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Technology / Hardware

Capital, skills, scale, UK tech economy challenges and how to overcome them

For the UK to have a strong digital economy it must build on its successes but also address its shortcomings.

A few weeks before the start of the election campaign Ambrose McNevin spoke with Julian David, TechUK CEO about the UK investment environment, attracting capital, attracting skills, building infrastructure and pushing back at authorities, legislators and governments on data access.

In this week of election manifesto launches each in turn will touch on technology and digital technology in particular as engines of economic growth and platforms for cutting public sector costs and improving services.

But all of those outcomes require a strong UK tech sector.

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Julian David, TechUK CEO says his job is to represent the UK Tech industry and to help build a business friendly environment for the tech sector .

He says "There is no doubt that the UK is a seen as a great place to be a tech company but there are challenges. There are a lot of challenges coming into the space both local and international."

One of the local challenges can be seen through the lens of capital.

The UK has an excellent record for start ups. But it has an average record for hosting business growth and a poor reputation as a location for helping tech businesses scale.

The City of London doesn’t operate in the same way Silicon Valley works. The City tends not to put good valuations on IP based companies. So what you see often is that the buyer of UK companies through a trade sale is a US firm. They apply higher valuations, says David.

"There is still a big challenge. At one level there is a change. There is a huge amount of start up activity. Things around tax credits, patents and even branding areas such as Tech City are working."

"Companies such as ARM and Imagination Technologies are clear leaders but are based around a design and license concept. They employ hundreds of people – this is now getting into low thousands. Their influence is huge but their economic significance in the UK is limited," he says.

What do companies need to scale?
While finance is a concern, currently the emphasis is more on skills.

TechUK is involved with the Digital Economy Council focused on ‘delivering a long term strategy drive the growth of the information economy sector.’
In a report authored by tech investor and entrepreneur Sherry Couto, finance came in at number four five on a list of concerns. Ahead of finance was capability – access to skills and access to markets.

The following factors, in order of importance, are the key reasons why companies are unable to scale in the UK:
– Finding employees to hire who have the skills they need
– Building their leadership capability
– Accessing customers in other markets / home market
– Accessing the right combination of finance
– Navigating infrastructure
Source: The Scale Up Report on UK Economic Growth – Author Sherry Couto

TechUK believes inward migration of properly skilled digital experts is vital to growth.

"There is always a shortage of skills," David says. "Immigration of people with the correct skills is important. Yes we want to build the skills but we need to import these skills. That needs to be dealt with."

Then there is access to markets. "It is not just things such as government procurement but extends to the recognition of local innovative companies."

Is the UK a magnet for inward investment?
"There are many things people like about the UK. Time zone; Rule of law; English language; Openness to innovation; A friendly business environment. And there are things that are less world leading. Tech infrastructure is on the cusp. There are plenty of surveys that show we are in the pack in terms of broadband and wireless connectivity whereas we used to be leaders," says David.

Is being in the pack good enough these days?
In the areas of broadband and mobile infrastructure David believes there is progress to be made.

"If you are an established big player, you can get what you need. If you are a start up you can get what you need. If you are looking to grow – once you get past a certain size you have to pay a lot for it or you can’t get it," he says.

"The government is putting investment in. But we think we need to up the game. Take South Korea, they already have 5G working. If you look at potential – it is great. We are poised to do this. And the question we have as TechUK is: "Is there long term infrastructure investment that is going to come through," he says.

After this year’s budget David issued a statement: "The UK is well placed to be a global leader in the development of the Internet of Things and the announcement of the £40 million investment will help accelerate the development of new innovative solutions for health, social care and smart cities. If the UK’s communication infrastructure is to remain globally competitive for the long term, it is vital we have a bold vision for the future. Today’s ‘moonshot’ announcement is exactly that and will focus the minds of Industry, policy makers and regulators to think about how we can deliver ultrafast as widely as possible across the UK."

Manifestos
While politically neutral, with a looming election TechUK has been keeping busy around Whitehall.

"We’re pleased to see all of the parties speaking about it. Technology is now a doorstep issue. We’re really calling for the next government to up the level of investment," says David.

In September 2014 TechUK issued its own manifesto for growth and jobs 2015-2020
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"A big piece of our Manifesto was about confidence in the use of data and the abuse of data. We think the set up is pretty good. If you look across Europe the UK environment is business friendly and has the right balance. We think there is work that needs to be done to ensure people believe that and have confidence in that. So we call for a chief privacy officer. That is not the information commissioner renamed. The information commissioner is someone seeking out errors. What we want is someone to take data issues head on, to say when we use your data it is being done within a democratic oversight and a legal framework that will enforce it."
"Last year, there were a few throwaway comments from government and security agencies. We went public and said no, the implication of the statements was that there should be a conversation between the industry and the government and that there could be some sort of trade off for secret access to information. We said that’s not going to work. The last thing the industry needs is an idea that there is a secret back door for agencies to access data of software developed or applications running in Britain. That would be disastrous."

TechUK is not against laws for access. It takes the threats of crime, terrorism and cyber abuse very seriously.

"Members engage with authorities and support law enforcement and in each case we work very closely with government. Our call is more resources should be made available. We also think there needs to be a balance in order to provide the right environment for innovation to bring jobs and growth to the UK," says David.
This article is from the CBROnline archive: some formatting and images may not be present.

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