, and a vow to make the UK the tech centre of Europe. But George Osbourne was curiously quiet on this today, leaving us to wonder what has happened to last year’s bold claims?

"Osbourne remains focused on reducing the UK’s deficit, but in today’s internet focussed world, surely there’s no doubt that encouraging our technology industry is absolutely key to economic growth and success? The UK has the ideas, energy and innovation to make the UK a world leading technology centre, but it needs the right support and investment."

Simon o’Kane, SVP Worldwide Sales at Huddle

"George Osbourne’s plans to ‘make Britain the place to raise money and invest in business’, was music to my ears. As he pointed out, at the moment many companies have to look at alternative investment markets to grow their business. This is creating a barrier to economic growth in the UK as innovative companies are lured abroad.

"Reducing corporate tax will certainly entice more international businesses to set up in the UK, but the focus here should be to buy British. We are a nation of innovators and there are many great business ideas struggling to get off the ground. Plans to spend more through the Small Business Research Initiative and cut the National Insurance bill for businesses certainly sound very promising. It will mean more entrepreneurs can take that next step in building their business and hire a team. We need legislation like this in place that gives the UK entrepreneur more value in the UK economy than global businesses."

Richard Britton, CEO and founder of CloudSense

"Increased investment in infrastructure is critical for UK businesses so it is good to see a number of measures in this budget designed to help foster the right business environment. However, it is disappointing that there hasn’t been the level of investment in the digital economy that would have provided a major a boost to the country’s thriving tech industry. The telecoms infrastructure we have in place at the moment needs investment if we are to keep pace with the likes of Australia which is committing considerable resources through their National Broadband Network. With a better digital infrastructure in place we could then see tech start-ups emerging right across the country rather than just in certain established pockets. We have a brilliant tech sector in the UK but we need to give these young, innovative businesses the tools to grow and become significant employers. "


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