The UK’s digital economy represents nearly one third of the UK economy, and if nurtured properly, it could transform government, society and culture. But are we doing enough to secure Britain’s digital future – and if not, what more can be done? This was the topic discussed by politicians and financial and technology experts at a recent Spectator dinner, hosted by Mastercard.
One of the main topics of conversation was around British start-ups and the investment opportunities available in the UK. Jeremy Silver, CEO of the Digital Catapult, has built and sold two technology businesses in the past fifteen years – selling both of them to American tech companies. That’s not through choice, however. ‘I’d much rather have sold them to British companies’, he said, ‘but I couldn’t find one who would buy them.’ Is this a problem that needs addressing? Iain Wright MP, chairman of the business, energy and industrial strategy select committee, agreed with Fraser Nelson’s suggestion that Britain has a bit of an innovation problem. ‘We’ve got a small number of companies – often very large companies – who are doing incredibly well at innovation and improving our productivity, and then a huge long tail of companies across the country that are doing business as usual’, he said. ‘Business as usual will not be good enough in the 21st century’. Perhaps the problem is that, as a nation, we think more about short-term economic solutions, rather than long-term ones.
So if the UK needs to promote investment in new technology, does the government have a role to play in encouraging this growth – either through policy or other means? Well, potentially. One of the reasons suggested for the lack of British investment in tech start-ups was the shortage of government policy, framework or infrastructure – things that are vital to a growing digital economy. As a nation, we don’t lack ambition or ideas – what we lack is the impetus to enable them to grow into something larger. Drew Hendry MP agreed, saying that when he entered parliament in 2015, one of the first questions he raised was about 5G. ‘You would have thought I was suggesting legislating for hover boards’, he said, ‘but now, 16 or 17 months later, we’re talking about implementing 5G. There are lots of examples where the right attitude could have created the infrastructure.’
There are certainly areas where Britain is technologically far ahead of many other countries. One example is fast payments in the banking industry: the ability to send money from one account to another in a matter of seconds isn’t something that many countries have access to. Mark Barnett, President for UK and Ireland at Mastercard, added that his company is currently in the process of acquiring a leading British technology company that makes the technology behind faster payments. Here, he said, was an example of an ‘appropriate form of growth’ for a British company. The software they have built is the best in the world for the job – but with Mastercard they’ll be able reach 210 countries; something they wouldn’t be able to do on their own.
The fact that Britain is on the forefront of faster payments systems is most likely one reason why we have one of the highest proportions of cashless payments in the world. At the moment around 52% of financial transactions in the UK do not involve cash – but when it comes to the actual value of transactions, that percentage goes up to around 92%, according to Barnett. Does that mean that a cashless economy could be on the horizon? Barnett argued that the cost of cash is a drag on the economy of somewhere between 0.5 and 1.5%, and that although there are valid reasons for a bit of cash remaining in the system, there are a lot of ‘invalid’ reasons as well – mainly around the black economy. ‘Cash’, he said ‘is not a great thing for society’.
One of the problems of a cashless economy is that it is difficult for many of the most vulnerable people in society to open an account, argued Tom Blomfield, CEO of the new online bank, Monzo. Here, he said, is an area where government really can help. Obviously there are reasons for many of the banking regulations, especially around money laundering and terrorism. But are all of these checks necessary? ‘Why can’t you open an account that has a deposit limit of £10,000 per year?’, or one with a limited overdraft function, to prevent customers from building up personal debt? There might well be risks, but a ‘more proportionate risk-based approach’ to these issues would certainly be a step in the right direction, argued Blomfield, and would allow everyone to have a bank account. Two billion of the world’s population don’t have a bank account. Advances in technology mean that they could.
There are risks, of course. Cyber crime is a relatively new development, and technology has hugely increased the opportunities for fraudsters. Electronic forms of payment are, however, easier to trace than cold hard cash – which could be thought of as a bonus. Perhaps when it comes to risks we ought to be looking not at what James Cleverly MP called the ‘sexy risks’, like online fraud, but the ones right under our noses. We worry about people hacking into our emails or online banking systems. But even closer to home, what happens if the electricity gets turned off for one reason or another? During the London floods, Cleverly said, the two top priorities were the protection of life, and getting the London Stock Exchange plugged in. Similarly, when Japan experienced the terrible tsunami in 2011, one of the top priorities was keeping their data centres and communication networks running.
For many of us, the digital economy is still very much a brave new world. But it’s vital that Britain is at the forefront of this world. As Iain Wright said: ‘the winners and losers in the next few years will be about who can capture the economic value in innovation.’ Right now, Britain isn’t quite one of the winners on the global stage. But with a bit of work and some changes in attitude, we could well be.
Attending the event were: Fraser Nelson (Chair); Mark Barnett, President for UK & Ireland, Mastercard; Tom Blomfield, CEO of Monzo; Victoria Borwick MP, Member, Science and Technology Committee; James Cleverly MP, Member, International Trade Committee; Simon Grossman, Vice President, Regulatory & Public Policy at Mastercard; Drew Hendry MP, Chair of APPG on Digital Economy; Raj Mack, Head of Digital Birmingham; Alan Mak MP, Chair of APPG for Entrepreneurship; David McCreadie, Managing Director of Tesco Bank; Jonathan Reynolds MP, Shadow Economic Secretary to the Treasury; Dr Jeremy Silver, CEO of the Digital Catapult; Matt Warman MP, Member, Science and Technology Committee; Iain Wright MP, Chair of Business, Energy and Industrial Strategy Committee.