One of the ‘benefits’ of Brexit that I seem to remember we were promised by Vote Leave was supposed to be the ability to attract global businesses to the UK through lighter regulation and a more nimble government. We haven’t seen a lot of that so far. In fact, things seem to be going in the opposite direction. The government spends more time trying to manage the fallout from Brexit and keep the warring factions inside the party from destroying themselves.
This week we learned the world’s largest maker of electric vehicles, China's Byd, has named 5 EU countries (Germany, France, Spain, Poland, and Hungary) as the potential location of their European factory. Britain didn’t even make the long list, says the European president Micheal Shu. To make sure nobody was under any illusions he also said, “Without Brexit, maybe. But after Brexit, we don’t understand what happened. The UK doesn’t have a very good solution. Even on the long list, we didn’t have the UK.”
More recently we learned that ARM, the Cambridge based company that designs the chips that operate 95% of smartphones globally, is seeking a public listing in New York despite a huge effort by the UK government to get them to list in London. ARM is owned by the Japanese SoftBank which bought the company in 2016 for £24.3 billion.
They are said to be 'shunning' a London listing on account of persistent political instability and too shallow an investor base.
Arm’s co-founder Jamie Urquhart told Bloomberg Radio, “There's been very little continuity, very little strategy. Even now we're waiting for the government to come up with a semiconductor strategy. It doesn't take that much to start looking forward and thinking about what you're going to do... But you've got to do it.”
He said that the UK’s long-term technology strategy “couldn’t be any worse than it is at the moment...There’s very little here in the UK and on the things we are worried about, the Chinese already own them.”
A few days ago, CRH the giant Irish construction products company, also announced they would list in New York, prompting the BBC to ask if London was losing its lustre.
Last month, betting firm Flutter said it was thinking of a US share listing, and earlier this week, the Financial Times reported that oil giant Shell - the largest company on the London stock market - had considered moving its shares to the US market in 2021. BAT is under pressure to move to New York, too.
Russ Mould, investment director at AJ Bell, a low-cost platform for the DIY investor, said there were plenty of other companies in the FTSE 100 that could follow adding, "That's not a good look for the London Stock Exchange."
In 2021, Amsterdam overtook the London Stock Exchange (LSE) by shares traded when average daily trading in the Dutch capital surged from €2.6bn (£2.3bn) to €9.2bn in the first month after Brexit as exchanges shifted order books abroad.
Euronext, first formed in 1998 with LSE as part of the original founders although it eventually decided not to go ahead, is now a combination of seven European exchanges in Dublin, Paris, Oslo, Milan, Amsterdam, Lisbon and Brussels. By market capitalisation, Euronext at $5.5 tn is about twice the size of the LSE, although the New York exchange is four times bigger.
The largest tech company on the LSE is IBM, capitalised at about £80 billion. But the other day I noticed a story on the BBC about ASML, a dutch company that is now Europe's most valuable business. Never heard of it? Neither had I until last week. It makes machines worth £150 million each to manufacture the most advanced semiconductor chips. It had a market value of $300 billion in 2021 and is probably around $500 billion now.
After the budget this week, the OBR March forecast says on page 48 that business investment growth in the UK “stalled in the years after the EU referendum.” On the eve of the pandemic, it was 16.2 percent below the OBR’s pre-referendum expectations and more recently, the pandemic and the increase in global energy prices have also weighed on investment. But in the face of these global shocks, UK business investment (outside housebuilding) has “continued to underperform relative to other G7 countries.”
The news that Britain is about to join the CPTPP, the Pacific trading block, should be a warning. Only politicians who are deaf and blind to Britain's real problems could even think about joining it. We have little in the way of natural resources to export, our food is high quality but it isn't terribly competitive on world markets and our manufacturing industries are not only moving away, but the ones remaining are also under-investing compared to other G7 countries.
Our problem is 'tokenism' - we don't invest seriously but as little as we can get away with it and still look like a serious country. For example, the government announced £900 million to be invested in a powerful computer to rival Microsoft's ChatGPT AI software.
The Treasury said the investment will “allow researchers to better understand climate change, power the discovery of new drugs and maximise our potential in AI.”. There will also be a £1m prize every year for the next 10 years to the most groundbreaking AI research and £2.5bn over the next decade in quantum technologies.
Remember those numbers. Within a few hours, I read that South Korea intends to build a massive facility to make computer chips near Seoul, with about $230 billion in investment from Samsung Electronics. The plans were announced by President Yoon Suk Yeol on Wednesday and confirmed by Samsung.
“We will build the world’s largest new ‘high-tech system semiconductor cluster’ in the Seoul Metropolitan area based on large-scale private investment of almost 300 trillion Korean won,” the president said and added, "In addition, we will grow the ‘semiconductor mega cluster’ to the world’s largest in connection with the existing memory semiconductor manufacturing complexes.”
In Korea, Samsung is one of the giant conglomerates that dominate the economy, with the top 10 accounting for about 80% of GDP. They are known as 'chaebols', family-controlled empires which provide a range of products and services from shipbuilding to electronics. Samsung is the biggest and most powerful of them all.
This is what we are competing against.
When you next hear a government minister talk about Britain's 'world-leading' tech industries allow yourself a little smile. We can't make anything like the investment needed to compete ourselves and with Brexit, we are frightening away the companies who can.
