Editorial: UK puts AI at the centre of its Budget
British Chancellor Jeremy Hunt announced the country’s Spring Budget this week and supporting the AI industry was at the centre.
The UK is Europe’s AI leader. Indeed, behind the US and China, the country’s tech sector overall has the third-highest amount of VC investment in the world – more than Germany and France combined – and has produced more than double the number of $1 billion tech firms than any other European country.
Gerard Grech, CEO of Tech Nation, said:
“As a nation uniquely positioned between two economic powerhouses, the US and the EU, we must harness innovative regulation that will enable us to propel ourselves as an international hub and leader for AI, quantum computing, and deep tech.
This is a critical step towards creating a distinctive, value-driven tech ecosystem in the UK, setting us apart from other tech hubs.”
To support British startups, an ‘AI Sandbox’ was announced by the chancellor. The sandbox features a number of initiatives designed to encourage AI research and investment.
Among them is a prize pot containing millions of pounds. £1 million will be up for grabs every year over the next decade for the best AI innovations created by teams and individuals.
Ludovico Lugnani, Technology Solicitor at BDB Pitmans, comments:
“Following yesterday’s news of Open AI’s launch of its upgraded GPT-4 chatbot, the Budget’s announcement as to the creation of an AI sandbox offers a promising outlook for the UK to speed up the arrival of AI products to market.
As part of this, particular emphasis should be placed on providing effective guidance as to the implications of copyright law on generative AI applications following the recent claim by Getty Images against Stability AI over breach of copyright.”
Elsewhere, £2.5 billion is being ploughed into advancing quantum computing. The powerful machines will enable a literal “quantum leap” in AI.
“The power that AI’s complex algorithms need can be provided by quantum computing,” the chancellor told the Commons.
£900 million is also being invested to create an exascale supercomputer that will be several times more powerful than the country’s biggest computers and advance not just AI research, but also science, healthcare, defense, weather modelling, and more.
“[The supercomputer] should be a huge boost to the UK’s ability to support cutting-edge research in areas requiring complex modelling and simulations, such as climate change, pharmaceutical development and hi-tech engineering,” commented Nick White, Partner at law firm Charles Russell Speechlys.
Only one exacomputer is currently known to exist. The computer, known as Frontier, is housed at the Oak Ridge National Laboratory in Tennessee, United States.
Other relevant announcements in the Spring Budget are targeted less at the AI industry specifically but aim to solidify the UK’s ranking as the second-best country after the US to invest and launch a business.
Under the ‘Full Expensing’ plans, companies investing in R&D and IT equipment to boost growth will benefit. Every pound a company spends on new IT equipment and machinery can be deducted in full from taxable profits.
The independent OBR (Office for Budget Responsibility) says the measure will increase business investment by three percent every year. The chancellor has committed to the measure for the next three years but intends to make it permanent “as soon as we can responsibly do so”.
Furthermore, smaller businesses will also have an increased annual investment allowance of up to £1 million. This means that 99 percent of SMEs will be able to deduct the full value of all their investments from taxable profits.
Matt Hammond, Founder of Talk Think Do, said:
“I wholly welcome the tax savings on IT investments, research and development as announced in today’s budget. In recent years, Talk Think Do has benefitted substantially from the R&D relief and as a result, we have been able to reinvest the extra cash directly into hiring sector-leading talent.
R&D relief has helped to accelerate our expansion by over 750 percent in just four years. We are a successful example of how the relief has encouraged greater innovation in UK businesses and has unlocked significant growth opportunities. Today’s update benefits the economy at large and so I am glad to see this has been considered in the budget.”
The creation of 12 investment zones is set to further boost the UK’s tech credentials and spread opportunity across the country.
Eight have been announced in England and will be around research institutions in the East Midlands, Greater Manchester, Liverpool, North East, South Yorkshire, Tees Valley, West Midlands, and West Yorkshire.
Four more will be in Scotland, Wales, and Northern Ireland. These investment zones, based in the UK’s devolved administrations, will be announced by the end of the year.
Rikke Wichmann Bruun, CEO of MRM UK, commented:
“The announcement of investment into technology – including green technology – through the 12 investment zones presents a great opportunity for businesses and brands in the UK.
The ambition to transform Britain into the ‘next Silicon Valley’ also echoes new research conducted by our agency which found that Brits are the most optimistic about technology’s potential, in comparison to other Europeans.”
Cambridge, Oxford, and London – the so-called ‘golden triangle’ – are often seen as Europe’s closest rivals to Silicon Valley. Each city benefits from world-leading universities and research institutions that help to produce innovative startups and address global talent shortages.
The three cities are based in southern England and have historically benefited more from investment compared to the rest of the UK. Other cities – including Edinburgh and Manchester – have attracted increased investment in recent years, but it’s hoped the new zones will close the gap and unlock the potential across every region of the UK.
“Predictions that inflation will fall to 2.9 percent by the end of 2023 will be very welcome and there were a range of measures announced to boost the economy, including 12 new regional investment zones and a new policy to replace the ‘Super Deduction’,” said Stuart Haynes, Corporate and Commercial Partner at law firm Aaron & Partners.
“There are some fantastic tech innovators in this country and it’s pleasing to see the chancellor really get behind this sector to be a catalyst for economic growth.”
(Image Credit: Zara Farrar / HM Treasury under CC BY-NC-ND 2.0 license)
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