Prime Minister Rishi Sunak has called a UK general election for 4 July, raising the prospect that for the first time in 14 years it will be a Labour government shaping the business environment for the UK’s tech startup ecosystem.
The date for the 2024 UK general election was confirmed by a rain-soaked Sunak outside 10 Downing Street on Wednesday afternoon, following a frenzied day of Westminster speculation.
The most recent opinion polls give the Labour Party a 22-point lead over the Conservative Party – a similar picture to the past 12 months.
Should Labour translate those numbers into votes at the ballot box, it will form a government in a very different world from when it departed Downing Street in 2010.
Back then the iPhone was just three years old. A young American startup called Uber had not yet launched in the UK. In east London, a nascent cluster of web businesses were coalescing around Old Street Roundabout.
Over the past decade, the UK’s tech startup ecosystem has grown into an economic juggernaut. In 2013, it was valued at $60bn. Today, it is valued at over $1tn – the third country to hit that milestone after the US and China.
“It’s a potentially huge moment of change for the ecosystem,” says Dom Hallas, executive director of the Startup Coalition, a lobby group. “The last time Labour were in a position like this in the polls the tech startup ecosystem barely existed – now it’s a big part of the economic story both main parties will try to tell.”
Sunak’s general election gamble
For most of Sunak’s early premiership, government relations with the tech sector have mainly been positive.
The long overdue decision to form a dedicated science and technology department was universally welcomed in February 2023.
A month later, the government stepped in to facilitate the rescue of Silicon Valley Bank UK by HSBC, preventing a run on the startup-focused bank from causing widespread damage to the ecosystem.
And the government’s AI Safety Summit, held at Bletchley Park in November last year, was broadly hailed as a diplomatic success – if light on concrete commitments.
But more recently, there has been a growing feeling that the tech sector isn’t always being listened to.
Changes to the R&D tax credit system have faced backlash at successive budgets. The government was forced into a U-turn over its ill-judged decision to raise the income threshold for angel investors, a move that disproportionately excluded women. Meanwhile, efforts to curb legal migration have sparked concerns that the tech sector will find it harder to attract the best and brightest talent.
“For a start, it’s about time we saw better engagement with the startup ecosystem,” says Sarah Turner, Home Grown ambassador and Angel Academe CEO. “During the coalition Cameron years, entrepreneurs were in and out of Number 10, right at the heart of things and the engagement was high.
“It’s been remote and disjointed in recent times. I’d like to see an energetic government focused on the high growth scene that truly listens.”
All of this comes against the backdrop of high inflation, rising interest rates and the UK on course for the highest tax burden since the Second World War.
While Sunak might take solace in inflation falling this week to its lowest level in almost three years, some tech industry figures believe the Conservative Party no longer has the trust of businesses.
“Historically, Labour has never been good for businesses, and the Conservatives have always been ‘the party for business’,” says Michael Queenan, CEO and co-founder of UK technology company Nephos.
“However, under the Conservatives, costs have skyrocketed. It is the most difficult time to do business that we have seen in years and I don’t think the Conservatives can bank on business leaders’ votes as much they believe they can.”
Labour lacking detail
When a startup pivots, it changes course in a fundamental way to adapt to new conditions. The UK tech ecosystem will now be watching closely to see the extent to which Labour will veer away from the Conservative’s approach to startups, scaleups and unicorns.
Sir Kier Starmer’s party has been teasing its stance on tech and startup policy through a smattering of reports and public speeches. In February, the opposition party outlined a handful of fintech policies. It is expected to publish an AI strategy in the coming weeks.
Surveys suggest the tech industry likes what it has seen so far. A survey published in March found that three-quarters of tech leaders believe a Labour government would have a positive impact on UK innovation.
A separate survey of 500 UK firms last October by the Entrepreneurs Network found that 43% of founders felt Labour would support business, compared with 35% feeling the same about the Conservatives.
But there is a strong sense from the tech sector that they have not yet seen enough detail from Labour – something that will change when parties publish their manifestos.
Manifesto watch
In addition to seeing how the political parties compare against one another, tech industry figures will be watching closely to see what the party manifestos have in store for their respective sub-sectors or regional tech hubs.
Volodymyr Levykin, CEO and founder of Scottish rocket startup Skyrora is – unsurprisingly – hoping to see space investment as a top priority for the next government.
“The innovative and intensive nature of the industry means that we require support from all levels – in the form of public and private investment – to ensure that the UK is a world leader in space,” says Levykin.
Chris Bruce, chairman of Cambridge Tech Week, says whoever is in charge next “will need to think carefully about how to support the science and technology communities and tech hubs.”
He adds: “Cambridge and its deep tech research, development and entrepreneurship in areas like AI, quantum, semiconductors and new materials play a key role in growing our economy – it’s vital that the next government recognises this with policies and following action to match, to improve public services and create high skilled jobs that can power it forward.”
While startups will have their own specific wishes, tech will likely be a subplot in the broader spectacle of the general election. But advances in technologies like AI showing no sign of slowing down, the next government will need to get to grips with the wants and needs of the UK tech sector quickly.
“Tech is unlikely to be the main vote mover but there will be plenty to look out for on talent, access to capital and improving regulation,” says Hallas. “We’ll also be wanting to make sure the voice of the community is heard on what is needed.”
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