The government’s new industrial strategy contains 276 mentions of the word “growth” in its 64 pages. This is considerably more than the number of times “war” (184) and indeed “peace” (63) are mentioned in all 1,200 pages of War and Peace. Where will this forest of economic growth spring from? “High-growth sectors”: the areas of the economy that have grown fastest in recent years and which have greatest potential for future growth. The strategy lists eight of these, including renewable energy, life sciences and advanced manufacturing, but one sector seems to be getting a great deal of attention: Big Tech.
The government’s new investment minister – the latest in a series of ministers imported from the normal world by means of a life peerage – is Poppy Gustafsson, who was the co-founder and CEO of the cyber security firm Darktrace until it was sold to an American private equity last month. Leading the government’s new Industrial Strategy Advisory Council is Clare Barclay, CEO of Microsoft UK. Top billing at yesterday’s summit (14 October) was given to Google’s former CEO, Eric Schmidt.
These tech execs doubtless have some valuable insights about what will encourage businesses like theirs to invest, but it’s easy to imagine how their policy advice could be accused of interest. The public sector is one of Big Tech’s biggest clients – Microsoft was paid £112.7 million from the public purse last year alone, according to Tussell – and the tech industry spends heavily on lobbying governments because regulation is probably its biggest risk.
This is certainly the case for Google: last week, the US Department of Justice filed court documents which stated possible “remedies” to antitrust violations could include forcing the company to share data with its competitors, or even breaking it up. The UK’s Digital Markets, Competition and Consumers Act, passed into law this year by the last government, gives our competition regulator more power to police Big Tech, but yesterday Starmer all but warned the Competition and Markets Authority not to use it, telling the assembled businesspeople: “We will make sure that every regulator in this country, especially our economic and competition regulators, takes growth as seriously as this room does”. On stage with Schmidt, Starmer declared the UK would “run towards” AI, which could be used to “reimagine” the NHS. Schmidt was clear that companies like Google would spend in a less regulated country: “maybe you need a minister for anti-regulation”, he told Starmer, delivering the line with enough of a smile that it could, if necessary, be taken as a joke.
Technology has been reliably providing productivity growth and making people better off for centuries, and it seems this government is very comfortable with making Britain a more lightly regulated option to the US and Europe if this helps to “crowd in” private investment. But technology isn’t a silver bullet for growth.
One of the best things I’ve read on economic growth recently has been this blog by the economist and former No 10 advisor Giles Wilkes, who points out that in the basket of goods and services we all consume, a small group of things have been made much cheaper by the technological revolution. “Making photos and videos” and “data processing” have fallen in price dramatically as everyone bought smartphones, but these benefits haven’t spread out into other sectors. The fact that you can buy a theatre ticket online doesn’t make actors more productive; they still act to the same size audience over the same period. You can order food through an app, but that doesn’t make it cheaper to cook some chicken (in fact the chicken is much more expensive thanks to higher energy prices). Certainly the tech sector creates new jobs and new skills, but the services it provides often chiefly of benefit to the tech sector itself.
You could argue that what’s really noticeable about a lot of the tech sector’s innovations – such as social media, ridesharing or large language models – is that they often look a lot like ways of turning things other people are doing into work done for the benefit of Big Tech.
Starmer told the audience in the Guildhall yesterday that the “key test” of all regulation “is, of course, growth”. This seems to have passed without much comment, but it is quite a shocking thing for a prime minister to say in a country that has had its fair share of regulatory scandals and which, like others, still bears the economic scars of the 2008 crash. He might perhaps have said the same of deregulation; if the government is going to slash away at red tape on behalf of one sector, it had better know what we’ll be getting in return.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here
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