There was some debate in the City AM newsroom on Tuesday over which story should grace the front page yesterday.
On the one hand, news of £30bn worth of tech investment offered the kind of optimism we’re always looking out for, but on the other hand news came that global fund managers were pulling out of UK equities at a rate not seen for 20 years.
It was a classic good news/bad news toss up, made more interesting by the fact that the two stories were not entirely unrelated. In the end, and given that good news is hard to come by these days, we splashed on the tech investment story while the fund managers’ flight from the UK landed on page 2.
While some analysts attributed the scarper from UK equities to fears over the state of the UK economy and growing nervousness concerning the looming Budget, a look at where the money is going reveals the real story.
Investors are piling into US listed tech giants; the very giants who are now showering the UK with cash in order to fund our own bright, AI-powered future. While the investment is undoubtedly good news, there are caveats.
Some analysts are suspicious of the US tech giants’ apparent enthusiasm for investing in the UK, warning that the move could be a bit too one sided and risks leaving the UK dependent on US tech. Government ministers (and the likes of Nvidia’s CEO, Jensen Huang) are at pains to stress that the deals will boost our homegrown AI capabilities, but debates over “AI sovereignty” still linger, with UK tech investor Brent Hoberman warning yesterday that “the real opportunity is in what we build next.” He added: “Data centres yes, but also new national champions”.
This brings us back to the issue of UK equity markets and the question of whether our country is capable of producing, nurturing and, crucially, retaining, enough of its own tech superstars. Without wishing to oversimplify things, the London market is great for old favourites in mining, energy and consumer goods but less well-known for its thrusting tech unicorns.
The hope is that the billions of pounds of investment announced this week will help to build and grow genuine UK success stories, but the fear among some is that we’ll learn to content ourselves with being America’s biggest customer.