The current government cannot be accused of not trying to support the UK technology sector.
Tech City, the plan to promote East London as a destination for technology companies, has had the wholehearted backing the Prime Minister and Chancellor, as well as London mayor Boris Johnson.
A number of Tech City companies are making good: document collaboration cloud provider Huddle, for example, says it enjoyed 800% sales growth in the last year and dominates the government G-Cloud procurement framework. Plumbee, a social gaming company, clocked up eight-figure revenues within six months of launching.
Mostly, though, Tech City’s main achievement is to have persuaded a number of large, US-headquartered technology companies to open ‘innovation centres’ or R&D facilities in the region.
In early December, the Tech City Investment Organisation announced that Microsoft is planning to open new technology development centre in the area and that Cisco is building an innovation centre there. Earlier this year, Google opened up a co-working space near Old Street called Campus, while Amazon.com has located a new ‘digital media development centre’ near the Barbican.
Politicians bask in the implied endorsement of London’s viability as a technology hub. And the benefits for the companies are clear; aside from the presumed tax breaks, they stand to gain early access to any innovative work Tech City produces.
But not everyone is convinced that these ‘innovation centres’ will necessarily benefit the UK’s technology sector.
Speaking to Information Age for this month’s feature on enterprise start-ups in Tech City, Mike Rowlands, managing director of software development agency Lshift, argued that the most likely outcome is that these US companies will poach London’s best talent.
What hope does Tech City have in achieving its avowed aim of “creating the next Facebook or Google”, when the real Facebook and Google have first dibs on its keenest minds?
Meanwhile, many of the US tech giants who made commitments to Tech City have also come under heavy criticism for their tax contributions.
In December, Microsoft was accused of funneling £1.7 billion in UK revenues through Ireland and Luxembourg to avoid paying tax. A recent report from Bloomberg claimed that Google had avoided $2 billion in worldwide tax by moving revenue through a shell company registered in Bermuda. And Amazon.com is reported to pay zero corporation tax in the UK despite £3.3 billion in sales. (All three insist they pay as much tax as the law requires).
If the government is going to play such a hands-on role in the development of the technology sector, it should make sure it is UK industry and the British public that benefit.