Jumping on any good news to promote the UK’s few accomplishments, the Prime Minister Rishi Sunak claimed that the UK remains one of the best places in the world to start a tech business pointing to the UK’s success in creating 134 tech unicorns over the past ten years, which puts the UK behind only the US and China.
But while the UK might be able to attract foreign investment what it really needs is much stronger domestic support to help retain and scale these businesses, but for many technology companies the UK is not an attractive place to start or grow a business.
While the UK may have a successful financial-services sector, it has consistently failed to provide effective support for those tech companies looking to raise long-term equity capital despite London being able to offer significant investment opportunities.
By contrast in the US and Canada investors are more willing to risk investment in start-ups and SMEs, while in the UK there tends to be a real aversion to risk.
Speak to any CEO who has had experience of trying to raise funds and they will tell you that only in London is the first question, ‘when do I see a return on my investment?’ Is it no wonder then that leading UK tech companies are looking to list in the US or to raise money there?
The UK has failed to create a culture willing to take a long-term approach to investment, instead investors tend to focus on short term market moves or try to second guess geopolitics – none of which helps in terms of making good long term investment decisions.
Sustaining and scaling businesses requires long-term equity capital being made readily available to ensure that innovation can thrive.
While the UK has traditionally been seen as pro innovation and investment, today countries like France and Germany are now being far more active in driving and distributing investment into technology.
The UK government – post Brexit – needs to be actively pushing investment into the tech sector; it needs to make the UK more attractive to talent and it needs to make it easier to create businesses here in the UK. But we also need a financial market that’s less risk averse, because if we don’t address this the UK will become increasingly less attractive as a place to invest in and grow a business.
Tech companies need to be able to commit to a high level of development activity if they are to grow their businesses and deliver significant future returns, and they can only do that if there is a change in mindset when it comes to risk and a willingness to invest for the longer term.
