London's tech sector has been one of the country’s biggest success stories since the financial crisis. It works really well in London, aided by a range of world-leading creative industries, from film-making to news, which are themselves increasingly like tech firms. And let’s face it, there’s a cultural vibrancy that makes the capital a brilliant place to run a startup and hire good people.
With these conditions, you’d expect a massive explosion in trade with the rest of Europe in the area of so-called digital services. Yet the capital’s Tech City is being held back.
Currently, 42 per cent of the global digital services market – which includes apps downloads and Netflix subscriptions – is generated by EU members. Curiously, only 4 per cent is done across borders within the EU itself. And with London being the tech capital of Europe, we’re the ones being most held back.
Why is this? Well, of course, there is a language barrier, but translators aren’t prohibitive. If you’ve got a good app, you’ll translate it. The really big barriers are huge numbers of differing rules across Europe that make life difficult. These particularly affect startups, rather than established global competitors, because small firms don’t have huge departments to navigate them.
The EU itself has proposed a solution: the Digital Single Market. Now, I’d bet that, if you asked the average person on the street, they would say they had never heard of it. But for people running technology and media businesses in London, it’s really important.
What it will do is allow British firms who are selling successfully in Britain to be automatically able to sell across the EU, without getting bogged down navigating complex rules. In other words, just as the Single Market in the 1990s simplified trade in goods, this will simplify trade in digital services.The prize on offer for doing all this is significant. New figures out today from London First and the Centre for Economics and Business Research show that London alone will benefit to the tune of £1.7bn in economic growth and an additional 6,500 new jobs by 2030.
In the political melodrama over Britain’s EU membership, it’s easy to forget the very real risks from an exit. Yes, there are good reasons for fintech companies to remain in London regardless of our membership – as long as the banking sector thrives here. But the centre of gravity for many other tech firms could start to tilt to Berlin if we start a foreign policy based on cutting ourselves off from our European partners.
So it should come as no surprise that a survey reported by City A.M. in November found that just 9 per cent of the UK’s technology businesses want the UK to leave the EU. I think that shows pretty clearly the strength of feeling among those trying to build up global sales from London.
Leaving the EU would, quite simply, jeopardise the terms of our membership of the Single Market and certainly our ability to lead the creation of its new digital version. It seems rash, when we are doing so well to build a thriving tech industry, to throw our influence away and put the terms of trade with a huge market of more than 500m people at risk.