Many people see Artificial Intelligence (AI) as key to the future of humanity. At the moment the US and China are the only two players in the game: some suggest that the race has already started and that it is too late for new entrants, leaving UK, Europe and the rest of the world to a role of subservience. Dominic Cummings believes that the UK should be a part of this Big Tech. He is right in his aim but he is not going about it in the right way.
His current approach seems to rely upon being able to use state aid to help incubate Tech giants. This, it seems, represents the main area of disagreement with the EU. The sabre rattling that is taking place in the form of the Internal Market Bill, in order to pressurise the EU in the current trade talks, is doing irreparable harm to the reputation of the United Kingdom. If the Government follows through with this bill, no longer will Britain be able to take the high ground with respect to the rule of law. To quote Tony Blair and John Major “As we negotiate new trade treaties, how do we salvage credibility as ‘global Britain’ if we so blatantly disregard our commitments the moment we sign them? …Once trust is undermined, distrust becomes prevalent.”
To be flippant for a moment, Mandy Rice-Davies became a household name for her “Well, he would, wouldn’t he?”, when responding to the claim that Lord Astor denied an affair or even having met her. So, Northern Ireland Secretary Brandon Lewis’s pronouncement that the British Government proposes to breach international law in “a very specific and limited way” risks being repeated at every possible opportunity, whether by those already in a treaty with the UK or by Britain’s prospective Trade Partners – or indeed by every Tom, Dick or Harry caught speeding.
If the sabre rattling fails and the Government does not get the deal that it wants, it then seems that the Government will opt for No-Deal, doing irreparable damage both to the economic health of the country, already suffering the impact of COVID-19 and the worst recession for three hundred years, and to the reputation of this country for responsible behaviour.
It is ironic that this emphasis on state aid is the complete antithesis of Conservative economic policy to date. The British Government has hitherto argued for the restraint of State Aid, and the current level of State Aid in the UK as a % of GDP is half that of France and a quarter that of Germany.
The aim to create a Tech Giant is sound, however. One might have expected that some of the big tech giants would have been broken up by now. Internet search, for instance, is a fundamental part of people’s lives around the world. Over the past 20 years, Google’s global market share has hovered around 90% (currently 92%). In the past, the US has broken up quasi-monopolies in the oil sector and in telecommunications. But these large tech companies are engaged in a global competition to develop and become masters of AI. Neither the US nor China is prepared to weaken its runners in this race.
The dominance of major US and Chinese tech companies is not written in stone, however. It is something that has come about in a few decades and is a reflection of two very different economic systems, one the most powerful capitalist democracy in the world, the other the most powerful authoritarian country in the world. AI is forecast to play an increasingly dominant role in our lives, both in the factory, in the office, in the home and in every walk of life. Europe is the largest economy in the world and together has the financial and human resources to create its own tech giants. There is no reason why Europe should be left out of this race. We are late starters however, and will therefore have to take appropriate steps to compensate for this tardiness.
First, a serious study should be commissioned to determine why the UK and Europe have been unsuccessful up to now in creating tech giants and to identify what steps should be taken to remedy the situation. It is clear that there is a great deal more that the Government could do both in terms of financial environment and regulation quite apart from state aid.
The Government have established UK Research and Innovation (UKRI) bringing the various UK Government research funding mechanisms together and has launched a UK Research Roadmap setting out its plans for the future. These include an Advanced Research Projects Agency (ARPA), seeking to mirror success of the US Defence ARPA (DARPA) which has been of significant benefit to US Tech firms. This is a good start but there is much more that can be done. DARPA makes use of the huge US Defence budget: the UK could excel in Medtech for instance with the NHS is the role of the US Defence Budget. Much of the investment in US start-ups in any event is in the form of long term capital from pension funds not government.
The Entrepreneur’s Network has a list of 20 recommendations for improving the environment for start-ups – but nothing explicitly about the need to increase State Aid: it is not in the top 5 issues for the majority of tech start-ups, according to Dom Hallas, the spokesman for the group.
Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EIS) already provide useful funding for tech start-ups. Some tweaking of their rules could greatly increase their usefulness however. There is a lot of capital potentially available and the challenge is to encourage more of it to flow to promising tech companies.
In recent years US tech giants have acquired up and coming British tech companies (e.g. Google’s acquisition of Deepmind in 2014 and Microsoft’s acquisition of Switfkey in 2016 – and now NVIDIA’s proposed acquisition of ARM). It would be perfectly reasonable, in response to the US refusing to apply Anti-trust legislation to the sector, for the UK / Europe to refuse to allow any takeover by such a company. This could help shield the growing techs from predatory behaviour by US or indeed Chinese tech giants.
Brent Hoberman, of Lastminute.com fame argues that we should be thinking about how to help companies expand faster into different geographies before they get copied.
The US and China’s success is in part due to scale. Europe has comparable scale and the fact that the UK is out of the EU need not prevent the UK from collaborating with the EU. Germany for instance is building upon its manufacturing strength and focussing its efforts on robotics. The UK could focus on areas where it is strong, including deep learning and Medtech.
This should not be a question of picking winners, something that historically the British Government has been very poor at, but rather about providing the environment within which tech companies can start-up and flourish through to becoming sizable global companies. The focus should be on research and addressing the “valley of death” between academia and commercialisation – the Achilles heel of British research.
Rather than destroy Britain’s reputation as a leading upholder of the rule of law, the Government should develop a clear plan for fostering large home-grown tech companies – working with Europe irrespective of whether we are in or out of the European Union. The UK would suffer hugely from a no-deal and should propose a subsidy control regime to extricate both parties from this impasse.
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