UK Chancellor Jeremy Hunt aims to create a homegrown tech giant worth $1tn to rival Microsoft or Google. He is leading a regulatory overhaul to make it easier for start-ups to access funds and prevent the outflow of investment capital from UK equity funds, writes the Financial Times. Hunt’s vision includes a British version of Alphabet or Microsoft, and he believes the UK can become the world’s next Silicon Valley. His reforms include an overhaul of the UK’s listing rules and loosening restrictions on dual-class share structures. He cited the sale of UK artificial intelligence lab, DeepMind, to Google as an example of potential UK tech success.
UK Chancellor’s Vision for a Homegrown Tech Giant
UK Chancellor Jeremy Hunt has expressed his ambition for the UK to foster a homegrown tech company with a market capitalization of $1tn, akin to global tech giants like Microsoft or Google as reported by the FT on the 14th of May 2024. This aspiration forms part of Hunt’s vision for the UK to become the world’s next Silicon Valley. He acknowledges that this is a lofty goal but remains confident in its attainability.
Hunt’s vision comes amidst a wave of foreign bids for London-listed companies, which he views as a natural part of capitalism. He is leading a regulatory overhaul aimed at making it easier for start-ups to access funds and fuel growth, to stem the outflow of investment capital from UK equity funds. His yardstick for success is the creation of a British tech giant on par with Alphabet or Microsoft, even if it takes a decade to achieve.
The Scale of the Ambition
A $1tn company would significantly overshadow London’s most valuable businesses. For context, Apple’s valuation of $2.9tn alone surpasses the entire FTSE 100, which is valued at £2tn. The UK’s current leading tech company, chip designer Arm, was acquired by Japan’s SoftBank in 2016 and chose New York over London when it returned to the public market last year.
Several other companies, including betting group Flutter, building materials group CRH, and packaging company Smurfit Kappa, have also opted for primary listings in the US over the FTSE 100. Despite these trends, Hunt remains optimistic about the UK’s potential to cultivate tech groups as large as the US giants.
Regulatory Reforms and Investor Concerns
Hunt’s strategy includes an overhaul of the UK’s listing rules, easing restrictions on dual-class share structures favored by founders seeking to retain control of companies after they list, and reducing the number of transactions requiring shareholders’ approval. However, these proposals have raised concerns among some investors, who fear they could undermine Britain’s reputation for corporate governance and harm its attractiveness as a financial center.
Hunt dismisses concerns over a surge of takeover bids for UK companies, attributing this trend to lackluster share prices. He argues that the process of companies going private and then public again is a normal part of capitalism, and that private equity firms can often transform businesses over a period of four or five years.
Foreign Bids and the Future of UK Tech
The value of bids for London-listed companies this year has reached its highest since 2018, with most bids coming from overseas buyers capitalizing on relatively low valuations. US private equity firm Thoma Bravo has agreed to buy cybersecurity company Darktrace in a £4.3bn deal, while FTSE 100 miner Anglo American and International Distributions Services, the owner of Royal Mail, are also targets for foreign bidders.
Hunt’s goal is to ensure that UK tech companies have the opportunity to grow to the scale of Amazon, Google, or Microsoft within the UK. He cites the sale of UK artificial intelligence lab DeepMind to Google in 2014 as an example of the kind of success he envisions for UK tech companies. He wants future tech entrepreneurs to feel confident that they can raise the capital they need in London to stay independent and ultimately become giant tech players.
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