Tax rules mean UK lacks headline acts

Steve Dinneen
Follow Steve
WHEN David Cameron launched the Tech City initiative last November, he said he wanted the UK to rival Silicon Valley as a global hub of innovation. A year later and that goal seems as far away as ever.

Far from competing with Silicon Valley, Tech City is struggling to keep pace with Ireland and other UK hubs such as Cambridge.

If the European tech market was a festival, Ireland would be the main stage, attracting headline acts like Google, Facebook and Microsoft.

Tech City more closely resembles the new bands stage. Its talent is promising – Last FM has been joined by the likes of Huddle, Yammer, Mixcloud and SoundCloud – but they lack the international clout of an Apple or an Intel. An “anchor” company of this ilk would attract smaller firms, either by directly spinning them off or by creating demand for support services. But to snare a blue chip firm, the UK needs to provide a level playing field. Some analysts say Google has saved £3.1bn over three years by filtering its European profits through Ireland.

Setting up the infrastructure for Tech City without laying down a competitive tax system is like a dinner party host cooking the food but failing to send out any invitations.

The parallels with the UK’s video games industry are striking. In 2006 we ranked third in the world in terms of turnover. Since then rivals – notably Canada – have introduced lucrative tax breaks, pushing the UK into sixth place, according to industry body Tiga. The UK gaming workforce has dropped 10 per cent in the last two years, while the Canadian equivalent has risen 35 per cent.

Tech City is an exciting project but one that will need more than rousing speeches to make it work.