February 7, 2023

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How to make Britain a greater tech power

It has become a tired phrase among politicians to proclaim their ambitions to transform their city, region or country into the next Silicon Valley. The world is littered with failed and futile attempts to replicate the magical blend of entrepreneurial dynamism, financial adventurism, and university- and government-led research intelligence that has made Silicon Valley the world’s most dynamic innovation hotspot. Also, it’s not even clear that Silicon Valley still holds the allure it once had thanks to sharp discounts in tech markets, big tech’s societal failures, and crypto brethren’s financial disasters.

None of these considerations, however, stopped British Chancellor Jeremy Hunt from declaring in his autumn statement that he wanted Britain to become the next Silicon Valley. If he meant simply that he wanted Britain to become a more innovative and productive economy, few would question his intent. It is now up to him and the rest of the government to match their airy rhetoric with well-aimed action. The UK has a good story to tell about innovative tech startups. But there are at least four areas where government could help build on that success.

Almost every tech company in the UK is crying out for more skilled employees first. But the country’s outdated education system doesn’t offer enough of that. As a report by the ScaleUp Institute pointed out earlier this year, schools are not putting enough resources into computer science. The number of computer teachers in England fell by 17 per cent to 12,719 between 2013 and 2021. More than twice as many students study Literae Humaniores at Oxford University as computer science.

Companies often make up for talent shortages by hiring technicians from abroad. Skilled immigrants have made a huge contribution to British entrepreneurship and the government should make it clear that it welcomes them. But some ministers have done their best to deter students and entrepreneurs by stoking bitter anti-immigration talk. According to the latest Gallup poll, the UK has now slipped to seventh in the list of desirable travel destinations, having consistently ranked second behind the US in previous polls.

Third, the government has rhetorically pledged to make Britain a scientific superpower, promising to increase R&D spending to 2.4 percent of gross domestic product. But that’s the bare minimum needed to be competitive in the global economy. It lags far behind countries like Israel, South Korea and the US. Permanent exclusion from the EU’s €95 billion Horizon research program would destroy many UK-based science projects. And biotech startups rant about Hunt reducing R&D tax credits for smaller companies.

The government must finally do more to incentivize growth capital to scale promising start-ups. Over the past two decades, Britain has built Europe’s most dynamic venture capital industry, but it still lacks the financial firepower to transform national champions into global companies. Its bond-loving institutional funds should be encouraged to copy their Canadian counterparts and invest more in alternative equity investments.

France’s President Emmanuel Macron has championed his country’s tech sector for several years, offering Britain far tougher competition. Paris recently took London’s crown as Europe’s most valuable stock market. This rivalry should give Britain another incentive to double down on the successes of its own tech sector. Britain will never build Silicon Valley again. But it could still produce its own powerful economic mix of research, technology, finance and creativity.