A week ago, many were wondering whether the UK’s tech sector would become less relevant in a post-Brexit world. The news of Arm’s acquisition by SoftBank for £24bn means many things for UK tech – but irrelevance is not one of them.
This acquisition is positive and timely news. Following the referendum, it’s an immediate vote of confidence in UK tech. There are of course the instant benefits in terms of financial payouts to staff, the windfall for HM Treasury through capital gains tax, and the fact that SoftBank has committed to create another 1,500 Arm jobs in the UK over the next five years.
Then there are the long-term benefits to the UK tech ecosystem. I have read plenty of commentary that laments the fact that another UK company has had to sell out to a foreign buyer and that this country will never be able to build its own Facebook or Google. But in my experience, this is misguided.
It’s not that long ago that people were questioning the UK’s ability to create a $100m tech company, but companies such as Rightmove and Asos smashed through that barrier in the noughties. Then commentators questioned the UK’s ability to create billion dollar companies. Today, according to GP Bullhound data, we have 18 of them, from Zoopla, to Skyscanner to Farfetch.
This week’s acquisition is proof that the UK can produce multi-billion dollar companies and there will be further trickle-down benefits too. History tells us that a major transaction such as this serves to create a new generation of hungry entrepreneurs and future angel investors.
Over the next few years, a pool of experienced talent will leave Arm to build their own companies or invest in others, strengthening activity in the early-stage startup ecosystem, especially in the deep tech space (companies focusing on artificial intelligence and the like) from whence they came.
The UK is already a hotbed of deep tech innovation. According to the startup research firm, Tracxn, there are over 850 deep tech startups in the UK, including just over 350 founded in the past two and a half years. This includes 52 in Cambridge which is now the biggest deep tech cluster outside of London. Arm’s HQ is in Cambridge so it is a safe bet to assume that Cambridge’s strength in deep tech will only flourish.
As a former employee of Skype, I have seen first-hand how a big European acquisition leads to the development of, and investment in, the next generation of European tech titans. Great European companies such as Supercell, Klarna and Transferwise have all been spun out of the Skype experience, and companies such as King, Twilio and Stripe have Skypers in their executive ranks helping them scale up. It is also worth remembering that Arm itself was spun out of Acorn, a British computer maker in the 1980s.
Arm may be a British company but it has been built on the shoulders of international talent which has come from abroad to make up a sizeable proportion of its UK-based workforce. In fact, one in five tech workers in Britain are currently non-UK citizens.
As we toast the success of this great British success story, it reminds us that there is work to be done convincing the government that the current visa system is broken and needs fixing. Currently, it’s nowhere near fit for purpose. According to Pat Saini, head of the immigration team at law firm Penningtons Manches, it costs upward of £5,000 in visa costs and related fees to hire a person from outside the EU. Hiring from within the EU could become just as expensive and time-consuming for British businesses.
We should be looking at the current post-Brexit uncertainty as an opportunity to rip up our current visa systems and start again, prioritising visas for entrepreneurs, and making it easier for talented developers and engineers from across the world to gain work visas.
We’ve been lazy in the past. With a pool of amazing tech talent from the EU on our doorstep, we were able to tolerate cumbersome bureaucracy and overlook huge opportunities from further afield. We will not possess that luxury anymore.
It’s possible to imagine a world where the UK is an even more attractive place to live and work than the EU and Silicon Valley – reaping enormous social, technological, and economic benefits – but if we want it, we need to make it happen.
Let this week’s incredible acquisition of Arm be the beginning, not the end, of the great British technology story.