Spring Budget 2023: Headlines for creative businesses

In his speech to the House of Commons on Tuesday 14 March 2023, the Chancellor announced that his Spring budget will deliver growth by (amongst other things) "harnessing British ingenuity to make us a science and technology superpower". Certainly, a laudable ambition – but what does this budget do to support the development of new technology, scientific breakthroughs and the strength of our creative industries? We take a look below.

Tax Reliefs

First up are tax reliefs for the creative industries:

  • The reliefs currently available for film, high-end TV, animation and children’s TV will be reformed, so as to become expenditure credits (34% for film and high-end TV, 39% for animation and children’s TV) instead of additional deductions.
  • The new video games expenditure credit will have a credit rate of 34%.
  • An extension to the temporary higher rates of relief for theatres, orchestras, museums and galleries, although there are also some changes to qualifying expenditure.

Loss-making research and development (‘R&D’) intensive SMEs will be entitled to a higher rate of tax relief: Eligible SMEs whose qualifying R&D expenditure constitutes at least 40% of total expenditure will be able to claim a credit worth 27p for every £1 of qualifying expenditure.

However, this doesn’t fully offset the impact of previous rate reductions under the existing scheme and unfortunately will be cold comfort to many SMEs who don’t qualify for the new relief.

Innovation and R&D initiatives

Beyond tax, the budget includes new initiatives designed to drive innovation in emerging industries such as AI and quantum technologies. For AI, these initiatives include:

  • A £1 million AI challenge prize – the “Manchester Prize” – to be awarded by government annually for the next 10 years to researchers that drive progress in critical areas of AI.
  • A new “AI sandbox” to boost support for AI businesses in the UK. It’s intended to help innovators get cutting edge products to market and work at pace with the Intellectual Property Office to provide clarity on IP rules so generative AI companies can access the material they need.
  • £900 million of funding to implement key recommendations of the independent Future of Compute Review undertaken by Sir Patrick Vallance to build an exascale supercomputer and establish a new AI Research Resource.

For the quantum computing sector, support comes in the form of a new “Quantum Strategy”, which sets out a vision to be a world leading quantum enabled economy by 2033, alongside a research and innovation programme totalling £2.5 billion over the next ten years.

The budget also includes a commitment from the government to lead on the regulation of AI and maximise the potential of Web3/the Metaverse – although there is little detail around what this will entail.

More broadly, the Chancellor announced a refocusing of the Investment Zones programme, committing to create 12 new high-potential knowledge-intensive growth clusters across the UK, to be situated around universities or other research institutions.

The scheme will be backed by £80 million of investment over five years in each zone and aims to accelerate R&D in certain sectors identified as key to the UK’s future – green industries, digital technologies, life sciences, creative industries and advanced manufacturing.

The budget also allocates £100 million of funding for the Innovation Accelerators programme to 26 transformative R&D projects, although full details of these projects have not yet been released.

Our thoughts

In announcing the Spring budget, the Chancellor acknowledged the growth and development the UK has seen in industries such as film and TV, advanced manufacturing and energy, and highlighted the importance of emerging industries such as AI and quantum computing – all industries that thrive on the development of intellectual property. Whilst a number of headline grabbing initiatives designed to support these industries were unveiled, in many cases the specifics are yet to be announced and (as we all know) the devil is in the detail.

Will this budget establish the UK as a science and technology superpower? Only time will tell - but it looks like the government would like us to be in the running.