UK Tech Needs More "Risk Appetite" to Achieve Global Success, Former Arm CEO Says
The UK’s ability to commercialize technology businesses globally is lagging behind, and a change in investor mindset is needed to propel the country onto the world stage, according to Warren East, former CEO of Arm and Rolls-Royce. While the UK boasts considerable innovation, countless brilliant ideas end up being commercialized and exploited elsewhere, leading to a sense of national disappointment and underachievement.
Key Takeaways
- The UK needs a shift in investor mindset to support high-growth tech firms: There is a lack of "risk appetite" in the UK, hindering the ability of companies to scale up and compete globally.
- More investment from pension funds is crucial: Pushing for changes in capital market rules to allow more pension fund investments in startups is key to stimulating risk appetite.
- Arm’s US IPO highlights the problem: The decision of Arm, a UK-based chip design firm, to list on the Nasdaq instead of the London Stock Exchange signifies the UK’s struggles in attracting large tech IPOs.
- The “scale up” challenge is a common theme: While the UK excels in the "startup" phase, it often falls short when it comes to supporting businesses to reach global scale.
A Nation of Innovation, Yet Lacking Commercialization Might
In his keynote speech at Cambridge Tech Week, East highlighted the widespread concern over the UK’s poor GDP per head growth and its inability to translate innovation into global success. He expressed disappointment at how often businesses that achieve scale in Britain relocate or list abroad, often in the US, where they can tap into a deeper pool of capital and a more established ecosystem for supporting growth.
East emphasized that the UK has a lot to offer, particularly in terms of innovative technology, but struggles to "realize as many global businesses as that promise would suggest." He attributed this to a lack of "commercialization" infrastructure, which he described as a "common story of all the wonderful stuff that gets made in Britain and then gets commercialized and exploited elsewhere."
Risk Appetite: The Missing Link
East acknowledged that the UK excels at fostering startups, but the lack of "risk appetite" among British investors is a significant hurdle for scaling up. He highlighted the stark contrast with the US, where investors are willing to take on more risk, allowing companies to access greater resources and push their ambitions further. "Investor risk appetite in the U.S. is higher than it is in the U.K.," East stated.
The Arm IPO: A Defining Moment
The decision of Arm to list in the US, rather than London, in 2023, was a resounding blow to the UK’s ambition to become a leading tech hub. East’s comments highlight the need for the UK to address the underlying challenges that led to this outcome. While Arm remains majority-owned by SoftBank, its listing abroad reflects broader concerns about the UK’s ability to support large-scale tech companies.
A Call for Change and Collaboration
East acknowledged that there have been calls within the UK tech community for changes in capital market rules, to encourage more pension fund investments in startups and stimulate a greater "risk appetite." He expressed optimism about the future of this initiative, but stressed that "businesses can’t guarantee that’s going to happen, and can’t wait for the rules to change."
The UK’s success in achieving technological leadership on the global stage hinges on overcoming these challenges. By fostering a more risk-tolerant investment environment and building a robust ecosystem for scaling up tech businesses, the UK can capitalize on its innovative potential and realize its ambition of becoming a leading force in the global technology landscape.
