Budget 2023: funding to support carbon capture development and tax boosts for SMEs

Chancellor Jeremy Hunt delivered his Spring Budget in the House of Commons on Wednesday, 15 March 2023, with a target of rebuilding a strong economy by tackling inflation and the cost of living crisis. Of particular interest to us is the government’s focus on carbon capture, tax boosts to smaller businesses, and the future of the nuclear energy and artificial intelligence (AI) sectors.

Investment allowance increase and further tax boost for small businesses

Reinforcing the attempts to grow the economy, Hunt announced that the Annual Investment Allowance has been increased to £1m for small businesses. Considering 99% of the UK economy is made up of small and medium-sized enterprises (SMEs), all of them will be able to deduct the full value of their investment from that year’s taxable profits. In addition to supporting the burgeoning startup community by increasing the tax-deductible amount spent on investment, the Chancellor has also introduced a tax boost to further promote spending. SMEs will be able to claim £27 for every £100 spent, as long as they spend 40% or more of their total expenditure on research and development (R&D). Introduced measures should see SMEs investing and researching, with a goal of growing the business and thus the UK economy.

Financial support for the development of carbon capture technologies

As anticipated, the chancellor has confirmed a budget of up to £20bn to support the development of carbon capture methods, as well as its storage and usage technologies. Not only is it expected to help capture 20-30 million tonnes of CO₂ per year by 2030, but it will also support up to 50,000 jobs and attract further private sector investment. This area of cleantech is already a hot bed of innovation, however, the extra funding available is likely to enhance the speed and quality of new solutions brought to market.

Confirmation of the classification of nuclear power as environmentally sustainable

The clear-cut validation of nuclear power as “environmentally sustainable” gives it access to same investment incentives as any other renewable energy. Along with the confirmation and in line with Britain’s goal of energy independence, Jeremy Hunt has also launched “Great British Nuclear”, looking to support the industry by providing better opportunities and lower costs to produce nuclear power. The chancellor went a step further and announced a competition for small modular reactors. If the technology is found to be viable, the government promises to co-fund the technology. With such clear government backing, we expect the rate of innovation in the nuclear power sector to go up significantly.

Encouragement and prizes for groundbreaking artificial intelligence research

The already rapidly expanding sector of AI has been promised a prize of £1m every year for the next 10 years “to the person or team that does the most groundbreaking AI research.” The current rate of R&D in the sector is astonishing as it is, and £10m worth of prizes available will only spark the competitiveness and drive amongst innovators.

Looking ahead

The budget highlights the government’s trust in the rate and direction of innovation driven by the SME community, as well as cleantech and AI inventors. As a follow-on effect, increased innovation will likely result in a spike in filings of intellectual property rights in a bid to help commercialise the technology in question. We look forward to seeing how the introduced policies and measures will affect the technology and science space.