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London’s tech sector is not used to feeling vulnerable. The capital recently reclaimed its position as Europe’s leading technology ecosystem, ranking fourth worldwide (behind the Bay Area, New York and Boston — all in the US) in a table collated by tech deal tracker Dealroom. The capital’s companies raised $17.7 billion in venture capital last year and it is home to 138 “unicorns” — firms valued above $1bn.
But new Prime Minister Andy Burnham arrived in Downing Street late last month and it has prompted an unusual bout of nerves. The former Manchester mayor has created No 10 North, promising to move power out of SW1. Not only that, he has abolished the Department for Science, Innovation and Technology (DSIT), the Whitehall home created only three years ago in order to give tech a louder voice. The panic began before Burnham had taken office. One Labour MP reportedly called the closure “getting rid of the department of the future”.
Defence Secretary Wes Streeting and Prime Minister Andy Burnham meet apprentices during a visit to BAE Systems, Submarine Academy for Skills and Knowledge (SASK), in Barrow in FurnessAFP/GettySo now the PM is in office, what’s ahead for London’s and the UK’s wider tech sector? “I wouldn’t necessarily say there’s fear because there’s a bit more understanding of what’s happening,” says Doniya Soni-Clark, associate director of external affairs at industry body techUK. The organisation opposed abolishing DSIT, but Soni-Clark says members are now looking for clarity rather than heading for the exits. “There are still a lot of details that need to be ironed out.”
Mixed messages
That uncertainty can be seen in Ipsos polling published on July 29 which showed an equal proportion of businesses — one third each — thought Burnham had what it takes to be a good Prime Minister, disagreed, or neither agreed nor disagreed.
What detail we have seen has been similarly equally positive and negative for the tech sector. The new PM has moved responsibility for national AI strategy, public-sector adoption and the AI Security Institute into the Cabinet Office, alongside a new AI taskforce and prime ministerial adviser. Kanishka Narayan, the AI minister, has also been elevated to cabinet.
However, under the Government’s new departmental structure, telecoms, online safety and the Government Digital Service have gone to an expanded culture department. Science, innovation and support for scaling companies sit inside a renamed business department. That fragmentation matters more to London’s technology firms than Burnham’s postcode. Soni-Clark says companies still aren’t sure where some major policy issues — including AI and copyright, data centres and AI growth zones — will ultimately sit.
And for businesses preparing for regulation, uncertainty can quickly become delay. “There’s a lot of investment,” says Soni-Clark. “There’s a lot of time that goes into making sure that tech companies are compliant with new regulations.”
“If you send out signals that wealth creation isn’t a high priority, then people will go elsewhere”
Benedict Macon-Cooney, chief AI and innovation officer at the Tony Blair Institute for Global Change
London’s bigger fear is not that Burnham will order Google DeepMind to decamp to Deansgate from King’s Cross. But “the lack of talk on tech and AI and some of these big instrumental changes has been notable”, says Benedict Macon-Cooney, chief AI and innovation officer at the Tony Blair Institute for Global Change. “If you send out signals that essentially wealth creation and economic growth aren’t your high priorities, then people that want to do that will go elsewhere.”
London is Europe’s leading technology ecosystemalice_photo - stock.adobe.comThis isn’t just a Burnham problem. A March survey of 531 business decision-makers by techUK and Public First found 84 per cent of technology firms were unconvinced growth was genuinely a government priority. Nearly half had considered moving investment or operations abroad.
That uncertainty hits the capital the most because of its totemic position in UK tech. London’s density of capital, universities, skilled workers and large laboratories has created a strong ecosystem. Recent research mapping Britain’s AI economy found 41 per cent of the country’s AI entities were concentrated in London. The fruits of that labour are only now starting to be shown. “That is something that you need to really deeply build upon and not try and drive out,” says Macon-Cooney.
The Manchester factor
Greater Manchester already has a £5bn technology ecosystem, more than 10,000 digital and tech businesses, around 250 AI companies and roughly 300 cybersecurity firms across the North-west. The region has deep roots in advanced materials, manufacturing, cyber and university-led research — exactly the sort of sectors that could benefit if Burnham’s “reindustrialisation” rhetoric becomes patient investment rather than regional pork-barrelling.
One thing the new PM might want to tackle is that Manchester’s founders still struggle to access capital. A regional study found although 74 per cent of surveyed start-ups had used an accelerator, incubator or support programme, it didn’t reliably translate into funding. Founders cited geographical investment imbalances and limited access to investor networks. Improving that is likely to be high on Burnham’s agenda.
A stronger Manchester need not weaken the capital, Macon-Cooney points out. Meanwhile, Soni-Clark says techUK’s members are not especially worried by devolution itself. But they do want continuity — something Burnham’s clean sweep can’t necessarily offer. “There’s a lot of great work that’s already happened,” she says. “It would be a shame to dismantle it.”
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As always, time will tell what actually happens. The autumn Budget will provide a better test than Burnham’s opening week, reckons Soni-Clark, although that looks a long way away. As Macon-Cooney puts it, Britain’s window to compete in AI is “very, very small”. The new prime minister’s task is to widen the map without shrinking the opportunity.