Innovate Finance analysis: Today’s Spring Statement by the Chancellor of the Exchequer

23rd March 2022 | Blogs, News

by  Adam Jackson, Director of Policy at Innovate Finance

Today the Chancellor of the Exchequer, Rishi Sunak, unveiled his Spring Statement which sets out UK Government tax and spending plans and economic forecasts.  This is not a full Budget – that will come in the autumn – but it was significant as an interim report on Covid economic recovery, the impact of the war in Ukraine, and the rising cost of living.

Here are five take-outs for the FinTech community:

  1. Prepare for the biggest fall in living standards on record

Russia’s invasion of Ukraine will push inflation to a 40-year high of almost 9 per cent in the fourth quarter of 2022 and an average 7.4% inflation over the year as whole. The economic forecast by the Office for Budget Responsibility (OBR), published alongside the spring statement, gave this blunt statement:  “with inflation outpacing growth in nominal earnings and net taxes due to rise in April, real livings standards are set to fall by 2.2 per cent in 2022-23 – their largest financial year fall on record – and not recover their pre-pandemic level until 2024-25.” These figures are after taking account of the rebates and tax cuts announced by the chancellor today – that reduce the fall in living standards by a third of what they would otherwise be.

As ever, OBR’s analysis is essential reading for further details on the economic and fiscal  outlook: Economic and fiscal outlook - March 2022 ( and includes this graphic illustration:

This will have serious consequences for FinTech customers and users, as well as on firms’ own business models. From a  consumer point of view we know this will  impact further on financial resilience, debt, and mental and physical health. SMEs will face increased costs and reduced demand and we can expect a rise in distressed businesses. We know from initial discussion with FinTech leaders that this is galvanising firms’ commitments to provide innovative services that help customers reduce costs, grow their savings, and strengthen financial resilience – as well as helping those in vulnerable circumstances. At Innovate Finance this will be an important part of our work with our members and the FinTech ecosystem over the coming months.

2. Uncertainty and volatility are the new normal

Rishi Sunak said that due to the war in Ukraine "we should be prepared for the economy and public finances to worsen potentially significantly".  The Ukraine conflict has major repercussions for the global economy, whose recovery from the worst of the pandemic was already being buffeted by Omicron, supply bottlenecks, and rising inflation. Taking a look back, the OBR notes that “in the first quarter of this century, the UK economy has been subjected to an extraordinary array of shocks. The financial crisis, Brexit and the pandemic are all expected to have long-term consequences for potential output”.  

Looking ahead, the economic forecasts are subject to uncertainty including the developing situation Ukraine and international sanctions, further impacts on energy prices which could drive inflation closer to double digits, and the emergence of a vaccine-escaping Covid variant.  Political, economic and social volatility seems set to continue. FinTechs have always challenged established business models, flexing quickly and enabling their customers to adapt to change and this will continue to be an important part of business strategy. Growth will continue to come from being relevant and responsive to customer and societal needs.

3. Investment: new incentives in 2023 

The Spring Statement included specific measures that will support FinTechs in the UK.  It confirmed that R&D tax credits will be extended to data, pure maths and cloud computing. Unfortunately firms will have to wait until April 2023 for this to take effect. This important change, called for in the Kalifa Review, will incentivise greater investment by FinTech companies in new products and services including AI, machine learning, open banking and software as a service (SaaS) – all of which will ultimately benefit the consumer. 

The statement confirms that from April 2023, all cloud computing costs associated with R&D, including storage, will qualify for R&D tax relief. The definition of R&D for tax reliefs will also be expanded by clarifying that pure mathematics is a qualifying cost. 

More widely in terms of capital investment, although the two-year “super deduction” scheme ends in April 2023, the Chancellor announced that the Government is looking at how to further incentivise capital investment. The Treasury will be seeking views on this over the coming months with a view to announcing cuts to the tax rates on business investment in the autumn Budget. Let us know if you have ideas to feed in. 

4. Skills and talent: Doctor AI and reviews of apprenticeship and share schemes

On skills, there was a welcome announcement of new Government investment in AI doctorates - to create a thousand extra PhDs in artificial intelligence through Centres for Doctoral Training (CDTs).  The Government also announced a review of the apprenticeship levy to look at how best to incentivise business to invest in training. There may be opportunities here to ensure that the levy is more accessible for StartUps and ScaleUps and that it can be used for the types of training FinTechs need.

Less welcome was news on the conclusion of a government  review of the Enterprise Management Incentive (EMI) scheme. The review had looked at how EMI can best support high growth scale up companies  to recruit and retain the best talent. Sadly – and despite calls from the FinTech community - the government has concluded that no change is needed and the current EMI scheme remains effective and appropriately targeted. However, they are launching a further review to consider if the other discretionary tax-advantaged share scheme, the Company Share Option Plan, should be reformed to support companies as they grow beyond the scope of EMI. 

We would welcome any evidence or views you may have on apprenticeships and the Company Share Option Plan.

5. More government intervention likely

Rishi Sunak set out a series of measures to soften the rising cost of living, including raising the National Insurance Contribution threshold to match the income tax threshold; cutting fuel duty by 5 pence per litre; and providing funding for household support fund for those most in need via local authorities. 

Given the continuing global volatility and scale of the cost of living crisis, with further energy price rises possible in the autumn,  it seems likely Government will need to provide further interventions during the year to help households and small business affected.  During the Covid pandemic we saw how effectively FinTech could deliver government support such as the Coronavirus Business Interruption Scheme (once it was made accessible to FinTech SME lenders) and FinTechs should now  be recognised as a critical route to market for financial interventions and a core partner in helping design cost-efficient and targeted, effective solutions.


In his Spring Statement the Chancellor provided a heads up on the economic storm ahead and an initial set of measures to help stabilise the UK economy and households. He also took the opportunity to demonstrate his longer term priorities for tax cuts and raising productivity. For FinTechs it provides a further picture of business and market conditions ahead and some areas (in addition to  regulation) where we can help shape Government policies over the next six months.

Get involved with us

If you would like to keep up to date on regulatory and policy issues then you can sign up for our policy newsletter, attend one of our events including the global summit IFGS on 4-5 April (which will feature senior Government Ministers, UK and international regulators and global FinTech founders), or become an Innovate Finance member to get involved in and help shape the discussion.

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