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UK Wants Its Own High-Tech City in London – Will It Fly?

Apparently, nobody told British Prime Minister David Cameron California's Silicon Valley isn't any longer what it used to be. The once super-hot center of global high-tech finance and innovation is getting a lot of competition these days from rival cities in India and China.

Cameron is raising the stakes with a plan to transform Shoreditch in the East End of London into a high-tech city that would rival Silicon Valley and compete with rising design and manufacturing centers in China and India.

To support the plan, Cameron has also announced his government’s intention to introduce immigration and investment policies that would allow major players in the tech industries to invest in technological innovation projects in Shoreditch. He is not alone. Russia, too, is planning to engineer its own Silicon Valley.

What does this mean in terms of technological innovation, job creation, and sustainability for the United Kingdom and the high-tech world? Here's the case Cameron made for the East London High-Tech City of tomorrow:

    We’re not just going to back the big businesses of today, we’re going to back the big businesses of tomorrow. We are firmly on the side of the high-growth, highly innovative companies of the future. Don’t doubt our ambition.

    Right now, Silicon Valley is the leading place in the world for high-tech growth and innovation. But there’s no reason why it has to be so predominant. Question is: where will its challengers be? Bangalore? Hefei? Moscow?

    My argument today is that if we have the confidence to really go for it and the understanding of what it takes, London could be one of them. All the elements are here.

Cameron is right that London has what it takes to serve as a nourishment center for high-tech innovation. The city's role as an international financial center is undisputed; numerous colleges and research institutions are fairly within reach; and the transportation system combined with an internationally acclaimed legal system makes it a natural attraction for cautious investors. In this sense alone, London should only be rivaled by the original Silicon Valley itself.

However, are these factors enough to help the UK upstage the vibrant design and manufacturing centers that have sprung up in Asia? Furthermore, how will London's Silicon Valley distinguish itself? Cameron wants to set up London as the natural center of innovation needed by Western Europe. The sentiment should be applauded, but the government has to do more than talk. It must vote the resources to make it work.

In the UK, Cameron's high-tech city ambition is being considered with mixed emotions because people know a lot must be in place for it to succeed. The announcement raised numerous questions, including whether the government is able and ready at a time of acute budget cuts to provide the resources required to ensure a smooth and successful takeoff. Is the UK also ready to offer the proper immigration policies that helped propel Silicon Valley to its current height?

Cameron has announced plans to incorporate changes to the current immigration laws and Intellectual property laws to advance his course. This is good, but California's Silicon Valley is itself changing — and becoming less significant to the technology world — at a time the UK wants to pattern its high-tech city after the famed North American location.

Businesses such as Britain’s {complink 858|BT Group plc} and major US technology players, such as {complink 1131|Cisco Systems Inc.}, {complink 2294|Google}, and {complink 4505|Qualcomm Inc.} have signed on, but until we get additional information this plan can only be best described as commendable. On paper.

17 comments on “UK Wants Its Own High-Tech City in London – Will It Fly?

  1. Rick Merritt
    November 10, 2010

    I think this is a great idea. Every major urban center ought to have some sort of science and technology hub IMHO.

    Politicians walk a fine line here. They can rally support and resources from public and private sectors, maybe even scope out a very high level vision for the theme, but ultimately they need to let the public, private stakeholders who buy into the hub set the focus and the approach of the hub.

    It will be interesting to see if the UK can muster enough forces for this effort and what its participants want focus on. What are the unique resources of the London scitech region? And what unmet world issues do they best map to?

  2. Barbara Jorgensen
    November 10, 2010

    London does have a lot of pros as a technology hub. One of the distinctions of the Valley was the predominance of venture capital firms. Obviously, those took a massive hit, but how does the UK fare on venture investment? Obviously, VC is a global resource, but proximity had its advantages in the Valley's heyday.

  3. Ariella
    November 10, 2010

    After reading your post, Anna, I looked into the topic a bit.  I found this article, which was rather critical of the the prospect of turning London into a high tech center.  Among the author's complaints is the fact that Google and Facebook “use – legal – tax avoidance schemes to avoid paying the taxes they should, with Google managing an effective tax rate of just 2.4%. By channelling its UK revenues through Ireland, Google avoids an estimated £110 million per year in UK tax. Facebook is building a similar system of avoidance.”  So it is not just in the US that corporations find ways to significantly reduce their taxes.  See Barbara's post on corporate tax at http://www.ebnonline.com/author.asp?section_id=1071&doc_id=199853&

     

  4. bolaji ojo
    November 10, 2010

    Ariella, So, life on the corporate lane comes down again to companies asking to be left alone to do business while seeking handouts from the government in terms of tax holidays or tax breaks, grants for research work and other forms of assistance that would help reduce costs and boost profit. I can bet it's difficult for most governments to figure out ways to attract companies to their shores while still ensuring adequate taxes are paid.

    The challenge for most governments is that if they don't offer these breaks to businesses, others will and end up winning the coveted jobs. So, the UK is going to hand businesses huge tax breaks in the hope of attracting major companies to its new high-tech city. Let's hope the companies stay long enough for the country to benefit from its investment.

  5. bolaji ojo
    November 10, 2010

    Rick, I am curious too. Your last set of questions got me thinking about whether or not regions of the world can divvy up the business of product innovation in such a way that no particular locality is left out. Will such a system work where, for instance, Western Europe focuses on wireless innovation and China devotes attention to automotive enhancements and North America embraces nanotechnology? I don't see this happening. First, it's not a promising and healthy way to drive innovation and second, if one sector takes off faster than another you can bet engineers will flock to the more successful line.

    So, we come back to the old way of resolving issues like this: these geographical regions will have to duke it out with support from their respective governments. Even this process is not without a wrinkle though. Companies manage their businesses for their shareholders' profit and not for the benefit of host nations. Totally fascinating stuff.

  6. Anna Young
    November 10, 2010

    Hi Ariella, Isn't it just cynical that big corporations can manipulate the tax loopholes to enrich themselves while gorging on government give-aways? However, the UK government recently claimed it has closed the tax avoidance loopholes. It is not surprising that the well off would by and large find ways to avoid paying taxes but will the new jobs the government expect them to create compensate for the lost tax revenue?

  7. Ariella
    November 10, 2010

    Good point, Anna.  Even if they don't gain tax revenue, an increase an employment is, undoubtedly, of benefit to the country's economy.

  8. elctrnx_lyf
    November 11, 2010

    I'm not sure if Cameron is hitting it right. If london has to become next silicon valley then what does the current one will be. Electronics and Information technology may not be as powerful as before to generate any employment in London. But cameron should encourage innovation from the universities and allot more funds as US government did for the research of alternate and renewable energy.

  9. Anna Young
    November 11, 2010

    What the British Prime Minister is advocating is more than just output from universities. He wants research in universities coupled with actual design, production and high-tech financing. I'll have to agree with him on that. Research is good and it provides the seeds for tomorrow's great products but it must go together with real world practice. London already has great universities and research institutions but it is losing to other centers that can combine academia with practical business enterprise.

  10. elctrnx_lyf
    November 11, 2010

    Getting to the root of the problem will explain it clearly why it will not be possible to create a silicon valley in London. I do not think there is any people living in london who can live a great life if they are engineers or working in electronics manufacturing. If USA them selves losing out jobs in the electronics compared to the asians it would be difficult to create any impact by UK. So I would suggest UK should encourage the exisitng european companies to expand the business globally.

  11. Hardcore
    November 11, 2010

    Politics is not about helping people, but self promotion, so once politicians start talking about technology and initiative, you just know its going to be another 'lame duck', with loads of photo opportunities, and touchy feely sessions.(can I have my arm back please)

    The future is space, drive the space initiative and all other technology will be boosted including consultancy and especially 'supply chain' companies, the Earth would then just become another part of the supply chain.

    Since space is a reasonably new 'field' you could afford to be really  inventive as regards tax, start with only a few % for businesses deeply involved in space technology, for example exploration, travel, holidays, mining and distribution.

    Leave them alone  and see what they come up with, guaranteed if you offer the incentives they will find the best areas to do business(look at Branson at Virgin), but a warning…..

    if they are not left alone, then you only need to look as far as Hong Kong and the government initiative they call the “cyber port” to see the result of what happens when politicians think they know what the world of technology requires.

     

     

  12. stochastic excursion
    November 12, 2010

    The creation of clustered industrial centers has historically been beneficial to the industries concerned.  Take early 20th-century Detroit and the Pacific-rim automotive sectors. 

    Whether instituted by industrialists or bureaucrats, these types of initiatives have led to the growth of educational institutions oriented to industrial goals.  This raises the level of technical literacy in the geographic region where the industrial activity is taking place.  There's no doubt this is a desirable goal for any national policy.

  13. Hawk
    November 16, 2010

    Stochastic, The Detroit auto-city example you gave is correct and frightening considering what's happening to that part of America today. It makes me wonder if Silicon Valley in California might become less important to the high-tech world once more of the design, manufacturing and fulfilment functions migrate elsewhere, perhaps to East London, New Delhi or Shenzhen. If all these other centers expand their role in the electronics design, supply and financial systems, then we should expect some not-so positive impact on the original Silicon Valley. Perhaps British prime minister Cameron didn't see it this way but I believe he just challenged the ongoing viability of the original Silicon Valley.

  14. Anna Young
    November 16, 2010

    Even if Mr. Cameron does not accept that he is challenging all the “Silicon Valleys” by trying to establish a rival system in London, they certainly know when they are being called out. This is good for the entire electronics supply chain, though. The creation of all these high-tech cities offers each country and region the opportunity to contribute immense talents and resources to the pool, which will benefit everyone in the long run.

    Britain's planned high-tech city won't replace Silicon Valley or derail the plans being implemented by officials from Asia to Eastern Europe and South America. It will make it clear, though, that the West is not going to roll over and let others believe it has no role anymore to play in the supply chain.

  15. stochastic excursion
    November 16, 2010

    Silicon Valley has its quality of life issues, among them a significantly inflated housing market.  The British government's initiative indeed presents a challenge with regard to this.  Still, Silicon Valley's access to Stanford grads is definitely a competitive advantage.

  16. Ms. Daisy
    November 16, 2010

     

    Anna, Cameron's announcement of his government’s intentions to introduce immigration and investment policies to attract investors to Shoreditch needs to be backed with concrete plans of how he will harness the potentials in the universities in the area. Also where and how is he going to get investors in this time of cut backs and uncertainty. 

    This may just be a political dream for now! 

  17. Anna Young
    November 16, 2010

    Ouch, Ms. Daisy! That hurts. Surely, Mr. Cameron can dream and he can call on the powers of his government to try to bring this to pass. He can also direct some resources towards the realization of this dream. Yet, I can't but see your point. He cuts and plans to cut more from the budget and then floats a dream that will require more spending. It's hard to square all these up but somehow he must try and bring it to pass now that the program has been announced.

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