Scotland’s tech trade body has delivered a mixed response to Chancellor Rachel Reeves’s Budget, saying new investment pledges offer “some grounds for optimism” but warning that tax decisions and economic uncertainty are continuing to weigh on growth.
Karen Meechan, chief executive of ScotlandIS, said the package announced on Wednesday “presents a mixed picture for Scotland’s tech sector,” noting that the additional £820 million allocated to the Scottish Government could strengthen the long-term foundations for digital growth.
“The allocation of an additional £820 million for Scotland signals stronger fiscal foundations for public services and with that, the potential for renewed investment in infrastructure, skills and innovation,” she said. “It’s also encouraging to see continued support for several industrial, decarbonisation and defence projects across Scotland.”
Industry analysts say funding stability is critical for Scotland’s tech ecosystem, particularly as businesses navigate rising costs and global competition. According to the latest economic indicators, access to digital talent remains the number one growth constraint for scale-ups, ahead of capital availability.
Against that backdrop, however, Meechan expressed concern about the Chancellor’s decision to extend the UK-wide income-tax threshold freeze. “The extension of the income-tax threshold freeze is still a concern for our sector,” she warned. “Over time, this ‘fiscal drag’ will create a significant tax burden on businesses and undermine Scotland’s ability to compete for talent. For start-ups and scale-ups already under pressure, this risks slowing growth.”
Recruiters have already pointed out that the tax freeze—combined with Scotland’s different income-tax banding—could widen pay differentials with UK regions competing directly for cloud, data and cyber-security talent.
There was a warmer reception for moves aimed at supporting high-growth companies. The widening of eligibility for Enterprise Management Incentive (EMI) schemes was welcomed by ScotlandIS and other business groups, with Meechan saying the reforms “could help SMEs and scale-ups compete more effectively on a global stage.”
New government procurement frameworks—particularly those involving artificial intelligence and emerging technologies—were also highlighted as a potential win for Scottish companies. “The new procurement frameworks – particularly for AI – could be an incredibly promising change for Scotland if translated effectively,” Meechan said. “However, the real value of today’s announcements for Scotland will only become clear when the Scottish Budget is published in January and we see how the additional resources are allocated.”
She urged both governments to treat the coming months as a chance to align policy with the needs of Scotland’s fast-growing digital economy. “Until then, we urge both UK and Scottish governments to work together to ensure policy and investment choices genuinely unlock growth, innovation and competitiveness for Scotland’s digital economy.”
With Scotland’s tech sector now employing more than 80,000 people and contributing billions to the national economy each year, industry leaders say the stakes are high. Much of the Budget’s impact will depend on whether the Scottish Government channels the additional funding into digital infrastructure, skills pathways, regional innovation clusters and support for R&D-intensive firms.
Source: Futurescot