Chancellor launches £500m business software subsidy in the UK. What's 'approved' software then?

UK targets 100,000 small businesses with up to £5,000 boost

The UK government is promising to subsidise new software investment by small and medium-sized enterprises by up to 50 per cent, or a maximum value of £5,000.

The Treasury has not yet said how that list of "approved" software packages will be drawn up, however.

As part of the spring Budget’s effort to Help to Grow, under the government’s COVID-recovery branding, UK chancellor of the exchequer Rishi Sunak announced the scheme would aim to help 100,000 SMEs after it launches in the autumn.

“With the pandemic, many businesses have moved online. This has been a challenge, but we want to turn it into an opportunity. We're going to help small businesses develop digital skills by giving them free expert training and a 50 per cent discount on new productivity-enhancing software worth up to £5,000 pounds each,” Sunak told the House of Commons.

According to documents released with the Budget, UK has relatively low adoption of digital technologies and software compared to international competitors, while UK SMEs are less likely to use formal management practices than SMEs in peer countries.

The government cited figures from the Office for National Statistics that suggest there is a direct effect on productivity: the use of one business organisation software is associated with a productivity premium of at least 10 per cent, while analysis shows that small improvements in management practices are associated with a 10 per cent increase in productivity.

The UK has long struggled with a productivity gap and will need to close it if the nation is to overcome a COVID-relief debt mountain not seen since WWII.

Registration is open now, and government plans to launch the voucher scheme together with free, impartial advice, via an online platform. The software subsidy is available to eligible businesses with between 5 and 249 employees, and can be spent on "listed software, rather than bespoke packages," a Treasury spokesman said.

The Help to Grow scheme also involves a new UK-wide management programme designed to upskill 30,000 SMEs in the UK over three years. A 12-week business school course would be 90 per cent subsidised by the government.

Other announcements affecting the tech industry include plans for an elite points-based visa. To go live by March 2022, it is intended to allow those with a job offer from a recognised UK scale-up sector or company to qualify for a fast-track visa. There will be a review for the "Innovator Visa" to make it easier for those with the skills and experience to found an innovative business to obtain a visa, while the government also plans to launch the new Global Business Mobility visa by spring 2022 for overseas businesses to establish a presence or transfer staff to the UK.

Responding to today's budget, Julian David, CEO of tech trade organisation techUK, welcomed the budget’s plans to increase business investment with tax incentives, especially the so-called "super-deduction", which will allow companies to cut their tax bill by up to 25p for every £1 they invest, although he cautioned: "We would strongly encourage that these schemes, including the Super-Deduction, are applicable to the needs of modern businesses who increasingly rely on intangible digital investments in cloud-computing, data and AI tools to boost growth."

He added: "The Chancellor has also listened to calls from the tech sector to enable the best and brightest talent to come to the UK through a new fast track visa scheme as well as supporting domestic retraining with additional financial support for both apprenticeships and traineeships."

The chancellor managed to avoid potential pitfalls for the tech industry, including a mooted 2 per cent online sales tax, which Sunak reportedly delayed in February.

The trade body was keen say it hoped online sales would be treated with equivalence to physical sales earlier this year. ONS figures show online sales moving from 18 per cent of all retail sales in the UK in September 2019, to more than double the slice, 36.3 per cent, in January 2020 as the pandemic began to bite. ®