Britain’s tech sector is flying. But, asks ANGELA JAMESON, will new Government cash be enough to stop Brexit bursting the bubble?
Bill Gates is to create a smart city called Belmont in Arizona in an attempt to build the desert state into a tech hub to rival Silicon Valley.
Of course there is a long history here in the UK of industrialists like the Cadbury family and the Lever Brothers using their wealth to build new towns and introduce innovation.
In the 19th century they build decent housing and sewage systems, whereas tech titans want driverless cars and connected buildings.
While Gates is pumping money into a smart city, our own Government made a more modest announcement that it would put £21m, spent over the next four years, into Tech City UK.
Tech City UK is an independent organisation that works to accelerate the growth of the tech sector in the UK by focussing on skills, running programmes to help young companies move to the next stage of growth, and publishing research and data into the sector.
It was started six years ago when David Cameron urged the world’s tech firms to come and establish themselves in East London, around a gloomy and congested fringe area that was quickly rechristened Silicon Roundabout. Successful companies which have benefitted from Tech City UK’s work include Just Eat, Zoopla and Funding Circle.
The new money announced this week, alongside a package of measures to help boost cyber security skills and quicken the roll-out of high speed broadband, will see Tech City UK evolve into a new organisation called Tech Nation. From April next year, Tech Nation will take its secret sauce to 10 UK regions, as well as London.
The Government organisation will focus on increasing skills, helping ambitious entrepreneurs fulfil their potential and accelerating the growth of specific sectors, in particular Fintech – technology companies that focus on providing financial products to consumers or products for the banking sector and Artificial Intelligence, computers who can almost think for themselves.
In truth only a very few rampant free marketeers would rule out any Government support for businesses that create wealth and provide well-paying jobs. From car manufacturing to aerospace, the UK has long provided strategic support to certain industries – especially those who employ lots of people in poorer regions.
Nor would Silicon Valley be what it is today without extensive Government support. According to a study by Brookings Institution, 18 of the 25 biggest breakthroughs in computing tech between 1946 and 1965 were funded by the federal government. The US government began schemes to encourage venture capital (ie risky) investing as early as 1958.
Public finances are now tighter than ever, yet if anything belief in the Government’s need to help certain industries is growing.
The problem is that Governments around the world do not have a great track record in picking winners. Also the mechanisms by which the Chancellor can easily help small and growing businesses – tax breaks and tax incentives for investors – can be easily derided as merely helping the already wealthy.
This week’s help for the tech sector – which followed an £84m boost for robotics and innovations in the energy sector announced earlier this month – was carefully framed in a package that also focused on skills training for young people and rural broadband.
One of the reasons that the tech sector has been a great success in recent years – growing at twice the rate of the non-digital tech sector and now employing more than 1.7m people – is because it is a lot easier to start and run a business here than in other countries.
Investors have poured money into British tech with a record £5.6bn being invested in the first half of 2016, much higher than in other European cities.
However, there are unique challenges ahead for a sector that relies more on highly-qualified but foreign born workers than other sectors. Across the country, 13% of the digital workforce were born overseas. In London that figure rises to 31%.
Many of the EU and non-EU workers who settle here and start businesses are proven wealth creators, others will be the wealth creators of the future. That is why the most important part of this announcement was not about money at all, but about a doubling of visas for those who can demonstrate exceptional talent.
It may not be the answer to the sector’s problems but it does show the Government recognises the issue at stake and there are some things that only the Government can help with.