Jeremy Hunt’s use of ChatGPT to help write the introduction to his pro-innovation speech on Friday felt both neat and unfortunate.
Neat to highlight the uses of such advanced software; unfortunate to raise the thought that much of the government’s policy on tech can too easily be drawn up by an AI chatbot.
In fact, asking ChatGPT for a ten-point plan to boost innovative growth yields some promising but familiar ideas: investment in R&D, support for start-ups and access to funding.
It is the sort of ambitious but proposal-light stuff that we’ve heard from ministers hoping to make the UK “the next Silicon Valley.” But it is no longer cutting it for many in the sector at a time when the UK is in a post-Brexit race to attract and keep innovative companies.
Tech founders and investors are already talking about how they can use the $369bn on offer under the US Inflation Reduction Act for technology including electric vehicles, hydrogen and carbon capture.
A response by EU states would leave the UK squeezed between two rival regions fighting over the most exciting future technologies. In Europe, countries such as France have been quick to roll out the red carpet for tech firms to relocate and grow.
Yet UK government policy has recently been slightly puzzling. Take the decision to cut back the R&D tax credit scheme for start-ups that many have relied on to grow in recent years. In a survey by industry body Coadec of more than 250 UK founders, almost everyone said the cuts made the UK significantly less attractive.
Of course, tax credits can and should be reformed to address fraud risks. But such incentives are one of the most important levers the UK has to help lossmaking start-ups in their early days. If anything, they should be expanded. Likewise, renewing or extending tax reliefs offered by the Enterprise Investment Scheme and Seed Enterprise Investment Scheme in the long term should be a priority.
The broader environment also matters if those tax incentives are to lead to businesses that stick around. Founders need a functioning exit for their firms in the shape of a London stock market equipped to provide both analyst coverage and investor interest. Promises to reform the listed market, including fixing the dulling effect on analyst research from Mifid II, need to happen quickly to make London more attractive to tech firms.
The government can help address funding gaps for start-ups and scale-ups in the UK. Shovelling the same money around won’t help: a forthcoming semiconductor review, for example, needs to be clear about new financial support for the sector, rather than simply pointing to existing funds marshalled by the British Business Bank and Innovate UK.
The government is giving much weight to the outcome of a regulatory review by Patrick Vallance in some of these areas. But this will be little use to the sector if the answer is more strategies, reviews and task forces with little to back them up.
Tinkering with rules in search of short term Brexit “benefits” may not mean long-term structural improvements. Take the £100bn Brexit win ministers highlight from changes to Solvency II insurance regulation: there is no guarantee that British pension funds will invest in British assets, let alone innovative sectors, given their duty to find attractive returns regardless of nationality or sector.
The UK government needs to create the backdrop to ensure there are attractive firms and industries in which to invest, in both private and public markets.
And deregulation can’t solve everything: the top Brexit-related request from founders is that the visa system for talented workers be expanded and streamlined so they can get the staff they need.
The chancellor is right to call out the successes of the tech sector: London in particular is a tech leader in Europe, raising more funds for more businesses than rival cities in recent years.
But regulatory reforms need to be matched with broader policy and financial and fiscal support for industries that should repay many times over in taxes and employment. Otherwise ambitions to become the next Silicon Valley will remain just that.
