There’s an often-quoted adage, which goes something like this: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate.”
What unites them all? Yes, they are all disruptors, that have turned traditional markets – some of which are centuries old – on their heads in a matter of a few short years. And they have all inspired subsequent entrepreneurs to disrupt other areas of the economy.
But what else do they have in common? None of them are British.
Read more: Dear London, where’s our Google?
With the level of talent, innovation, and sheer bloody-mindedness of UK tech firms, that doesn’t sit quite right with me. The UK tech scene has so much to be proud of, but why haven’t we been able to create our own global giant?
Just last month, digital secretary Matt Hancock said that we are on the right path to creating a tech titan to rival Google or Facebook. He pointed out that we’re attracting investment from overseas at a rate of knots. In 2017 alone, London tech firms took in almost four times more funding than Germany – and more than Sweden, France and Italy combined.
Hancock is confident that post-Brexit Britain can be a home for global companies of scale that we so often see coming out of the US and China.
But I’m not sure I’m convinced just yet. I am very much in favour of overseas investment, but rather than rely on this to boost our digital economy, we also need the government to nurture our home-grown tech talent and better propel it onto the global stage.
From talking to tech firms on a daily basis, there are three key areas I believe the government needs to address if it’s serious about tech.
The first is funding. In my opinion, the UK’s entrepreneurial potential is being stifled because our financial ecosystem is geared towards startups, not scaleups.
Of course, it will be great for Britain to be a global leader in tech startups, but the digital economy – and, indeed, the UK economy as a whole – would be much better off if we became an incubator of growth, known for helping the small and mid-sized businesses of today become some of the world’s biggest companies of tomorrow.
The appetite is there for growth capital. More than half of tech companies plan to seek new funding streams this year, but too many struggle to access the long-term capital they need. Private equity is becoming an increasingly popular route. Traditional bank funding less so.
Whether they’re disrupting existing markets or creating new ones, technology companies come up against the same challenges that businesses have always faced: growing, scaling up, and accessing finance for growth.
Brexit may currently be sucking the life out of Westminster resources, but once that eases, businesses are calling on the government to put long-term “patient capital” firmly back on the agenda.
The second issue is skills.
Perhaps more than any other segment of the economy, our tech sector relies on a global pool of talent. Over a third of tech companies blame the UK education system for failing to teach or prioritise STEM subjects well enough, despite a sustained government drive to increase skills and take-up of these subjects at higher levels in schools, colleges, and universities.
The government and industry both need to keep banging the drum for more relevant homegrown skills development. Education and training of all forms need to play a part – schools, universities, apprenticeships, on-the-job training, and upskilling.
At the same time, the government should reinstate the two-year post-study work visa to help attract international workers into tech firms. It’s not either-or – the UK tech scene needs both domestic and global talent.
And finally, we need to tackle the issue of incentives. The government offers a number of tax reliefs that are relevant to startups and scaleups – R&D tax credits, patent box, and the EIS – but none are designed explicitly with tech firms in mind.
The UK tax regime is still biased towards investment in goods and machinery, with fewer incentives to encourage spend in tech innovation and digital infrastructure.
If the government really wants to support and propel the fast-growth tech community onto the global stage, policymakers are missing a trick by not creating targeted incentives as a springboard to success.
The government has said promoting R&D innovation is a priority. It should be. Get these fundamentals right, and the next Facebook or Alibaba could be made in Britain.