CBR exclusive briefing: UK Minister for the Digital Economy Ed Vaizey, MP, answers CBR’s questions and talks size, disruption and changing the investment culture for tech firms.
Defining what constitutes the Digital Economy is not straightforward. An app, a supermarket with online offers, sharing a taxi via an app could all be defined as digital. As can running a software firm, making a film, developing a video game or operating a mobile phone network.
So while the a specific definition of what it is and therefore finding hard numbers on its exact size and contribution to GDP is as yet inexact, we know it is growing and it is growing in importance.
We can say with confidence that the tech sector is currently accounting for around 10% of the economy and digital and tech growing faster than any other part.
Ed Vaizey, UK Minister for Culture and Minister for the Digital Economy says the UK can lead Europe into the digital age.
CBR: How big is the digital economy?
Minister for Culture and Minister for the Digital Economy Ed Vaizey: "There are lots of debates about what exactly makes up the digital economy. This includes the app economy, the sharing economy such as Airbnb to the software industry and creative industries such as films and games which is worth around £70bn per year. Broadly speaking the tech economy is around 10% of our economy and it is a bigger portion than in many of our competitors and is growing faster than other parts of the economy."
CBR: Will it become more important and how do you see that developing?
EV: "The whole Tech City agenda, which started in 2010, is seen as main part of our economic policy and is part of making the UK the best place in Europe to start and grow a tech company. We want to be at the tech heart of Europe, attracting inward investment from the US and growing our own companies."
CBR: Where can the UK lead?
EV: "We are investing in the future, in 5G and the next wave of spectrum innovation. And we have specific programmes to support and test bed the Internet of Things. There are the catapults. Digital catapult, future cities catapult, satellite applications catapult, and the Alan Turing centre all acting as test beds for business."
"I couldn’t say we lead the world in a particular sector but would make the point that we are a government that accommodates disruption better than others."
"We’re a government that gets on the front foot and doesn’t react by saying we must stop these new innovators. Because they are challenging the status quo we say: "How can we help by removing regulations which are preventing this economy growing?"
So I think those three areas, investing in innovation, being open to new business models and making sure government sits are the heart of this revolution is where we lead."
Q: London has the capital base but does it have the capital culture to invest in tech businesses to get them to the scale of an Airbnb (starting valuation around $25bn) or an Uber ($40bn-$50bn)?
"No, or not yet. That is what is at the heart of this issue. The big problem we have in tech is finance. And that’s cultural problem. You look at a Facebook, yes, Mark Zuckerberg takes deserved credit for the great innovations and success but the untold story is the people who financed Facebook in the early stages. This wall of money that hits small tech companies in the US combined with the Silicon Valley philosophy that you back one hundred and one big success pays for your other 99 is real. We’re getting better at it. We’re getting better and we’ll be much better in five years. At the moment finance is part of the difference between the US and the UK. It is not a difference in skills, it is not a difference in entrepreneurial zeal."
CBR: Can the UK be the Silicon Valley of Europe?
EV: "We are. I’m not being complacent, there is always more to do. In my view we have Silicon Valley in Oxford, Cambridge, or the clusters around the UK. And that’s part of the thinking around the Northern Powerhouse initiative with Tech North. And what Tech City has done is to make it high profile, to show what is happening. Look at policy changes we can make to help companies invest, look at visas for talented people and to get the right talent into the UK to help tech companies grow and scale."
"There are some things the government can’t legislate for and the biggest change that will happen when we get the capital investment going. Things are moving. Universities are changing rapidly and engaging with the business world."
"We have a range of tax incentives to encourage investment at the early stage. More people who make their capital in tech and reinvest it in the next wave will create a virtuous circle. British people don’t have a problem with those making fortunes. So when people like Mike Lynch [founder of Autonomy] goes on to invest in next wave it is applauded. We need active venture capital companies in partnership with successful tech entrepreneurs who invest personal wealth and then engage with the companies they invest in."
CBR: How digital ready is the UK economy?
EV: "You have the Deputy Governor of the Bank of England and the Chancellor of the Exchequer George Osborne talking about digital currencies and how the UK can lead. It was the Chancellor who encouraged the creation of Innovate Finance, to act as a trade body for the sector. That acts as a massive beacon. If you are a company wanting to do something in Fintech and are looking around the world then, the fact that Innovate Finance exists is really important."
"Tech City has played a crucial role identifying start-up companies that are going to go places. Look at the Tech City Future Fifty companies such as Nomad, Skyscanner or Shazam. We will be very active in keeping them in the UK."