Boris Johnson wants the freedom to pump hundreds of millions of pounds into tech startups to promote companies that can mimic Apple, Facebook or Alibaba – China’s answer to eBay.
The Prime Minister has accused the EU of using the withdrawal agreement it signed last year to block this strategic shift in the UK̵
After months of arguments, it has become a major stumbling block in the Brexit talks, along with the longstanding dispute over fishing rights and the city’s banks and insurers’ access to EU markets. This is the importance given to the state aid issue, it could even ruin the talks and worsen the chances of a Brexit trade deal.
Johnson’s chief advisor, Dominic Cummings, has long believed that the government should promote science and innovation through strategic investments established by a new generation of civil servants.
Using the latest research on social trends and algorithms that show the early adoption of new technology, these officials will sanction the public sector money used to support innovation at each stage.
No. 10 believes that the EU will use the withdrawal agreement to impose state aid rules on the UK, and these rules are being interpreted in a draconian way to stifle the UK government-funded major investment.
At stake is the nation’s ability to invest in its future, and especially in its technology sector, without any intervention from another country.
Cummings isn’t the only one who believes the state can provide the launchpad for a new generation of tech companies, mimicking the success of the U.S. Advanced Research Projects Agency (Arpa).
Arpa was compiled by the Eisenhower administration in the 1950s and was instrumental in many technological breakthroughs, including drones, mice, and the internet.
Cummings has written at length that a UK version of Arpa should be an integral part of a post-Brexit strategy for the UK, making it “the best place in the world to invent the future”.
Other supporters of Arpa – albeit not Brexit – include University College London economist Mariana Mazzucato, who has made a name for herself promoting the idea that entrepreneurs, far from being buccaneers, are more likely to resort to inventions that be paid for and developed with public funds.
Some Conservative MPs disagree with the idea, believing that it is based on a socialist, state-known mindset. Officials who pick winners, no matter how many algorithms they use, are anathema to an ethic from the Tory Party, which still believes that the private sector should be the driving seat of the economy.
The program has also been criticized by those who believe that most of the inventions that underlie today’s U.S. tech companies were actually due to the huge increases in defense funding in the 1970s that led to Arpa’s reinvention as Darpa – the agency for advanced defense research projects – have led.
However, critics of government intervention have few responses to the persistent short-term problem in the UK tech industry. For decades, inventors and entrepreneurs have been selling their young companies to global technology giants, which means Britain cannot claim to have one of the largest companies in the world on its shores.
The FTSE 100 index of top companies ranks Sage among its largest technology companies. The Newcastle-based company is an innovative company, but its accounting software won’t be the cornerstone of the fourth industrial revolution.
Ocado has a solid internet retail business and cell phone chip maker Arm Holdings is a global leader. However, these sizes of the UK tech industry are vulnerable to outside influences. Arm is being sold by its Japanese owner to an American graphics card manufacturer, Nvidia, while there are constant market talks about a possible buyout from Ocado.
Tech industry officials don’t want to be seen criticizing government efforts to invest in startups. Extra money is always welcome, especially when it fills funding gaps and provides private investors with the convenience they need to get involved.
However, like most of the UK’s export-oriented industries, technology firms want unrestricted access to European markets and foreign expertise, as well as government support. That means Brexit and a bureaucratic visa system are as much of an obstacle to a healthy tech industry as the lack of a UK Arpa.