Hero

A blueprint for an entrepreneurial technology driven economy

SECTION 1 - Introduction

Meeting the challenges faced by UK-based tech companies

Becoming the best place to start and grow a business

As the Nobel economist Paul Krugman observed: Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker

There are three ways to increase national output:

  1. 1. require your workforce to work harder or for longer;
  2. 2. increase the size of your workforce through immigration; and
  3. 3. harness technology to produce more with the same effort.

UK productivity has remained stagnant for decades. It is arguable that successive Governments have avoided the hard work required to design and implement intelligent policies to increase productivity by taking easier, short-term, options. Post Brexit, per capita growth is arguably now the only real option for raising living standards for all. Consequently, the UK has been forced to focus its productivity strategy on the third option to increase national output. The central plank of the Government’s strategic plan for industrial growth in the UK is now to harness the economic benefits of the Fourth Industrial Revolution, using technology to both deepen and embed UK private sector participation in the global trade in goods and services.

The plan is that, by providing additional “smart” support to private enterprise, the UK can reposition itself at the cutting edge of the AI and big data revolution, helping to reverse years of sluggish economic growth. Despite loud voices from some quarters, the UK is not going to rebuild a globally competitive manufacturing base and will instead have to continue to focus onexporting highly skilled services.

Stripped back, the core ambition is for the UK to leverage the Fourth Industrial Revolution through the creation and growth of companies that are able to challenge the global dominance of the US and China’s trillion dollar tech behemoths like Apple, Google and Tencent. An honest appraisal of the chances of meeting this ambition is required. Neither the UK nor any of the EU member states are home to $1tn companies, nor is it looking likely that they will be.

The potential economic impact of a successful AI and tech strategy in the UK is significant. One study forecasts that by 2030 UK GDP could increase by 10.3% by investing in and harnessing the economic benefits of AI. Another study has forecast that AI could see a 40% increase in productivity by 2035. These benefits would add an estimated £570bn to the UK’s GDP.

The five foundational objectives that the Government has set itself to achieve its strategic plan are to: become the best place to start and grow a business; become the world’s most innovative economy; upgrade the UK’s infrastructure network; ensure prosperous communities across the UK; and create good jobs and greater earning power.

Of the three main challenges faced by UK tech companies the starkest is undoubtedly attracting growth capital throughout the journey from start-up to high value enterprise. For this reason, the bulk of our report focuses on access to capital. Finding and retaining talent and navigating disjointed Government policy and an array of horizontal and vertical regulatory obligations are also critical issues facing the tech sector, and are also featured in this report.

We believe that, rather than gambling on delivering the next generation of world beating tech behemoths, the Government’s tech policy objective should focus on helping to create successful companies in the spaces that are too small for the existing global players to fill.