A coalition of prominent technology companies, think tanks, and industry leaders has come together ahead of the Autumn Statement to urge the UK Government to take decisive action to support investment in digitalisation.
In a joint industry letter, the collective calls for the introduction of enhanced tax reliefs for expenditure on digital services, a move that could enhance innovation and productivity across the UK’s business landscape.
The aim of this proposal is to empower small and medium-sized enterprises (SMEs) to embrace digitalisation and leverage emerging technologies like Artificial Intelligence (AI) to increase productivity and ensure sustainable growth.
Signatories to the letter include national trade body techUK, Newcastle software giant Sage, the North East Chambers of Commerce, and Scotland IS. The letter recommends an increased tax deduction of 140% on the first £50,000 of expenditure on productivity-enhancing digital services. This represents an additional 40% compared to standard business expenditure and caps at a maximum of £17,500 in tax deduction.
The UK digital economy is a vital contributor to the nation’s finances, generating a staggering £392.9 billion in 20201. Nevertheless, the country lags behind its global counterparts in the adoption and application of digital technologies. According to research conducted by Be the Business, the UK invests less in technology compared to its G7 peers, even though 92% of SMEs consider technology crucial to their survival.
Economic modelling by Sage has demonstrated that fully realising the benefits of technology by SMEs could add an extra £232bn per annum to the UK economy. The intervention proposed in the letter would provide a much-needed boost during a time when accelerating growth and business productivity is crucial, particularly to combat inflation and prevent the UK from falling behind other high-tech nations.
The letter encourages the UK Government to send a clear signal to the tech sector by supporting SMEs and underpinning tech investment through a simple digital adoption incentive scheme.
Julian David, CEO of techUK, said: “SMEs are the backbone of the UK economy and need to get the right support to grow and scale. A coordinated effort to bolster digital services will not only empower SMEs but also propel the UK into a future where innovation, growth, and competitiveness are secured.
“The digital economy is the cornerstone of growth, promising to deliver a new generation of enterprises, tech startups, and innovation. This is an opportunity for the UK to regain momentum in tech adoption, essential for driving further investment.”
Steve Hare, CEO of Sage, added: “The UK Government wants Britain to be a tech superpower, enabling home-grown businesses to compete internationally. For this to happen, it’s crucial SMBs are supported on this journey.
“Other nations have implemented policies that reinforce their digital infrastructure. It is time the UK not only follows suit, but aims to lead, by elevating financial incentives for SMBs when it comes to digital services.
“This will empower small and mid-sized business owners to become more productive and grow sustainably.”
