As the government tries to stabilise the country’s economy after the worst recession since the Second World War, it has been forced to reconsider the models of economic growth pursued since the era of neo-liberalism began.
This rethink has seen renewed emphasis on investment in skills and infrastructure, and a drive to foster increased technological innovation.
But even with this focus on encouraging startups and entrepreneurs, the chances of the UK creating a hub of innovation that in any way resembles Silicon Valley remain pretty slim.
In June, Gordon Brown announced the creation of a UK Innovation Investment Fund to support technology-based businesses with high growth potential. The fund is designed to spur the growth of small businesses, startups and spin-outs in the fields of digital and life sciences, clean technology and advanced manufacturing.
In July, the first government-backed innovation awards for science and technology the iAwards were launched. Science and innovation minister Lord Drayson said they would recognise the achievements of individuals and businesses working at the cutting edge of technology.
More specifically, the government said, the iAwards would highlight innovation that would help tackle the nation’s key challenges, such as creating jobs, addressing the healthcare needs of an ageing society and fighting terrorism.
New research adds support to the government’s belief that supporting
innovation can help to drive recovery. Last week, a study by analyst IDC suggested UK IT spending is likely to outpace the country’s current meagre rate of GDP growth to reach £50bn by the end of this year, up nearly two per cent on 2008.
IDC’s research predicts the UK IT market will drive the creation of nearly 2,500 new businesses and 78,200 new jobs by the end of 2013.
But while the government is finally acknowledging the important contribution the IT sector makes to the country’s economic wellbeing, it needs to do substantially more if it wants to help UK technology firms emulate the performance of their US counterparts.
In May, the British Venture Capital Association published figures showing that while US investors provided $30bn (£18.8bn) in 2008 for startups, the UK invested only $1.7bn.
The reasons why the UK has not managed to create its own version of Silicon Valley are not clear-cut, but during a flurry of startup-focused events in recent weeks, speakers and entrepreneur delegates tried to find the answer.
Suggestions included the fact that the US holds more startup events that
together venture capitalists, angel investors and entrepreneurs. Many delegates cited cultural differences for example, the US has a more open culture where money can be discussed freely and it is more supportive of risk-taking than the UK.
The US media was also said to do more to encourage startup activity and
universities in the US are seemingly better able to nurture innovative thinkers.
Other answers included the higher capital gains tax in the UK compared to the US, and the lack of UK government tax credits given to new businesses.
Events such as last month’s 10th Cambridge Enterprise Conference and Seedcamp clearly demonstrate that the UK startup scene is brimming with potential that needs to be harnessed. This country desperately needs to build on this talent to create a vibrant hub of innovation. Government investment and award incentives are a start, but they are not enough on their own.
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