UK budget must 'ease taxes' for Scottish tech firms

The chancellor’s budget is an important moment in the calendar of any business. Whatever Rachel Reeves announces will set off changes in companies across the country as the UK Government pushes for greater growth.

But the path to growth in Karen Meechan’s mind is clear when it comes to technology firms in Scotland. She believes to kickstart significant growth in the industry, the budget needs to lower taxes.

As the chief executive of ScotlandIS, the membership body for the digital technology industry, Meechan has her finger on the pulse of what makes business in Scotland tick.  

“I think we are seeing a need for a significant easing of tax burdens, specifically for our technology sector,” said Meechan. “We've seen over the last couple of years, and certainly with the income tax rises, that they have hindered our competitiveness when trying to attract new skilled workers in Scotland.”

The topic of tax is always a tricky one, but Meechan thinks that if the chancellor’s budget cuts taxes like employers' National Insurance contributions (ENIC), the potential for growth in Scottish tech companies could be huge.

The rate for employers' National Insurance (NI) contributions rose from 13.8 per cent to 15 per cent in April, following the 2024 budget. It is highly unlikely that Reeves is planning to roll back on this rise in this budget.

The impact of the rise in ENIC is being felt in Scotland. Research from the Fraser of Allander economic research institute shows that firms are increasing charges and bringing in fewer staff in response to the financial pressure generated by the change. Almost nine in 10 companies surveyed in March said they anticipated higher costs for the following six months and 80 per cent expected "very weak to weak" economic growth.

In Scotland there are over 11,200 digital tech businesses employing nearly 76,000 people in what is the country’s fastest-growing sector for inward investment. In 2024, the digital technologies sector was valued at £6.8bn, making up 4.7 per cent of the country’s total economic output.  

Between 2014 and 2024, the sector’s Gross Value Added (GVA) grew by an average of 7.1 per cent each year, outpacing Scotland’s overall economic growth of 0.5 per cent during the same period, according to ScotlandIS. 

“Any way in which the UK Government can reduce the financial pressures on businesses will be a win for them,” says Meechan. “It can only be a good thing because it frees up capital and cash within the business that allows them to grow, allows them to recruit and allows them the financial capacity to access other markets. So any kind of financial pressures that are alleviated from businesses can only be useful.”