How does the UK stay ahead of European tech?
Last week the outgoing Prime Minister Theresa May opened London Tech Week (LTW) saying that Britain needs to maintain its leadership position in the sector. So how does it stay ahead?
Measured by venture funding and exits alone, the UK heads the European pack.
💰UK 4th in the world for #scaleup investment
📊 2.5x higher scaleup investment relative to UK economy
👩💻 5% of global scaleup tech workers based in UK
🦄 35% of Europe’s tech unicorns created in UK
🥇 1st in the world for #fintech#WeAreTechNationhttps://t.co/QYk2Tf1ym7
— Tech Nation (@TechNation) June 13, 2019
But it is encountering intensifying competition.
Based on Lexington’s conversations with contacts in the tech sector, we identified four areas for action:
Talent is the foundation
The first question of almost any founder or CEO is “How do I find the people we need?” This is ever more pressing with Brexit. To paraphrase one contributor at the Createch conference, investors want to know “How good are your people, and have they done things before?”
Tech businesses need talent, especially in specialised sectors such as AI. There needs to be a pipeline of able graduates from world-leading universities supplemented by the best global talent. This requires concerted action, as the Centre for Policy Studies has highlighted. First, an immigration system that recognises the value of these people to the economy. Second, an education sector which provides a skilled workforce, whether that is at school through to world-leading technical universities.
Investment needs incentives
UK tech is ambitious and dynamic. However, some feel that even more investors and long-term capital could be attracted into the market beyond record levels reported by Tech Nation and Dealroom. Tax incentives for early stage investment have been successful, but some institutional investors are still heavily skewed towards buyouts.
With a new Prime Minister due to be chosen shortly and a spending review pending, changes here could help draw in a more diverse field of investors to further fuel growth. However, there is another factor in play: certainty.
Britain is experiencing a chaotic political period. Businesses need certainty and without this, new investment is at risk. Brexit will not be solved overnight. However, a new Prime Minister could grasp the opportunity to promote new domestic policies that encourage more innovation.
Last week’s White Paper on Regulation for the Fourth Industrial Revolution and previous announcement of the future of mobility regulatory review are welcome examples. However, the question is whether policy makers can then find time to deliver the changes required. The sector needs to continue campaigning for this approach in Westminster, Whitehall and beyond.
There is also a healthy conversation about how to regulate and create a system which encourages growth. Last March, Lexington recently convened a panel discussion involving Damian Collins MP, Atomico, Habito and Doteveryone to explore this issue.
Media reporting tends to be about the large social media platforms. It is important that innovators help design new policies to avoid rules that hold back entrepreneurship. However, many entrepreneurs are keen to have more regulation in place of cumbersome or non-existent frameworks. They see this as vital to securing public acceptance for new products and services.
LTW demonstrated the strengths of UK tech. There is much to be enthusiastic about. However, this is no time to stand still. Leading players need to continue making the case for change.
By Francis Mallinson, Associate Director
To find out more about Lexington’s tech sector work, click here.