Rebuilding the UK economy on IT

The current recession has caused the greatest damage to the UK economy for over 100 years, writes Stephen Kelly, CEO of Micro Focus.

The current recession has caused the greatest damage to the UK economy for over 100 years, writes Stephen Kelly, CEO of Micro Focus. The industries on which we had relied upon in the past were considerably weakened for various reasons. Manufacturing has seen a huge decline, leaving UK shores to exploit lower cost economies overseas. UK natural energy sources are diminishing and the correction in financial services has left banks as a shadow of themselves just three years ago.

As a result, business, academia and government are looking to other industries to step up and assist the recovery of UK plc. With around 1.5 million people working in the UK technology sector, Britain now has the potential to generate a significantly larger contribution to national GDP from this IP-rich industry, while creating sustainable employment and supporting economic recovery.

The UK has a rich heritage of innovation in technology. The computer, the television and the internet are just three examples that prove, when it comes to innovation, the UK can create world-leading businesses. Additionally, the UK represents the gateway to Europe and to global business expansion with its supportive infrastructure, culture and language. Today's most successful UK software companies have continued to perform well in the face of the recession and have reversed an established trend by acquiring US companies. The consistent performance of these companies and the intrinsic innovation within our nation should signal that the technology industry can help kick start the recovery of our economy.

So how are we going to achieve this? In July 2009, a Technology Manifesto was launched at the House of Lords with the full support of cross-party parliamentarians, industry analysts, academic bodies and UK businesses alike. The Manifesto outlines five clear directional priorities to generate this growth. Firstly, we need to increase the availability of world-class talent in the UK. More people need to choose technology as a career to create a larger talent pool of executives with experience of the technology sector. Government needs to ensure universities are investing in the IT courses required to generate the IT graduates for industry. Failure to do so will mean there simply will not be enough IT graduates to support the UK industry. Academia also needs to create and run courses specifically designed to nurture graduates who want to pursue careers with dynamic IT companies.

Secondly, we need to harness the expertise of technology leaders of UK origin around the world to coach the leaders and would-be leaders of UK-founded, emerging technology businesses. This can be achieved by creating a hub, where technology entrepreneurs can get the advice and contacts they need from experts all over the globe. Accompanying this, the government needs to sponsor a programme to twin proven technology leaders with their emerging counterparts.

Next, to nurture start-up tech companies, there needs to be a radical change to the tax incentives available. To make this a reality, two areas require close attention. The criteria for involvement in an Enterprise Investment Scheme could be changed to enable those involved in a business to gain tax relief for their investments. This would then encourage experienced entrepreneurs to participate in companies where they have invested their capital. Also, we need to introduce a more generous tax incentive regime for the technology sector to participate in corporate venturing. This is the scheme where a larger company can invest in a smaller company and benefit from tax relief, while the smaller organization gains access to the larger's expertise and resources.

Fourthly, specific fiscal incentives should be implemented for UK-founded technology companies seeking to accelerate world-leading R&D. The most successful global technologies all invest heavily in R&D to keep ahead of the competition. We now need to encourage our technology firms to invest more in R&D and protect their innovations better so they can exploit them fully around the world. Although strides have been made to extend the availability of tax breaks, the claims process remains highly complex. This needs to be simplified, so smaller firms find it easier to claim relief. To further this proposal, the government should commission a feasibility study to see if the company rate for small and medium-sized enterprises could be extended to companies of all sizes in the technology sector. This would encourage UK technology companies with global ambitions to invest in new and patented products and technologies.

Finally, we need to proactively encourage international technology companies to invest in a UK Hub. Global technology companies need to base their R&D, service clusters and European operations in the UK. If this happens, our highly skilled IT personnel will stay here, rather than move abroad. We need to increase our efforts to encourage such inward investment to drive economic growth, jobs and prosperity.

With an election on the horizon, we strongly recommend these directional priorities for consideration by all the UK's political parties. The principal goal for the party in power next year is to lead the UK out of recession. Whichever party this is needs to recognize the potential in the UK technology sector. Exploiting it properly could significantly increase its contribution to GDP and create 250,000 jobs in the sector over the next ten years. The potential is huge and the UK tech sector truly could be the catalyst for the recovery of UK plc.

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