Innovation

A Manifesto for Digital Change (Part 3: A New Industrial Strategy)

Insecurity, joblessness, and stalled living standards are powerful drivers of protectionism – we learned that in no uncertain terms from the Brexit vote. However, “an economic policy that seeks to shield the UK from globalisation and innovation would be the equivalent of standing on the shore with King Canute”, warns techUK, the organisation that represents 700,000 technology innovators.

June 7, 2017

TechUK’s manifesto for digital Britain, which was published alongside those of the UK’s political parties, continues: “This does not mean that the new government can ignore the unease about globalisation. On the contrary, it must deliberately strive to ensure that the new economy is for the many, and not the few.”

This echoes Labour’s main campaign pledge, despite techUK’s determination to avoid accusations of partisanship. That said, it is hard to argue with the need to build just such an economy; indeed, it was surely the key driver of the Leave vote.

TechUK believes that the economic renewal it describes can best be delivered via a new industrial strategy – rather than, say, the uneasy mix of financial services and 19th Century thinking that has emanated from Whitehall in recent years (as if the country is run by philanthropists in stove-pipe hats).

“This should be a long-term and evolutionary framework to build the capacity and capability in the UK’s economy and create a truly innovation-led economy,” says techUK. “When considering the role of digital in the industrial strategy, policy makers should focus firstly on the significant income and productivity gains that will result from accelerating the process of digitisation across the economy.”

In our previous two reports on the techUK manifesto, we focused on the challenges of maintaining confidence in the UK’s digital economy in the environment of surveillance, internet regulation, and technology censure that was favoured by the last Conservative government, and on the battle to create the skills needed to succeed in a 21st Century economy, when that same government failed to set out a convincing vision for the young.

So how can techUK’s vision to create a new industrial strategy succeed?

First, let’s deal with one problem of Brexit itself. According to a 2016 survey by Computing, 83 per cent of medium to large organisations in the UK have data hosted in continental Europe. On leaving the EU, the UK will lose the automatic right to transfer personal data to and from other EU countries – unless the new government secures an agreement with the European Commission.

“Given data flows are of critical importance to the UK economy and the very wide definition of personal data under the new EU data protection rules, the next government must make securing a water-tight legal framework to continue the free flow of data across borders a top priority for the negotiations,” says techUK.

“The government must ensure transitional measures are in place to cover data transfers between the point we leave the EU and the formalisation of any new mechanism.”

But what of the new industrial strategy itself – the one that techUK rightly believes will be essential if the UK is to stand any chance of post-Brexit success?

_94927474_gettyimages-542714930

First, R&D investment needs to rise. Its handful of top universities aside, the UK continues to under-invest in R&D, currently spending less than 1.67% of GDP, compared with the EU average of 2.03%.

The new government should set a target of investing three per cent of GDP in R&D by 2025, says techUK. This will send a clear signal to foreign investors and academics that the UK remains a leading hub for innovation and scientific collaboration.

That would certainly be a better strategy than the adversarial message sent out by the last government to scientists who were critical of Brexit, and the risks it still poses to the pan-European research programmes in which the UK has been a key player.

“We urge the new government to give UK Research & Innovation (UKRI) powers to set science and innovation budgets over 10-year cycles,” continues techUK. “This will help ensure the long-term approach to R&D funding essential for delivering the most impactful results.”

A new investment culture will also be essential. This is another longstanding problem for the UK, which has been very good at small-scale seed/angel investment, and at large-scale, multibillion-dollar private equity investment, but very poor at the important bit in the middle: pumping millions of dollars into a portfolio of startups (the thing that Silicon Valley does so well).

Establishing a Patient Capital Council to deliver evidence-based policies on developing a culture of long-term finance is one solution, suggests techUK, along with strengthening the role of the British Business Bank (BBB) to mitigate the impact of leaving the European Investment Fund and European Investment Bank.

Another big challenge is creating the right regulatory environment. One of the stated reasons for Brexit was to escape what many perceived to be European meddling and bureaucracy – a perception that rather ignored the fact that most regulations enable trade on mutually agreed terms, and offer citizen, business, and labour protections.

Theresa May’s promise earlier this year to create a “bonfire of regulations” (a story buried a few weeks ago by the announcement of the General Election) might win headline support from right-wing tabloids and their offshore proprietors, but it will do nothing to inspire and encourage international trade.

TechUK advises that the government should adopt the European Better Regulation Guidelines in UK legislative practices, and ensure that legislation supports the development of high-growth and disruptive business models.

More, techUK advises that the government should support the creation of an independent Data Ethics Council to shape the future norms governing data science. Again, this is something that many Conservatives may resist, as it has a very European flavour.

Put another way, it is hard to ignore the feeling that in order to make a success of Brexit, the UK may simply end up recreating many of the European proposals it sought to escape: it may be the only way to survive, yet alone flourish.

Next, techUK reminds the government that the communications infrastructure itself will be key to a successful post-Brexit economy. It urges the government to drive investment in the national infrastructure and next-generation communications technologies, tackling obstacles including planning permission, sharing infrastructure, and commercial operators’ access to public land.

The government should also identify and address obstacles to broadband take-up, it says – so that more than 90 per cent of premises will subscribe to a broadband service by 2020 – and create connectivity corridors on all major transport routes.

But here the UK faces another problem: BT, a company whose arrogance and mismanagement has done more to hold back the growth of digital UK than almost any other factor.

BT’s misleading assertion that the vast majority of the UK has access to “superfast broadband” must end, and be replaced by a strategy to actually build a superfast infrastructure at superfast speed.

_89472696_fibrelight

A majority of the UK has access to broadband, certainly, but it is far from superfast, let alone consistent and reliable – unless companies pay for expensive private installations. Currently, BT has no financial incentive to make superfast broadband a standard when it can make more money by offering it as a private, premium service. Non-corporate consumers, meanwhile, remain at the mercy of BT’s appalling customer service.

Perhaps the best thing the next government could do would be to break up BT and pump money into the immediate, fast-track upgrade of our digital infrastructure – which is not a recommendation that techUK could make itself, of course.

Overall, a clear, ambitious, tech-centric vision for the post-Brexit future is vital, but it’s at risk of being overlooked when – according to the FT – over 750 trade treaties will have to be renegotiated from scratch for the UK just to tread water, let alone swim towards the horizon.

Today’s political posturing and rhetoric will be fast forgotten in the post-Brexit world. So whatever your political affiliations might be, as innovators let’s all push towards making the bold vision explored in this and our previous two reports real.

It must, genuinely, be an economy that works for everyone.