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It seems an improbable odyssey for London to ever become the new Silicon Valley

Jeremy Hunt believes the UK can create a home-grown tech giant, but for a trillion dollar tech company to emerge, it needs a thriving foundation

Last week, British chancellor of the exchequer Jeremy Hunt audaciously told the Financial Times that the UK can create a $1 trillion home-grown tech giant to rival Microsoft or Alphabet within a decade. Photograph: James Manning/PA

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Chris Horn
Thu May 23 2024 - 06:00

On the last day of 1600, Queen Elizabeth I responded to a petition from 232 merchants and adventurers led by the queen’s cousin, the Earl of Cumberland, by granting them a royal charter to “merchandise” the East Indies, Asia and Africa at their own cost.

The British East India Company was accordingly launched. It came to dominate the world’s trade in commodities such as cotton, silk, sugar, tea and – notoriously – opium, paying considerable dividends to its shareholders as a result.

Arguably, the East India Company was Britain’s most powerful company ever.

Among its pioneers was Streynsham Master, a colonial administrator in India who rose to become a member of the company’s council, eventually lavishly retiring to a castle estate just outside of Nottingham. Jeremy Richard Streynsham Hunt is among his descendants, and is currently the British chancellor of the exchequer.

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Perhaps his namesake ancestor and the wealth created by the East India Company were on Jeremy Hunt’s mind last week when he audaciously told the Financial Times that the UK can create a $1 trillion (€925 billion) home-grown tech giant to rival Microsoft or Alphabet within a decade.

Currently, only six companies – Apple, Microsoft, Saudi Aramco, Alphabet, Amazon and Nvidia – are members of the trillion-dollar club worldwide. Hunt aspires for the UK to be the world’s next Silicon Valley. He asserted that “it’s a big dream but we can definitely get there”.

The largest British companies today are AstraZeneca (pharmaceuticals) and Shell (oil and gas exploration). Each is approaching just a quarter of Hunt’s one $1 trillion target. The most valuable tech company is Arm Holdings (semiconductor design), valued at only one-eighth of a trillion. Although headquartered in Cambridge, the company is in fact no longer British but now 90 per cent owned by Softbank, a Japanese investment group.

The most valuable company in all of Europe is Denmark’s Novo Nordisk (pharmaceuticals), valued at just more than half a trillion dollars.

The chancellor was responding to concerns about foreign raids on UK-listed companies, such as Arm Holdings which is now listed on Nasdaq in New York rather than the FTSE in London, and also the recent spate of listing transfers from London to New York including CRH, Smurfit Kappa and gambling group Flutter.

While he has overhauled financial regulations to facilitate access to capital by start-ups, and to encourage UK investment funds to hold risk capital, it would nevertheless seem an improbable odyssey for London to ever become the new El Dorado.

What would need to happen for Hunt’s vision to be realised?

First, will there ever be another trillion dollar opportunity to own a new technology wave?

Although the quest for generalised artificial intelligence (GenAI) is well under way, I have argued that the current approaches to GenAI are brutally primitive and unacceptably profligate. More thoughtful and indeed intelligent solutions may be latent and could potentially be extremely disruptive.

[ We are at last creating AI approaching human intellect but the underpinnings are insubstantial ]

[ Chris Horn: AI is getting smarter ]

Are the British sufficiently innovative?

Absolutely, and with an impressive track record. Arm Holdings has led the world in low-power advanced semiconductors. DeepMind Technologies was founded in London in 2010 and has become a world leader in AI technology. It was acquired by Google in 2014 and is now a core foundation of Alphabet’s GenAI effort.

Colossus, an early computer, and the jet engine were major British innovations during the second World War. The first practical television, and colour television, were British inventions. Heads up displays, vertical take-off aircraft, beta-blocker drugs, hip replacements, bagless vacuum cleaners – the list is almost endless.

For a trillion dollar tech company to emerge, it needs a thriving wide foundation. Silicon Valley has a portfolio of thousands of small- and medium-sized tech companies, which are the supply chain for the giants, not so for physical components but for human capital, research and innovation.

The chief assets in most tech companies are fiercely sought staff, rather than the traditional fixed and physical plant of manufacturing firms. Regulators in the UK and elsewhere in Europe often have protracted compliance processes carefully nurtured over decades, but which sometimes jar against the agility of a still emerging sector whose assets are highly mobile humans.

Why have tech companies in Britain not grown even more, but instead exited in acquisitions arguably too early?

It may be natural for company founders to seek quick personal wealth. Perhaps the mind set of many UK venture capitalists and risk investors is likewise to take returns when they become available rather than confront further competitive growth.

My view has often been that while each funding round should continue to accelerate a company, founders can take some small sum off the table so they can at least bank a modest return for their work to date.

Most of all would be a change in economic mindset towards adventure and achievement. Perhaps Hunt is inspired by the audacity and determination of those 232 petitioners in 1600.

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