Money & Markets: Why the UK markets do not show the love to engineers
Financial systems in countries like China, Japan and US support engineering and technology companies but in the UK, it’s a different story. The UK markets just don’t recognise their value.
Engineers do not find it easy to prosper in the UK. The markets have historically had a love-hate relationship with them and the sort of systemic support they would get in Germany is simply not there in the UK. This is not much better for technology companies; most are scorned in the City and there are scant examples of them when you compare the scene with the US.
The City is not a fan of new-fangled tech and doesn’t consider engineering to be valuable. This is a sad state of affairs because it undermines the ability of the country to keep up with the rapid change in technology necessary for any country to be in the first division.
International travellers will see this starkly as they compare and contrast developments around the world. The sheer scale of developments in places like China, the modernity of Japan, the incredible technological hustle of the US, all these dynamics cast a long shadow on what goes on in the UK.
It all comes back to money and finance, and in the UK the long-term picture is ugly. The financial system in the UK does not support business, it is geared to property. It will happily support someone with huge leveraged debt to buy a house. If they want to borrow a few hundred thousand to start a business they will be out of luck.
Likewise, the UK markets have little appetite for engineering or tech. If you want to raise money for mining in some distant opaque place, you are in good shape; want to be an engineering company or a tech business and you are going to have a hard time.
It is hard to fund long-term projects via the public market because UK markets have a short-term view. Anything beyond a year is too far ahead, and the way US companies can build their businesses off the back of years of losses is not an option in the UK. The City focuses on profits and then gives a low valuation on them.
Most exciting technology developments or engineering projects need a lot more time than a year. This is where off-market investment by venture capitalists gets traction, but the UK scene, which has been growing significantly, is still nowhere near as significant a driver as in the US or Japan.
Some countries have a good balance of support for engineering and technology companies and some haven’t. The ones that don’t end up consuming the output of those that do. Technology and engineering is where the economic value-add lies that drives economic prosperity; without it an economy must take what it is given and pay the price.
The UK needs to do a lot better.
There is a litany of good British companies each year swallowed by better-supported foreign companies. With them goes core technology and skills, the long-term assets that a country needs to be in the first rank of industrial nations. One month it will be an education technology company, snapped up and gone to China, the next a chunky-sized engineer snapped up by a European rival for peanuts. You don’t have to look far to find leading tech companies languishing on the UK stock market, with valuations a small fraction of what the US markets would support them at. Have you noticed that it has been a long time since British companies were buying up foreign ones? Now even the UK stock market has itself been approached to be bought out by Hong Kong.
The UK markets do not recognise the value of its engineering or tech business in the same way as large chunks of the world do. It is pretty clear the system is no fan, when engineering companies which would be lauded in say Germany or China are called ‘metal-bashers’ in London. Meanwhile tech companies get picked off one by one as they start to get traction or are left to flounder without the sort of finance that is showered on their competitors in the US, China and Japan.
This short-sightedness is a very perilous attribute in a world of fast change requiring ever increasing investment in the sort of complex technology that ends up the key to global success. The proof is easy to see. Where is the UK’s equivalent of Google, Amazon, Facebook? That boat was well and truly missed, so instead they pick the UK clean. Where is the next generation of the UK’s equivalent to Uber, Lime, Dropbox, Snapchat? You can extend the list easily enough yourself. The UK missed that wave too. Dominant tech players: what happened to ARM? What happened to the British computer game industry; where is our Xbox, Nintendo, PlayStation? Robot makers, AI companies, database giants? Our next generation global giants are...?
It is not as if the UK doesn’t populate foreign tech goliaths with talent, fill them with world-class technologists or even design their incredible world-beating products like Sir Jony Ive has for Apple.
This unwelcoming business environment is a chronic problem that urgently needs fixing, because if at some point the UK lost the ability to create the technological talent is currently throws off, what then?
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