The red tape could keep the country out of the forefront of the AI revolution
Rishi Sunak, a British scientist and technologist, announced his plans less than six months earlier to turn Britain into a global superpower in science and technology by 2030. This lofty vision has already been shattered by high taxes and bureaucratic red tape.
The British chip designer Arm announced plans on Monday to reject the London Stock Exchange and instead list with New York’s Nasdaq, in the largest US IPO for nearly two years.
Sunak held discussions with Arm’s owners (the Japanese investment company) in order to encourage the Cambridge based company to list on the British stock exchange. Sunak had held talks with the Japanese investment company, which owns Arm’s Cambridge-based subsidiary, in an attempt to encourage it to list on the British stock exchange.
What was supposed to be a British success has become another example of policy failing. A senior source from a large tech company told me that the UK’s attitude to technology over the last few years had already put the UK in a disadvantaged position with regards to significant investments. “Despite our hopes that this would change, it seems like our concerns are falling on deaf ear.”
London’s stock market faces some natural headwinds. New York is more expensive and has higher trading volumes because the US economy is stronger and bigger.
Recent London listings have also failed, including . This includes the takeaway delivery company Deliveroo which saw its share price plummet 25pc when it made its debut on the stock market in 2021.
There are broader negative trends. Since the financial crisis, London’s stock exchange has declined by 40pc. The S&P 500 is dominated by large tech companies, which account for 28pc. They are growing and continue to do so. Britain attracts slower-growing, older conglomerates, not the businesses that will drive the economy of tomorrow.
The government has discussed loosening the rules of stock exchanges to attract start-ups with rapid growth. As with many other promises made to take advantage of Brexit’s opportunities, the government has only talked the talk and delivered very little. The Government takes a long time to implement changes and they tend to be superficial.
To attract more business to Britain, it is important to reduce the burden of taxes and regulations. The Government instead increased corporation tax to 25% from 19%. The Financial Conduct Authority instead has introduced new rules governing listed companies. These include requirements related to diversity, inclusion, and climate disclosure.
It’s not just the tip when it comes down to Britain scaring away tech companies.
The Competitions and Markets Authority had earlier this year blocked Microsoft’s acquisition of Activision Blizzard. Microsoft’s Brad Smith responded by warning that the decision sends a “clear signal” that “the European Union offers a better place to launch a company than the United Kingdom”. Among others, the EU, US, Brazil and South Africa approved the acquisition. CMA could now look to reverse its decision, which is embarrassing. Those anti-Big Tech mantras that British politicians, commentators, and regulators have been repeating for years are now coming back to bite.
You’d be wrong if you thought that this would make them rethink their strategy. The new legislation that is currently before Parliament will place extraordinary regulatory burdens on Britain’s digital sector. These are far more than what can be imagined in the US and EU.
The Online Safety Bill is the first, and it will be finalized in the House of Lords by next month. It’s difficult to describe the regulatory burdens imposed by the 302-page Bill, putting aside threats to privacy and free speech. The word “duty”, which appears 327 times in the bill, is also repeated 564 times. Each of these requirements will increase the cost of doing businesses and discourage innovation.
Take the requirement to conduct “risk assessments” whenever features are added or modified. This will discourage smaller platforms to bother operating in the UK.
There are also a variety of duties relating to transparency, records, complaints, and the removal of content. Firms that fail to comply could be fined billions of pounds. This is not a welcome mat for new tech companies.
Ofcom’s power to force private messaging services, such as WhatsApp and Telegram, to scan messages is a major concern. This is a serious threat to encryption.
Meta-owned WhatsApp, and other services such as Signal are considering withdrawing from Britain. This would cause chaos for millions of people, including ministers, who, as the Lockdown Files revealed, use these services to run their country.
Online Safety Bill (OSB) isn’t only anti-business legislation that is currently being debated in Parliament.
The Digital Markets and Competition Bill allows the CMA to create bespoke and continuously evolving requirements for all major digital companies in the UK, with limited accountability. The regulator could require them to consult with them before introducing any new features or products.
Iain Wood, from Amazon UK, has warned that “the Bill could slow or block innovation and make the UK harder to innovate”.
The CMA will be able to challenge decisions only on the basis of process under the judicial standard.
The Digital Markets Act is the EU equivalent and, despite its flaws and shortcomings, it clearly defines thresholds and requirements, and prohibits certain actions. Any decisions can be challenged on their merits.
Britain currently has the most vibrant tech scene in Europe. The industry is worth more than $1 trillion and is the third-largest in the world, after the US.
We have a great history of innovation, fantastic talent, and many successful start-ups. All this will be for naught if the government continues to pursue its anti-tech agenda.
We run the real risk of regulating ourselves into a technological backwater, rather than being at the forefront of the AI revolution.