Why is Starmer ignoring Britain's tech sector?

Spectator

5 hours ago

The government's hotly-anticipated industrial strategy has at last arrived. In it are a handful of bold new announcements, and a lot of old recycled ones. There are some big shiny spending commitments – a couple of billion pledged here, a few hundred million spent there.
But perhaps the most consequential element, especially for the tech sector, is a note right at the back of the document on page 152. It expresses an ambition for procurement rules to be consistent with the government's wider industrial strategy to grow the economy – or as the document puts it in fluffy Whitehall-speak, contracts must 'set at least one social value key performance indicator'.
I've spoken to several British tech firms who say that current rules have become rigged against them
More than £400 billion of the public sector's annual budget relates to procurement contracts. The government is the single-largest customer for virtually every kind of private sector service, including in areas like software. So the way it organises procurement has huge economic implications, much more so than throwing some cash at AI research or helping build a supercomputer.
Current procurement practices in tech do not seem to align with the government growth mission. A cursory flick through the government's procurement database finds that at least £15 billion in software contracts have been awarded or part-awarded to one of Microsoft, Amazon, Oracle, Palantir and IBM since 2020, dwarfing any and all UK tech firms.
That is the continuation of a longstanding trend of the UK being far more likely than its peers to contract services overseas. According to a 2021 EU study of the procurement market, more than a third of major UK government contracts are awarded to foreign suppliers, well above the EU average of 22 per cent.
The UK approach is also quite different from that of the US, where there is a longstanding home bias in procurement. According to a World Bank report, 'In the case of the US, the federal government openly and actively discriminates against foreign firms when making its sourcing decisions.' That was written in 2023, long before the arrival of Donald Trump's erratic America First tariff regime, which has massively accelerated this practice.
It would be foolish for the UK government to do the same thing, and game procurement rules to guarantee British firms get all the money – that would lead to inefficiencies and poorer quality services.
But I've spoken to several British tech firms who say that current rules have become rigged against them. Some have even been told they were ineligible to apply for contracts, despite having won the same ones a couple of years earlier. Whether that is due to successful lobbying of the all-powerful big tech firms, or Whitehall incompetence, is hard to say. But the door is now open for this to change.
The question now is whether the government will deliver – and there are some warning signs that it won't. The Prime Minister seems far more interested in chatting with – and working with – US business leaders than he does with execs in Britain.
Since last year, Keir Starmer has tweeted a picture of himself in a meeting with a CEO on only three occasions: with Blackrock, Bloomberg and Apple. And in this week's industrial strategy document, the government pledged training for UK workers by partnering with Microsoft, Google and Nvidia.
After meeting with Nvidia's Jensen Huang earlier this month, Keir Starmer published a new 'memorandum of understanding between the UK and Nvidia' in which the two parties 'are collaborating to support the upskilling and reskilling of the UK workforce across industry, research and the public sector'.
When the government set up a new board to advise on British industrial strategy in October, to the British tech sector's astonishment, its pick for the chair was a CEO at Microsoft. Nine days later, Microsoft signed a five-year deal with the government on 'digital transformation' which would allow public sector bodies 'access to cost savings' when they procure Microsoft services – and earlier this month, that CEO was awarded a damehood.
This attitude pervades Whitehall, and can lead to big government spending decisions. Officials from the Department for Science, Innovation and Technology (DSIT) meet with US companies far more frequently than they have British ones, departmental records show. DSIT officials met with Google on at least eight occasions in the fourth quarter of last year — more meetings than for any other company.
Starmer seems to think blowing billions on deals, collaborations and partnerships with big US tech firms will somehow support British industry. But if the government's industrial strategy is to have any lasting impact, he must pick up the phone to British business instead.