Ahead of the Chancellor's budget announcement tomorrow, Intellect has called on the government to incentivise large technology firms to nurture young businesses, encourage lending, and allocate ring-fenced apprenticeships funding.

In particular, the trade association for the UK tech sector demanded the introduction of a progressive tax incentive to encourage large tech businesses to mentor start-ups. This would support the ongoing development of these companies to help them transform into professionalised SMEs.

Intellect also asked for the Funding for Lending scheme to be expanded, to encourage investment in technology businesses seeking to export and expand internationally. It pointed to disappointing figures showing that bank lending has fallen further, adding that this issue requires “decisive action” from the Chancellor.

Finally, the trade body called for the allocation of apprenticeships funding for specific target growth industries, including the tech sector. The European Commission recently took action to address Europe's IT skills shortages with the launch of a 'grand coalition'. Now Intellect wants the Chancellor to back this up with internal action.

“This budget comes at a tipping point for the UK economy,” said Julian David, Director General of Intellect.

“On one hand, there are serious concerns that the UK could be facing a triple dip recession and this fear has been magnified due to Moody's downgrading of the UK's AAA rating. On the other, there are promising signs of growth especially from the tech sector where young companies are springing up and established tech businesses are continuing to expand and create jobs.”

David added that the UK tech sector represents 12 percent of the UK's GDP and is often cited as a “shining example” of an industry emerging with strength from the economic downturn.

“The Chancellor cannot take this growth for granted. The tech sector is undoubtedly playing its part in the recovery of UK PLC but this budget must outline support for the continued growth of tech in the UK,” he said.

The news comes as a report by the think tank Social Market Foundation reveals that the government’s aim to rebalance the economy away from financial services is inconceivable, due to a shortage of home-grown graduates in the science, technology, engineering and maths (STEM) sectors.

According to the report, 40,000 extra graduates a year in STEM will be needed to fill the 104,000 graduate-level STEM jobs the economy is predicted to require annually, assuming that the numbers of STEM graduates entering other professions stays the same. This will mean that the number of UK STEM graduates each year will have to increase by almost half.

The Social Market Foundation concludes that policy must focus on strengthening science and maths teaching at pre-GCSE level to boost home-grown skills by even more in the long-term.

“Widening the pipeline of STEM students by raising GCSE science achievement and A-Level take-up among some groups will make modest inroads towards narrowing the skills gap. But this alone will not be enough,” said Nida Broughton, Senior Economist at the SMF and author of the report.

“The real solution to the UK’s huge STEM deficit lies in starting much earlier to boost GCSE attainment across the board.”