Chancellor's Autumn Statement missed productivity opportunity, says IT industry

The government missed an opportunity to focus on improving productivity in its Autumn Statement today, according to the IT industry.

Chancellor George Osborne said on Tuesday that although the figures from the Office for Budget Responsibility (OBR) did not predict a recession for the UK, economic headwinds from the euro zone could push the UK into another downturn.

Intellect, the trade body for the UK technology sector, said that increasing investment in the nation’s digital infrastructure – which it welcomed – was not enough to drive the nation’s economic productivity and growth.

“To make a difference this [investment in digital infrastructure] must be part of a much bigger plan to make the whole of the UK economy more innovative, productive and competitive.

“In the absence of strong demand from either public or private sector, the only route to growth will be through sustained improvement in productivity across the public and private sector. Productivity needs to be much more explicit in the government’s strategy,” said Anthony Walker, director at Intellect.

Intellect nonetheless welcomed a number of the initiatives Osborne announced, which included new tax breaks for investors of new start-ups, a further £75 million funding to support smaller technology companies commercialise their products and services, and the introduction of a R&D tax credit for larger companies.

TIGA, the UK games industry’s trade association, agreed that the government still needed to implement an effective strategy for promoting growth.

Such a strategy would re-balance the economy away from financial services towards business investment and export-focussed industries, it said, suggesting an extension of the new R&D tax credits that Osborne announced today.

“The UK government needs to support those sectors where we have a competitive advantage: high technology industries and creative industries, including the video games sector.

“Expanding the scope by the R&D tax credits to include the cost of IP protection, design costs and premises costs would help many creative and high technology businesses. Introducing TIGA’s plan to enable small businesses to offset training costs against corporation tax would enhance productivity,” said Dr Richard Wilson, CEO of TIGA.

However, offshore IT and software development company HCL Technologies, said that government has still not gone far enough in its pledge to open up public sector contracts to SMEs.

“By freezing public sector pay and reforming public sector pensions in a bid to cut costs, the government is ignoring the fact that every year, millions are lost through the award of fat contracts to brand name suppliers, and ignoring those who can deliver the same services more efficiently, and for a fraction of the cost.

“If the public sector is to truly arrest this country’s economic decline and inject new impetus into both the private and public sector, it must open up its procurement processes even further to give smaller providers the opportunity to deliver these services,” said Bindi Bhullar, director at HCL Technologies.

Copyright © 2011 IDG Communications, Inc.

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