The UK stands at a cultural and economic crossroads in the aftermath of the Covid-19 pandemic and a last-minute Brexit deal.
With many businesses coy on bold investment after an extended period of uncertainty, Chancellor Rishi Sunak’s announcement this month of a £520m funding boost to support Britain’s digital infrastructure and skills will be a much-needed shot in the arm for business leaders. The time has come to guide Britain towards an efficient e-infrastructure, with businesses underpinning the future dividends.
Even before these twin crises took a hold of UK business strategy, the economy was in desperate need of reconciling its dependence on outdated tech. Figures released by the ONS measuring the UK’s productivity gap before the onset of the pandemic highlight the danger of complacency, with growth notably sluggish over the past decade. Particularly as businesses adjust to new ways of working, it is crucial that investment in tools that can drive productivity and sustainable economic growth is made a priority.
Additionally, a recent study by Microsoft and Goldsmiths University showed that more than two thirds of UK business leaders felt their enterprise was facing a digital skills gap. Interestingly, the two most significant factors reported were the cost of improving skills, and a lack of strategy in investment. This demonstrates clearly that while it can be tempting to take a surface-level view of the skills gap as an issue for businesses to correct, the role of state investment and infrastructure cannot be discounted.
So, how has Mr Sunak sought to encourage business leaders out of their shells to remedy this fundamental issue with the UK economy?
Research & development
In his Budget 2021 announcement, the Chancellor stated that “brilliant SMEs are the backbone of our economy … so it’s vital they can access the tools they need to succeed”.
For leaders of small and medium enterprises, these words will come as a welcome reassurance of their long-term standing in the UK’s economic plans – and the detail of the plans will provide a vigorous incentive to start investing for the future. The government has cited “relatively low adoption” of digital software and tools as a key reason for flagging productivity levels, meaning much of what has been announced is not just enticing for wary SME leaders, but crucial for the UK’s economic future.
Plans to review levels of tax relief on research and development costs involving tech stands as one of the most significant stimulus measures to date and will be a huge boost to firms lacking confidence under current conditions. It was further announced that data and cloud costs are being considered to come under this umbrella, which would be a welcome addition and lend this policy a potentially radical impact on business operations. Factoring in not only the sum cost of R&D investment, but also aiding enterprises in transitioning to a more streamlined and cost-effective digital strategy with an effective subsidy on medium to long-term operating costs will dramatically improve uptake should the policy roll out as anticipated.
All of these measures are aimed at making the UK an appealing host for outside investment in research, as well as lifting barriers for domestic enterprises to innovate and boost productivity. While encouraging investment is crucial, it should also be noted that the skills gap must be addressed to take the fullest advantage of the potential being unleashed.
Indeed, Microsoft’s study also found that 78 percent of business leaders in the UK feel that a large pool of digitally literate talent will be a key driver of growth. The UK’s new post-Brexit visa reform had left many concerned it would become much harder than before to recruit talent from other markets to plug the digital skills gap. These fears, however, have been swiftly assuaged with the announcement of fast-tracked tech visas for highly skilled tech employees, as well as entrepreneurs. This should maximise the opportunity presented by this substantive drive to make the UK more competitive in the short run, while the benefits of a planned £126m investment into training for domestic employees come to fruition.
Subsidies – help to grow digital
The overnight transition to remote working put tremendous strain on businesses and the economy. Such a radical adjustment will understandably have had a dragging effect on productivity, and much of this can be put down to poor tech infrastructure.
Exploring this issue, Studio Graphene commissioned a survey of more than 900 UK workers on the transition of working life to remote, or hybrid working. The findings revealed that half (49 percent) of enterprises were simply unprepared for remote working, with similar numbers having to invest in new hardware (49 percent) and software (48 percent) to enable the transition. Meanwhile, a quarter of employees (24 percent) found the change difficult due to not being comfortable using new technologies they were now expected to rely on.
The Chancellor has targeted this issue with further ambitious investment, in particular the Help to Grow Digital scheme, which aims to help more than 100,000 SMEs update their software and tools to bring them in line with modern standards, leaving bloated and obsolete systems in the past. A planned 50 percent discount on the costs of investing in new digital infrastructure is a much-needed nod towards a sustainable model of productivity and profitability for SMEs – the kind of streamlining which will truly position them as the “backbone” of the UK’s economic recovery in the short-term.
While these reforms will be welcomed with open arms by SME business leaders, they are of course compromised somewhat by fiscal limitations following Covid-19 and Brexit. Further investment, looking more at national infrastructure or broader digital training for all levels of employees in the UK, will be contingent on the success of these early stimulus measures. The early signs are an encouraging, if belated, recognition of the UK’s past failures with digital infrastructure, but only time will tell if these plans go far enough to bring confidence back into UK business.