As published in The Sunday Times, 25th June 2017
This week President Macron spelled out his vision of France as a country that “thinks and moves like a start-up”. The President, whose own meteoric rise resembles that of a Silicon Valley start-up, claimed that France would become the home of global innovation and at long last stop crushing its entrepreneurs with taxes and red tape.
Over the last decade many of Europe’s leaders have made similar claims, with continental capitals from the ‘Silicon Docks’ of Dublin to the ‘Startup Estonia’ Hubs in Tallinn claiming to be the natural heir to Silicon Valley. Despite these efforts, the UK and London in particular has remained the European leader as home to both the greatest number of Europe’s technology successes, as well as to the most amount of capital investment.
That is until now. Early data for 2017 suggests that for the first time in a decade the UK will fall behind France in terms of the total amount of capital invested (to add). On top of that, Macron has announced a raft of policies to cement France’s position as the home of European innovation. A headline grabbing 10 Billion Euro vision fund announced this week is being matched with a new start-up visa to help small companies hire non-French talent quicker. And while existing French labour laws have often been challenging for fast growing technology companies to navigate, it appears Macron is also looking at reform there too. The President’s aim of turning France into ‘a start-up nation” is a clear challenge to the UK’s success in this area.
While France appears to have a renewed focus on shifting its economy towards one driven by technology and innovation, the UK’s technology sector has had a much tougher year. While the UK leads Europe as the home of the most ‘Unicorns’, technology companies privately valued at over $1B, there have been some high profile collapses as cheap money and poor governance has led in the rapid rise and fall of companies such as Powa Technologies and VE Interactive, reminiscent of the dot com collapsed of 2000. Both these former unicorns went into administration in the last 12 months.
And while the UK continues to build world leading companies and produces renowned technologists, holding on to the winners has also proved difficult. Some homegrown stars have recently fallen into foreign hands with the world leading microprocessor company, ARM Holdings acquired by the Japanese based Softbank. Skyscanner was sold to China’s C-Trip and DeepMind, which some contend is the most important artificial intelligence company in the world, was bought by Google in 2014. While foreign investment into the UK technology ecosystem is welcome, had these companies been in more traditional sectors such as manufacturing or mining there would no doubt have been more Government oversight of such takeovers and possibly more public outcry about their fate.
To some these trends represent an unnerving shift in the UK’s fortunes. The nation that has been held up as a model for how to support innovative industries suddenly seems less footsure. It is not surprising that President Macron has spotted this weakness and has decided to exploit it ruthlessly as Government becomes bogged down in Brexit negotiations.
For the technology sector, Government support has been hugely important. The boom in start-ups was aided through the introduction of the EIS scheme, encouraging early stage investment into tech companies. The Government also helped UK-based start-ups hoover up global talent with the introduction of the Tech Nation visa for highly skilled tech workers who want to work here – so obviously an inspiration for Macron’s new policy initiative.
And the Government’s commitment to the sector remains: this week’s Queen’s speech, while rightly focussed on Brexit, also singled out areas of tech investment from electric and self-driving vehicles to private space companies, both industries the UK has a strong heritage in.
However as European negotiations loom there is a risk that supporting the UK’s burgeoning technology ecosystem drops to the bottom of the in-tray. At a recent lunch Balderton held for entrepreneurs many confided that they felt the ‘air had been sucked out of the room’ for ‘everything but Brexit’.
A Resolution Foundation report last week revealed that while the British economy has healthy levels of employment, wage stagnation has meant more and more people are employed in low paying roles. The technology sector is clearly one area which can create high skilled and better paying jobs, and as Britain begins to put in place its priorities for a post-EU world, it is vital it continues to be a world leader in the field.
In the tech sector, there is a long heritage of copying the best ideas of your rivals and making them even better. Macron looks set to ruthlessly mimic the best ideas of start-up Britain to put France at the forefront of Europe’s technology sector.
There is a risk that we will become stand-still Britain if we do not rise to La Republique’s challenge.