Chancellor wants to build $1tn 'British Microsoft'

Aims to challenge US giants with looser regulations

Chancellor Jeremy Hunt plans to raise a homegrown tech titan, but does the UK's investment landscape support that lofty ambition?

Chancellor Jeremy Hunt has told the Financial Times of his ambition to create a British rival to American tech giants like Microsoft and Google, although admits "it might not be for a decade."

Hunt said he'd "like to see a homegrown company with a trillion-dollar [market] cap," which would "reflect [his] ambition for the UK to be the world's next Silicon Valley."

Building the next Silicon Valley is a long-stated aim of British politicians, and Jeremy Hunt in particular, although so far places like London's Silicon Roundabout and Scotland's Silicon Glen have failed to spawn a company that can meaningfully compete with established giants.

The British ecosystem is more friendly to start-ups than the USA's, in large part because of Hunt's efforts. The chancellor has been trying to make it easier for start-ups to access funding and encourage UK investment funds to focus domestically, rather than overseas.

He has also loosened regulations - a controversial move in the financial sector, which has flourished in the UK because of its strong rule-based system - by overhauling listing rules, loosening some restrictions and reducing the number of transactions requiring shareholder approval.

But there's a long road from start-up to $1 trillion (£800 billion). That is more valuable than any company in the UK today - in fact, it's about the same as the entire UK tech sector.

Last year there were only six companies in the world with a $1 trillion+ market cap, and five were US tech firms (Apple, Microsoft, Alphabet, Amazon and Nvidia). The other was Saudi Aramco.

Hunt is expected to make his $1-trillion-company ambition part of his pitch to tech executives when he meets them later this week.

Despite saying it could take 10 years or more to build an ecosystem that could allow such a firm to flourish, Hunt insisted it was not too late to compete with US tech groups.

"There is no reason whatsoever that we couldn't have some tech giants that are both UK born and bred, but also grow to global dominance through the UK capital markets."

Not concerned by US takeovers

The chancellor waved away concerns about UK businesses looking to North America for investment, rather than building themselves out.

Even very recently we have seen British success stories like Arm choosing to list itself for an IPO in New York instead of London, and investment firm Thoma Bravo acquiring homegrown tech companies including Sophos and Darktrace.

The chancellor dismissed this as "part of how capitalism works."

"Very often...a well-run private equity company can really transform a business over a period of four or five years. So it shouldn't worry us at all, if that's happening to some great British companies."

Hunt referenced Sir Demis Hassabis' decision to sell Deepmind to Google in 2014.

"I want to make sure that the Demises of the future are confident that, if they want to, they can raise the capital here in London to stay independent so that ultimately the UK gets those giant tech players."

Computing says:

To stand any chance of this extremely ambitious plan succeeding, the UK's entire approach to investment will need to change.

We're very good at starting businesses. We have a supportive ecosystem for early stage companies, which form the backbone of British business, but scaling is where things fall down. Taking a company past a few hundred employees takes money - a lot of money - and huge amounts of that investment capital are concentrated in North America.

That won't change overnight. Neither will the propensity to sell for short-term gain, which is an understandable but, in this context, regrettable tendency among founders across Europe.

If Hunt wants to nurture a trillion-dollar company he'll need to encourage founders to hold on to their own organisations, and also take a close look at the UK investment landscape - where huge amounts of money funnel into the safer property sector than more risky industries.

If you were feeling uncharitable, you might also ask why the Conservatives didn't start a process they knew would take years when they came into power in 2010.