Something other than Brexit happened in parliament yesterday. The chancellor, Phillip Hammond, stood up and delivered his spring statement – and it was a really mixed bag for the tech sector.
Hammond promised to “support our world-leading entrepreneurs, creators and innovators” and “embrace the technologies of the future”, with the headline proposal £79 million of investment in ARCHER2, a supercomputer five times faster than the current generation of supercomputers, to be hosted at Edinburgh University.
Roughly the same amount was promised to build a new Extreme Photonics Centre in Oxfordshire, and £45 million to the European Bioinformatics Institute, a genomics research lab based in Cambridgeshire.
“The supercomputer funding is something eminently sensible and something we’ve talked to the government about their being a capacity gap in the UK,” explains Giles Derrington, head of policy for Brexit, international and economics at techUK.
However, while the chancellor’s tech pronouncements were among the highlights of the relatively sparse spring statement, he also took the opportunity to take digs at big tech. Hammond welcomed the Furman Review, a 150-page report delivered the morning of the spring statement, which railed against the dominance of tech giants and encouraged government to tackle anti-competitive practices.
“There’s a sense the government sees tech as something to be tackled rather than championed,” says Derrington. “We’re increasingly seeing this as a problem.”
It follows in the footsteps of other countries. This year France is introducing a more stringent tax system on big tech firms with more than €750 million turnover, plus €50 million turnover from digital activities within Europe, to redress the tax gap between online and offline firms. (The average company pays 23 per cent tax in Europe, while internet giants pay nine percent, according to EU figures.) And in the US, Democratic 2020 presidential candidate Elizabeth Warren has proposed breaking up big tech companies.
“There’s only so many times international investors can see the UK is doing something quite aggressive, unilateral and not that well thought through before you go: ‘Well, why would it be the country I invest in when I have alternative options available?’,” says Derrington.
“Policy makers need to reject short-sighted grabs at big tech profit margins, and insist on companies paying a fair share in taxation,” says Jen Persson, director of defenddigitalme. “Make long term investment in sustainable data models for public interest research and in open knowledge that need not come at the cost of privacy, but asks people what they want, and shows them how their data were used on a regular basis.”
Persson sees the Furman Review, which the Chancellor seems to be basing his future approach to the tech sector on, as “conflicted in what it wants to achieve.”
“We need to solve the incumbents’ grip on data, failures of public trust, the integrity of democratic systems tainted by misuse of personal data, and yet also comes across as a push to propagate more of the same companies,” she says.
Tackling perceived anti-competitive practices in the tech sector appear to be a theme the government plants to take: Hammond also wrote to the Competition and Markets Authority (CMA) asking them to undertake a market study of the digital advertising market – another proposal from the Furman Review. In his letter, Hammond seemed to signal which way the CMA may want to look, saying the sector “has been widely described as lacking transparency”.
It is “another very clear sign to the global digital platforms that legislation is coming,” says James Whatley, strategy partner at Digitas UK, a London marketing agency. “Phillip Hammond calling for the CMA to move faster, Brexit or otherwise, means certain parts of the government are taking this very seriously. The politicians are coming for the platforms. And arguably, it is long overdue.”
While all these developments – the CMA review, tackling competition and the ending last week of a consultation on a UK digital services tax – are aimed at big tech, they have knock-on effects on confidence in the wider tech sector. “Look at digital tax as a prime example,” says Derrington. “It’s very much intended to target the larger US tech giants but we have successful, rapidly growing British businesses whose investors are saying what happens when you get to this point?”
But the most important pronouncement for the future of the UK tech sector within the spring statement may be one that wasn’t labelled as specifically targeting the tech sector. One in eight people working in the UK tech sector are born outside the UK, according to data from Tech City UK. In London, that becomes 30 percent. A fifth of company founders are non-UK nationals.
The big fear has been that – regardless of when the UK actually leaves the European Union – there’d be a brain drain of UK graduates out of the country, and a drying up of the talent flowing into the UK from around the world.
In his spring statement Hammond announced that research institutes and “innovating businesses” will be exempt from a cap on employing PhD-level candidates with high-skilled visas starting this autumn. “A business-friendly immigration system is crucial if the tech sector is to continue to grow and drive the UK’s economy in a post-Brexit world,” says techUK deputy CEO Antony Walker.
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