Against a backdrop of aggressive regulatory hikes and a generally higher cost of doing business, several of the world’s largest technology companies are considering leaving London.
The capital, once considered an essential outpost for US-based tech firms, is moving in a direction that makes it increasingly hard, they claim, for these billion-dollar giants to function.
This would largely seem at odds with ‘pro-tech’ Prime Minister, Rishi Sunak’s general mission; to make the UK a super-hub for technological development, but dissent amongst Silicon Valley royalty continues to rise ever higher.
So what are the reasons behind the frictions and what could the imminent future be for the UK’s relationship with these companies?
At the brink
What is pushing these companies towards deserting the capital for other locations?
First and foremost, it’s the promise of regulation from the UK government and one piece in particular is giving Silicon Valley executives sleepless nights.
The Online Safety Bill is ostensibly a broad-strokes approach to tackling cybercrime, in particular sex and drug trafficking and the circulation of harmful content.
If passed, it would force companies to monitor all communications on their products and then report illegal activity.
The sticking point is that the trademark feature of many messaging services such as Signal, Telegram, and Meta’s Whatsapp is the precise feature under scrutiny; they are end-to-end encrypted and thus cannot be read by third parties or even the companies themselves.
This makes it an essential tool to protect the privacy of journalists, human rights activists, and diplomats. It is also, unfortunately, the number one breeding ground for harmful content sharing.
Currently at its third reading, the concluding stage, in its parliamentary journey, the Bill would amount to some of the tightest restrictions in the world for how tech companies police content.
Meredith Whittaker, president of Signal, said if passed the measures would force her to pull the company from UK operations altogether.
Her primary concern stemmed from the fact that if the companies created a ‘backdoor’ access to read people’s messages, it would provide access opportunities for even more illegal activity and even sabotage from foreign powers.
Meta has also echoed Whittaker’s message for its Whatsapp communication platform.
We’ve been here before
The Online Safety Bill isn’t the only piece of UK regulation coming down the road for tech companies.
There are amendments to the Investigatory Powers Act, first passed in 2016, that could have major ramifications for tech companies and by extension the UK economy. One proposed change could see firms requiring Home Office approval for new security features or updates before they can be rolled out to the service.
This particular point, which is currently being voted through Parliament, annoyed Apple so much that it threatened to remove Facetime and iMessage from the UK.
The Digital Markets Bill, meanwhile, is a first-time proposition that would give the Competition and Markets Authority (CMA) watchdog unprecedented powers to pass or veto major business deals involving major market operators.
These operators could then face financial or operational punishments if they do not follow the CMA’s decision.
The body’s most recent moment in the spotlight wasn’t a positive one.
US-based Microsoft was set to shell out $69bn for UK-based games developer Activision Blizzard until the CMA stepped in and blocked the deal on the grounds that it created too much of a power monopoly within the cloud gaming space.
Microsoft duly appealed the decision and the CMA has agreed to reconsider after finding itself on an island among worldwide regulators. But the damage was done, prompting Microsoft chief executive, Brad Smith to say, “There’s a clear message here – the European Union is a more attractive place to start a business than the United Kingdom.
Smith, in his anger, might have meant what he said but there are regulation headwinds coming there too.
The European Commission is in the process of finalizing a heavy-duty framework to control the responsible development of artificial intelligence programs, a sector in which many of those eyeing pastures greener than the UK will have big stakes.
The fact that companies like Meta, Signal, and Microsoft are potentially willing to embrace these constraints over operating in the UK should be a huge cause for concern for Rishi Sunak et al.
The Prime Minister has been very vocal about his wish for the UK to grow as a center for technological development.
His focus in recent months has been expanding the UK’s relationship with major AI developers in the hopes they will open headquarters in London; several including Palantir, OpenAI, and Anthropic have already agreed.
But it’s far from a guaranteed offer for many; UK-based AI developer, Deepmind, has chosen California as its home, a sign to many that Britain is neglecting its once stellar reputation as an incubator for technology start-ups.
The slow demise of London’s Silicon Roundabout, once a buzzing hive of technology start-ups and innovation turned almost abandoned industrial park, illustrates that the country’s growth system for young tech companies is failing.
Companies from other sectors, too, have chosen to exit the UK in the face of what they deem over-regulation; igaming operators expanding across the pond, or to Europe to utilize payment providers such as Trustly.
Make no mistake, the UK is still regarded as a strong global market for technology innovation.
But there are ominous signs that this is changing, most recently the threats, some veiled, some not, by tech companies of an impending exit.
The fact is that the government needs to prioritize too many things at once.
Homegrown technology talent is lagging behind countries across Europe to say nothing of Asia and the US.
There is growing dissent against the largest tech companies in the world who already have UK outposts about changes coming from the administration and companies on the rise are choosing other locations from which to launch their business.
The UK government cannot and should not allow these companies to dictate domestic policy, especially as it pertains to the safety of its citizens.
However, to the same extent, it is vital to maintain good relationships to keep those companies happy to remain there for the sake of the economy and the public’s day-to-day lives.