Looking at the FTSE 100, the Information Technology sector currently accounts for just over 1% of the index. Compare this to the US, which has seen tech lead the stock market boom over the last 10 years. Apple, Microsoft, Amazon, Alphabet, Facebook and Tesla are collectively valued at more than $8 trillion – equivalent to 25% of the total market cap of the S&P 500. In the UK, the market cap of the entire FTSE 100 is less than $2 trillion.
Of course, it has taken some of these companies decades to reach this stage – Amazon listed in 1997 and Netflix back in 2002; but the pay-off has been immense and the US has been hard to match for tech innovation and growth.
It certainly looks like the UK Government is taking the potential offered by the technology industry seriously, with Chancellor Rishi Sunak announcing that the Future Fund: Breakthrough will invest up to £375m of government cash alongside private sector capital in emerging UK tech companies, in return for stakes in those firms.
As the FT noted recently, many of the founders of UK tech businesses have claimed that they often fail to make the leap to the next stage in their development to become true leaders in their fields, instead selling out to international rivals such as SoftBank’s 2016 acquisition of ARM and Google’s 2014 acquisition of AI firm DeepMind.
Last month, robotics pioneer Blue Prism also warned it was seriously thinking about ditching its listing in London and moving its shares to the US, citing a lack of understanding of tech by British investors, claiming that it could be worth two-to-five times more if it was listed in the US.
All of this also comes in the midst of a long-awaited review of the UK fintech industry by ex-Worldpay boss Ron Kalifa, who, among a raft of proposed measures to ensure that the UK fintech sector continues to grow, recommends a transformation of listing rules in the UK.
This includes allowing founders and pre-IPO investors to retain super voting rights with their shareholdings (so no longer one share one vote), a measure which whilst currently allowed for a London listing, does preclude a company from being included in the FTSE 100 and FTSE 250. The divergence in voting rights accorded to some of the big US tech firms doesn’t come without controversy – Facebook’s Class B shareholders receive 10 votes for every share held, compared to one vote one share for holders of Class A stock.
Thatcher’s so-called Big Bang deregulation in the mid-1980s was pivotal in the UK cementing its position as the world’s leading financial services centre – whereas Kalifa’s proposed regulatory changes simply put the UK on a par with other centres such as the US and Singapore.
Without them, however, we may run the risk of eroding the UK’s opportunity to build a thriving tech industry – and thereby the prospect of transforming the UK stock market’s ability to nurture potentially transformational tech firms and expand the opportunity set for investors to capitalise on.