As the country emerges from the challenges of the pandemic, ministers and officials have a chance to build on the digital successes of the last two years, according to Julian David
The Covid-19 pandemic has been one of the greatest tests the UK’s economy and society have ever faced. However, the adaptability and creativity of the British people have been central to how our society and economy weathered the lockdowns and have put the country in a better place to rebuild after the crisis.
From where I was sitting, one of the key strands of the UK’s Covid-19 response was the way individuals, businesses, and government utilised technology to create new ways of working, connecting and shopping. Almost two years on from the first lockdown, this accelerated adoption of technology is no longer a knee-jerk response to the pandemic, with tech- and digital-led growth models being placed as central to the growth strategies of companies across the economy.
This is a shift based on experience and success. Larger businesses and those operating in sectors which were more able to conduct their work via digital channels performed better, with those businesses that were less able to make that switch more likely to have ceased trading or to have put staff on furlough. The most technologically-savvy companies did not just survive, but thrived, able to grow up eight times faster than their peers.
From what we see in how businesses plan to invest in 2022, tech-led growth is here to stay; Deloitte’s latest survey of chief financial officers shows that, in 2022, businesses will be focusing on investment in digital technology and acquisitions to deliver the gains in productivity and business performance that they want to achieve after the pandemic.
This sentiment was echoed by techUK’s members with over half (57%) of those who responded to our most recent Digital Economy Monitor Survey saying they plan to invest more in the UK, driven by a demand for digitisation.
One of the key strands of the UK’s Covid-19 response was the way individuals, businesses, and government utilised technology to create new ways of working, connecting and shopping. Almost two years on from the first lockdown, this accelerated adoption of technology is no longer a knee-jerk response to the pandemic.
To make 2022 the UK’s recovery year, we must readily embrace this opportunity.
A recent report by the Department for Digital, Culture, Media and Sport showed that if we can strengthen and support digital ecosystems throughout the UK, we could add another £41.5bn to the economy by 2025 supporting 678,000 new, well-paying jobs.
However, accelerating tech-led growth will not happen on its own and will require action to ensure that not only can we drive investment into the UK tech sector, but that other sectors of our economy have the ability and resources to complete their own digital transformation journeys.
Increasing investment in UK tech will require a number of steps.
Two-thirds of investment in UK tech comes from international investors. This is one of the UK’s great strengths – marking us out from our European neighbours who rely more heavily on domestic investment – and opens our sector to a mix of ideas and innovation from around the world.
The UK’s new National Security and Investment regime proposed a shake-up of merger rules that will put a much higher degree of burden on international investors, specifically in the tech sector where investments in technologies such as quantum, satellite and space technologies and artificial intelligence could be discouraged, held up or blocked if the new regime is not applied in a careful way. The best way to get this new regime to work will be to ensure there is a constant dialogue between officials and businesses so that everyone can understand where review is necessary and so that we can get fast decisions.
Another way we could boost investment is by lifting the pension charge cap under which current policy is preventing pension schemes from investing in asset classes such as venture capital that are big backers of UK tech. There is strong evidence to show that lifting the cap could mean pension funds get better returns for their members and could boost domestic capital investment in UK tech. This is something which is sorely needed as UK pension funds are among the most under underinvested in tech in Europe and compare particularly badly to the US and Australia.
We need to ensure SMEs and traditionally non-digital sectors see tech as vital for their growth journey. This is why techUK supports the expansion of the Government’s Help to Grow: Digital scheme which will provide discounts of up to £5,000 for SMEs to purchase productivity boosting digital services, why we have argued for a tax credit for SMEs to support digital skills training, and why we believe the government should drop its plans for an online sales tax which could reduce business investment in e-commerce and add to inflation for consumers. We invite companies to share their experiences and thoughts with us to further support the UK tech industry.
By taking these steps we believe the government can capitalise on the adaptability and creativity of the British people shown throughout the last two years and to make 2022 the UK’s recovery year by seizing the opportunity to build a world class digital economy.