The UK is turning into a technological backwater

Rishi Sunak's lofty plans to make the UK a «tech superpower by 2030» are already falling apart. Photo: IAN VOGLER/AFP

Less More than six months ago, Rishi Sunak announced plans to make the UK «a global science and technology superpower by 2030». This noble vision is already crumbling under the pressure of high taxes and cumbersome bureaucratic red tape.

On Monday, British chip developer Arm confirmed plans to drop its listing on the London Stock Exchange in favor of New York's Nasdaq. the biggest US IPO in almost two years.

Sunak has been in talks with Arm's owner, a Japanese investment company, in an attempt to encourage the Cambridge-based company to list in the UK. Obviously, they were unsuccessful, and this should not come as a surprise.

What should have been a British success story has instead become yet another example of political failure. “The UK approach to technology over the past few years has already left the UK behind in significant investment,” a senior source at a major tech company tells me. “Despite hopes that the situation will change, our fears seem to go unaddressed.”

It is true that listings on the London Stock Exchange face some natural hurdles. The US economy is much larger and stronger, with more capital moving around, meaning that New York tends to offer higher valuations and trading volumes.

Recent failures have also been seen on London listings, including, in particular, takeaway delivery. Deliveroo, whose shares fell 25% on their debut on the stock market in 2021.

2006 The UK is less attractive than the rest of the G7 countries

But there are also larger negative trends. We are seeing a 40% decline in London stock prices since the financial crisis. Big tech companies make up 28% of the total value of the S&P 500 and continue to grow. Meanwhile, the UK is attracting older, larger, slower conglomerates, not the growing businesses of the future.

The government has been talking about loosening stock exchange rules to attract fast-growing startups. It would have been a welcome move, but as with most other pledges to take advantage of Brexit opportunities, the government has been playing well but has achieved little. Change takes forever to materialize and tends to falter around the edges.

If Britain wants to attract business, it needs to ease the burden of taxes and regulation. Instead, the government increased the corporate tax from 19% to 25%. Instead, the Financial Conduct Authority has introduced new rules for listed companies, including requirements for diversity, inclusiveness and climate disclosure.

This is just the tip of the iceberg when it comes to how the UK is scaring off tech companies.

Earlier this year, the Competition and Markets Authority blocked Microsoft's acquisition of Activision Blizzard. In response, Microsoft President Brad Smith warned that the decision sent a «clear message» that «the European Union is a more attractive place to start a business than the UK.»

Microsoft President Brad Smith warned that the EU «is a more attractive place to start a business» than the UK. Credit: Virginia Mayo/AP

The deal was approved by the EU, US, Brazil, South Africa, South Korea and China. and Japan, among others. Unfortunately, the CMA may now try to reverse its decision. The anti-big tech mantra that British politicians, commentators and regulators have been repeating for years has resurfaced.

However, if you think that this will make them rethink their approach, you are very mistaken. The new legislation, currently before Parliament, will place an extraordinary new regulatory burden on the UK digital sector, far beyond anything imaginable in the US or EU.

First, there is the Internet Security Bill, which is due to go through its final stages in the House of Lords next month. Threats to free speech and privacy aside, it's hard to know where to start when describing the extent of the regulatory burden the 302-page bill imposes. In it, the word «duty» is mentioned 327 times, and the word «must» occurs 564 times. Each of these requirements will increase the cost of doing business and hinder innovation.

Just take the requirements and do a «risk assessment» every time features are introduced or changed. This will discourage smaller platforms from operating in the UK.

In addition, there are all sorts of responsibilities for transparency, record keeping, complaints, and content removal. If companies do not comply, they could face billions of pounds in fines, which is unlikely to create a favorable environment for technology startups.

Ofcom's granting the right to require private messaging services to scan user messages is of particular concern. This is a fundamental threat to encryption.

In response, Meta-owned WhatsApp and other services such as Signal are considering pulling out of the UK, causing havoc for millions of people, including ministers who, the lock files have shown, apparently use such services to run the country.

The Internet Security Bill is not the only anti-business bill now moving through Parliament.

The Digital Markets and Competition Bill will allow the CMA to set individual and ever-changing requirements for every major digital company in the world. UK with very limited accountability. They may be required to consult with the regulator before introducing new products and features.

Amazon UK's Ian Wood warned that «the risk is that [the bill] will slow down or block innovation and also make The UK is a more difficult place to innovate.»

It will only be possible to challenge decisions on the founding process in accordance with the standard of judicial review, which effectively turns the CMA into a judge, jury and executioner.

On the contrary, the equivalent EU regulation, the Digital Markets Act, despite all its shortcomings, clearly defines thresholds, requirements and prohibitions. – and any decisions will be fully contested on their merits.

As it stands, the UK has the strongest technology scene in Europe. The sector is valued at over $1 trillion and is the third largest in the world after the US and China.

We have great start-ups, fantastic talent and a long history of innovation. And none of this will matter if the government continues its anti-tech program.

There is a real risk that instead of jumping into the vanguard of the AI ​​revolution, we will become a technological backwater.

Matthew Lesh is director of public policy and communications at the Institute of Economics