Economies around the world have been bracing for impact in 2022, with factors including the after-effects of COVID-19, the energy crisis, and ongoing supply chain woes biting hard. These have threatened to elevate inflation, causing central banks to begin to panic and generating a cost of living and cost of doing business crisis. This has raised the prospect of major cut-price acquisitions with tech stocks plummeting.
For our leaders, such a moment calls for calm, rational economic decision-making to give the markets certainty, and give businesses the confidence to invest. In the UK, the newly appointed prime minister Liz Truss, and her chancellor Kwasi Kwarteng, have taken a catastrophically different approach.
Following Kwarteng’s announcement of a multi-billion pound tax-cutting package – including the abolition of the 45p tax rate and the axing of the cap on bankers’ bonuses – the pound crashed to its lowest level against the dollar since decimalisation. This was followed by turmoil in the government bond market, with the Bank of England forced to intervene in unprecendented fashion.
With economic chaos far from abating, and considering the state of tech stocks in 2022, the UK’s most valuable assets could soon be up for grabs. With the pound devalued, in particular, big tech companies and investment conglomerates could be licking their lips, eager to hoover up the best of British innovation at a cut-price rate.
UK domestic stocks have had a tough time so far this year, and British companies represent seven of the top ten potential takeover targets according to Bloomberg research. This is due to low valuations, a tumbling pound, and a favourable regulatory climate. Right at the top is BT, with Vodafone, and Darktrace, among the others in contention for takeover. The government had also hoped to convince the owners of Arm, Softbank, to IPO in the UK instead of the US. It seems laughable now that it’d choose the UK for its public offering.
Some companies are already making a move. Take Schneider Electric, for example, which last week said it would proceed with a full takeover of British software firm Aveva for £9.48 billion. There’s every reason we’ll see an acceleration in these sorts of deals.
The UK might also have to contend with more Chinese companies buying British organisations. The government is still mulling over the sale of Newport Wafer Fab to Nexperia, which is a subsidiary of a partially state-backed Chinese company. If such a deal goes through – alongside others – it could have profound consequences for the composition of the UK tech sector.
With stronger British tech companies, the UK can be at the forefront of technological innovation, with the entire population benefiting from the success of their research and commercial activities. Instead of creating the ideal conditions for our prized assets to be sold to the highest bidder, a responsible government should invest in and develop this sector. Foreign buyers, however, might now be ready and waiting to snap up our best British innovators, which runs the risk of Britain being left behind in the global race to develop and roll out new technologies like 6G, artificial intelligence (AI) and quantum computing.
Truss had previously likened herself to Margaret Thatcher, largely through her presentation, rhetoric, and photoshoots. Thatcher, of course, opened up state-owned companies to privatisation – which we’re still feeling the effects of today. Truss might go a step further by accelerating the loss of our prized technological expertise and intellectual property (IP).
Countries across the world – such as Japan, India, and the US – are actively working to bolster their respective tech industries, especially when it comes to semiconductors. The UK, too, needs a strong, home-grown, tech ecosystem now more than ever. We all saw what happened during COVID-19, when the sector was constrained by a supply chain crisis. The government had also previously signalled its intent to make the UK a global AI superpower. How likely are any of these plans to succeed if our assets are sold off at a bargain rate?
