In the context of a UK economy consistently at the bottom of economic growth leaderboards, and a stock exchange that is no tech company’s first choice for an IPO, this month’s Budget was uninspiring to say the least. Soundbites like we’re “on track to be the next Silicon Valley” are catchy, but wishful thinking. Moreover, the proposals are incremental and insufficient to make any difference to the UK tech ecosystem.
Tech is critical for the UK to win in the long run. The lip service paid to it in the Budget suggests that the Government understands this at least. Today’s economy is built on mature but slow-growing industries, like real estate and finance, that won’t drive growth for the next 30 to 50 years. And tech’s importance is not just economic: the UK’s global geopolitical influence will be limited without more and more meaningful tech success stories.
We are still a great place for tech companies to start and scale into global leaders. The language, a central global time zone, well-connected airports, and an inclusive, multicultural capital are major draws, and largely why we haven’t fallen behind our European peers yet.
However, UK tech has neither the private nor public sector support our global peers have, and we are losing comparative momentum. US private capital markets allocate far more to early-stage tech (via VC funds) than their British counterparts, and far more US entrepreneurs enable the next generation via angel investments. Others have individual ‘forces of nature’, like Xavier Niel investing billions to support French tech. Of course, entrepreneurs like Richard Branson and Brent Hoberman have done great things for the ecosystem, but no one here is making the impact Niel is making in France right now.
For UK tech to thrive, the Government needs to do more. It hasn’t been doing enough for a long time. The last meaningful policy contribution to the early-stage funding environment was EIS in 1994. There’s been vanishingly little since then, and this Budget was another anaemic effort. Pension schemes won’t save UK tech.
The Government must be considerably more radical in both thoughts and actions. The Chancellor’s Budget is barely a vitamin for UK tech; if we’re truly to become “the next Silicon Valley”, it needs steroids.
But first the Government must ask itself: is this what it really wants? And is it willing and able to tolerate the difficult trade-offs in practice?
Is it willing to be seen to be ‘favouring’ London over the rest of the UK? London is the home of UK tech and that isn’t changing soon, if ever. Supporting UK tech implicitly means supporting London.
Is it willing to do more to make the UK an accessible place for founders and operators? UK tech companies need overseas engineering talent. STEM initiatives are great, but won’t bridge the gap in the short term: it needs immigration. Brexit was obviously a huge own goal in this regard. New talent visa initiatives are a step back in the right direction.
Is it willing to let some benefit accrue overseas in the name of taxpayer or pension-holder value? The best VC funds investing in the UK also invest in Europe, the US, or further afield. Other state-affiliated entities, like Mubadala (UAE) or Temasek (Singapore) have made that call, and are much more relevant in UK tech than the British Government.
The good news is, it can be done. If it truly wants to see more generation-defining tech companies being built and scaled in the UK, the Government has the power to be dramatically more relevant and impactful and give UK tech the shot in the arm it needs.
A good start would be learning from success stories overseas. What France has done in the last decade— with Bpifrance bringing capital, La French Tech bringing tax credits and talent passports, and with President Macron and Economy minister Bruno Le Maire bringing visible, vocal support right from the very top— shows tech is one of their highest priorities.
The UK tech sector is, for now, larger than France. But in five years’ time it won’t be, unless we do something different.
Gareth Jefferies, is a partner at RTP Global
