Why the UK needs a vibrant capital market to achieve its tech hub ambitions

For British technology to reach the heights envisaged by government policy, Prime Minister’s Autumn Statementwrites that high-tech companies require continued reinvestment in innovation, products, and global distribution, supported by robust and prosperous capital markets. Ian Manoka, CEO of Gresham Technologies.

To ensure the UK is on track to achieve its goal of becoming a global technology hub, the Government needs to urgently address and consider a number of factors, working with UK industry bodies, regulators and the financial services sector. There is a need. TUI was the most recently high-profile company to be delisted from the London Stock Exchange (LSE), and failure to address this rapidly evolving trend could mean a serious flight of quality from the UK capital markets. , its global status as a promising technology will be threatened. hub.

The Autumn Statement follows the UK’s rise to prominence by hosting the world’s first AI safety conference for key AI decision-makers and pioneers. It provided an important opportunity to consolidate our position. But the question remains – what more does the UK government need to do to move the technology industry forward if it has a real chance of competing with Silicon Valley, Singapore and other emerging technology hubs? ?

Derailed ambition?

If investment flows into London continue to stagnate or decline, listed companies will inevitably limit the amount they can invest in innovation and development. Technology requires continued reinvestment in innovation, product development or manufacturing, and global distribution. Small businesses tend to reinvest proportionately large amounts of their profits back into their products, typically cannot afford large-scale production, and operate on low profit margins.

In recent years, there has been a focus on moving portfolios towards larger, more mature companies that are more consistently profitable and generate cash, which has been a trend in the US for example over the past 20 years. All this at the expense of the smaller Alternative Investment Market (AIM) companies that are supposed to be the future champions of mid-cap stocks and the UK economy.

Building UK tech momentum and supporting investment

To sustain the growth of the UK technology industry, strengthen capital markets infrastructure by facilitating investment, promoting liquidity and facilitating access to capital for technology companies through efficient financing mechanisms. This includes facilitating the regulatory framework.

As seen in the example of Ireland, where the ranking of UK-listed companies rose from 11th to 2nd due to growth in the domestic market, a prosperous domestic market increases the international competitiveness of UK-listed companies. Supporting investment in UK listed companies is vital. The ripple effects of stronger investment will foster innovation, create jobs, strengthen the entire economic ecosystem, and attract inward investment.

All of this will contribute to the UK’s position in the world market, which will be needed after Brexit. We use technology, software, and digital products to create valuable IP. Arm is an example of an IP-focused British tech company that made its stock market debut in New York City, with taxpayers benefiting at a loss to the city.

The Arm topic remains important for other reasons, including adjusting listing rules to streamline the initial public offering (IPO) process, ensure transparency, and accommodate the unique characteristics of technology companies, all of which include: Helping you attract and maintain a listing in the City of London. A better balance between investor protection and reducing unnecessary regulatory burdens is critical to dynamic and competitive markets.

signs of hope

This budget did not allow us to deliver the UK ISA in the way we wanted, but there are other angles to consider. Governments can promote market liquidity by streamlining relevant regulatory processes, encouraging long-term investments, and providing tax incentives to investors. Encouraging research and development efforts while fostering a favorable business environment can further increase the attractiveness of the London stock market for companies considering listing. The Autumn Statement sheds some light on all this and is an encouraging development, but there is still much work to be done.

The direction of the R&D tax credit – merging the two existing systems, lowering the tax rate for loss-making companies and lowering the threshold for small and medium-sized enterprises – is certainly welcome. At first glance, the visa changes all seem like a good thing, but it’s important to find out more information about how this will actually impact your business.

To ensure that investments in AI are directed in the right direction, special emphasis should be placed on ensuring research collaboration between businesses and public sector institutions. Such collaboration will help ensure smooth integration of AI with public applications in areas such as transportation, healthcare, and education. The supply of commuter electricity to each of these sectors must be planned according to the investment criteria and budgetary projections set by the Prime Minister.

Focus on research and development

Technology companies have unique characteristics, including rapid innovation, evolving business models, and a focus on intellectual property as the primary value driver. Their financial metrics and performance often differ from traditional, established industries. More adaptive listing rules that take these developments into account as part of the regulatory framework would be best suited to maximize the participation of these start-ups in the UK capital markets.

The City of London and the UK capital markets have powerful powers to enhance investor access and liquidity for these promising domestic fast-growing startups. Considering that most technological innovations, especially software, require years of continuous research and development to come to market, and that B2B technologies can take even longer for distribution and global scale. Cooperation between industry and government in research and development needs to be considered as part of a broader strategy. Year.

The end result is long-term, profitable, cash-generating income that contributes significantly to the economy and the Chancellor’s tax revenue.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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