Government urged to introduce digital skills tax credits for SMBs

Driving up wages without improving productivity through digital skills is a "recipe for high inflation", techUK warns

Conservative party conference banner displayed on a building in Manchester

TechUK has called on the government to offer tax credits to incentivise companies to invest in digital skills training as a way to boost the country's productivity.

The proposals follow Boris Johnson's speech at the Conservative Conference this week, where he pledged to 'drive up wages'.

Exactly how this would be achieved wasn't made clear and there are reports that other Tory ministers, including chancellor Rishi Sunak, are concerned about its effect on productivity.

TechUK, however, is mostly worried that small businesses across the country will be at risk unless they have access to the digital skills they need to transform their businesses. The lobby group suggests a tightening labour market will see SMBs struggle to recruit the talent they need, and with the PM's proposed rise in wage costs, many will see investing in training a luxury they can't afford.

"UK SMBs risk becoming the victims of a digital skills gap without the support of a Digital Skills Tax Credit," Antony Walker, the deputy CEO of techUK, said.

"Driving up wages without driving up productivity through digital skills is a recipe for high inflation. Many SMBs faced with a rising wage bill will feel they have less room to invest in skills when those skills are most needed.

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"The only sustainable route to the prime minister's vision towards a high wage, high skill, high productivity economy is through a rapid upskilling of the UK workforce," added Walker. "A Digital Skills Tax Credit targeted at SMBs would turn a skills crunch into a skills opportunity - boosting productivity and growth."

Sunak is understood to be "privately concerned" that wage increases driven by labour shortages will risk putting the UK in an inflation spiral which could see earnings growth wiped out by higher prices, inews reports. It's suggested that the chancellor also believes wage increases need to be tied to productivity growth.

"The lack of digital skills in the UK has led to intensifying competition for talent and upwards pressure on tech salaries," Walker added. "Without help, SMBs will find it increasingly difficult to compete with big businesses for digital talent, making them less competitive at a time when employment costs are going up.

"The chancellor must help SMBs to boost their productivity through a Digital Skills Tax Credit," he added. "This would help SMBs invest in their own skills base at a time when wage costs are going up."

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