techUK welcomed the opportunity to feed into Phase 2 of the Government’s multi-year Spending Review.
2025 represents a pivotal moment for the United Kingdom and its economy. The decisions made during this multi-year Spending Review will shape the course for the rest of this Parliament and the decade. techUK recognise the challenging fiscal position that the Government currently faces. However, by doubling down on digitisation of the economy, this is a crucial opportunity to achieve productivity gains, drive higher business investment and growth, and secure the UK’s position as a leader in emerging domestic tech markets.
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In the recent Autumn Budget and Phase 1 of the Spending Review, techUK was pleased to see the Chancellor act on recommendations from techUK’s Growth Plan. These measures will help drive business investment and productivity increases in the medium term. They include improving technology adoption in public services through clear targets, encouraging digital adoption in SMEs through new pilots, and protecting the UK’s R&D budget.
There are reasons to be optimistic. The upgrading of the UK’s IMF growth prospects in 2025 shows the UK is moving in the right direction, and the UK has strong fundamentals on tech as well. As outlined in our Growth Plan, and response to the Industrial Strategy, the Government can harness the potential of tech and digitisation to achieve its five missions, including securing the highest sustained growth in the G7. This is a sector now valued at over $1.1 trillion and already transforming daily lives, businesses, sectors, and public services.
The AI Opportunities Action Plan also marked a step in the right direction. The Plan is comprehensive in scope and, if executed, could spark a ‘quiet AI revolution’ in how the Government and business operate. AI alone could boost UK GDP by £550 billion by 2035.4 The Prime Minister has also recognised that ‘artificial intelligence is the defining opportunity of our generation’.
But there is now a fierce global race over the key technologies that will shape the future. From AI and Quantum to green technologies, competition between governments to attract talent, grow clusters of innovative technology companies, and be the first to deploy revolutionary digital public services has never been greater. These future technologies do not just offer to increase growth but will make working life easier and more rewarding across the economy, improving the quality of life of workers who use these technologies. In this global race for the future, the UK has many of the building blocks, including a robust regulatory system and rule of law, already in place to succeed and address potential risks. But our success must not breed complacency.
Despite more positive news for the UK growth, the Autumn Budget’s heavy tax rises on businesses will have an immediate impact. This sentiment was reflected in techUK’s member snap reaction survey, where most respondents rated the Budget as having a negative impact on their business.
Failing to seize the moment risks resurrecting familiar challenges: underinvestment undermining the UK’s international competitiveness, deepening regional inequalities, reducing living standards, and jeopardising progress toward the Government’s tech ambition. As we look back on this decade in 2035, it should be remembered as a time of bold and decisive action.
To achieve these aims, the Government must continue to forge a collaborative partnership with the UK tech sector, working together to swiftly address structural barriers that hinder technological development and deployment across the economy and public services. The modern industrial strategy presents an opportunity for this. Such a strategy must ensure ongoing efforts through the cross-Government review of tech adoption, 10-Year infrastructure Strategy and AI Opportunities Action Plan are consistent and make the most use of public finances to deliver return on investment for taxpayers.
Our response is framed through the following priority areas:
- Digital and tech adoption to support growth sectors: ensuring digital tech can be adopted across all businesses and sectors of the economy. Utilisation of digital tools could save SMEs the equivalent of multiple working weeks annually, and up to 1.2 hours per week per worker.
This starts with long-term funding package for practical interventions like the Made Smarter Adoption Programme across the identified growth-driving sectors, creating headroom and certainty for all businesses to adopt digital technology.
- Enabling the delivery of effective and efficient public services: leveraging the role of digital and tech adoption, including transformative productivity and efficiency increases, for public services. According to research, if AI is rolled out effectively across public services, it could save the UK’s public sector over £17 billion by 2035 – roughly half of what the UK currently spends on defence each year.
This starts with delivering the AI Opportunities Action Plan and outlining a roadmap and funding for implementing the accepted recommendations, with timelines and metrics for success. Along with allocating adequate funding to address legacy technology in public services.
- Creating a pro-business environment: supporting the skills development, infrastructure, tax environment and regulation to underpin the sector to overcome barriers and invest. For instance, HMRC reports that every £1 of tax forgone through R&D tax relief results in up to £2.70 of additional investment in R&D by UK companies.
This starts with setting out a front-loaded spending profile for R&D to reach 3% of GDP by the end of this Parliament.
- Place-based support to create a dynamic tech ecosystem: unlock the potential of all regions of the UK through the transformative effects the tech sector can bring, including by developing tech clusters.
This starts with launching a review into the use of SIC codes to capture the true shape of the digital economy and providing funding certainty to deliver on the modern industrial strategy.
Our response aligns with the upcoming modern Industrial Strategy and HM Treasury’s call for the multi-year spending review to focus on areas of effectiveness, value for money, support for growth, sectoral impacts and locational impacts. We note that clear prioritisation is integral. Therefore, techUK, on behalf of our members, makes a strong strategic case for spending and policies that we believe will deliver on the Government’s missions.
To further ensure delivery, techUK follow the Institute for Government and NAO in calling for the Government to commission ongoing ‘Dutch-style’ reviews of policy between spending reviews to ensure building the evidence base is a continuous process.
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