Britain is lagging in its efforts to commercialize technology businesses globally, according to Warren East, the former CEO of British chip design firm Arm.
Speaking at Cambridge Tech Week, East highlighted how a lack of investor risk appetite and a weak capital market environment are hindering the UK’s potential to scale up tech companies.
He argued that while the UK is strong in innovation, the inability to effectively commercialize these innovations on a global scale is a major setback for the country’s tech ambitions.
British tech companies face growth hurdles
The UK has long been a hub for technological innovation, yet it struggles to retain and scale its tech firms.
A key reason, according to Warren East, is the lack of robust capital markets and investor risk appetite within the country.
The former Arm CEO pointed out that successful tech firms often opt to relocate or list in more favorable environments like the US, where access to deeper pools of capital and a more aggressive risk-taking culture exist.
This trend is causing a brain drain that limits Britain’s ability to become a global leader in technology.
In 2023, for example, Arm, a pivotal player in the global semiconductor industry, chose to list on the Nasdaq in the US rather than the London Stock Exchange.
The decision was seen as a major blow to UK officials who were keen to attract more tech IPOs domestically.
Despite being a British-born company, Arm’s move to the US was driven by SoftBank’s strategy and the broader capital market dynamics favoring the US over the UK.
UK vs. US: Investor risk appetite
East also touched on the significant difference in risk appetite between UK and US investors, which he identified as a primary reason for the UK’s poor record in commercializing tech businesses.
He emphasized that the issue in the UK is not about creating startups; rather, it is about scaling them.
Unlike the UK, the US boasts far deeper capital pools that are willing to take risks on high-growth tech firms, making it a more attractive destination for companies seeking to scale.
To counteract this, East suggested that the UK needs to modify its capital market rules to encourage more investment from pension funds into tech startups.
Such changes, he argued, could stimulate risk appetite and provide the necessary funding to scale innovative companies.
He warned that businesses cannot afford to wait indefinitely for regulatory reforms and need to seek alternative strategies to thrive in the current environment.
‘Common story’
The British government and financial institutions have been pushing for changes in capital market regulations to make the UK more attractive for tech firms.
One of the proposals includes allowing pension funds to invest more in high-growth tech startups, which could provide a much-needed boost to the tech ecosystem.
While some progress is expected, East cautioned that these changes are not guaranteed, and companies should not rely solely on regulatory amendments to ensure their growth.
Despite these efforts, the challenge remains substantial.
With the US continuing to offer a more favorable environment for tech companies, it will be difficult for Britain to reclaim its position as a global leader in tech unless substantial changes are made.
Another critical point raised by East is the frequent export of UK-born innovations to other countries for commercialization.
He described it as a “common story” where technological breakthroughs made in Britain are later exploited elsewhere.
This loss of innovation not only weakens the UK’s position in the global tech market but also limits the country’s economic growth prospects.
East emphasized the need for a paradigm shift within the investor community to support and retain high-growth tech companies in the UK.
Can Britain catch up?
Looking ahead, East expressed cautious optimism that the UK could improve its track record in retaining and scaling tech firms.
He underscored the importance of immediate action from both investors and policymakers to create a conducive environment for tech businesses to grow.
While he doesn’t offer a “silver bullet” solution, East believes that fostering a stronger risk-taking culture among British investors could be a game-changer in helping the UK tech sector achieve global relevance.
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