US tech firms have been left frustrated with the UK over its regulatory framework, with some evenchoosing to exit the market. Key issues which are said to be pushing these companies to the brink are the Digital Markets Bill, which gives the competition watchdog power over large tech companies, and the continued decisions by the Competition and Markets Authority (CMA) to block high-profile deals that could help the UK economy prosper. In light of this, Claire Trachet, industry expert and CEO of business advisory, Trachet, highlights the need for the UK to balance creating effective regulation and continuing to drive innovation within the tech sector.

As these regulatory measures cause concern, they also highlight how the European Union is slowly becoming viewed as a more attractive place for business. This claim was made by Microsoft’s chief executive, Brad Smith, following the EU’s decision to approve the Microsoft-Activision merger, after the CMA blocked the $69 billion deal. Further to this, countries like France are taking a lead in driving investment and support for its tech startups, with President Macron recently announcing a significant stimulus package for the French startup ecosystem and its French Tech 2030 plan – which aims to nurture 125 of France’s leading tech startups through a staggering €54 billion investment. Trachet explains that whilst the EU has also been seen to introduce strict regulation in a similar manner, the continued push on investment and the EU being much larger could contribute to it being seen as more valuable than the UK in the eyes of big US firms.

In terms of the US, there appears to be more optimism in the tech sector, with the likes of AI and ChatGPT revolutionising the industry. For example, tech giant, Apple, was seen to reach a value of over $3 trillion, whilst for the first time, Nvidia, a chipmaker, saw its market capitalisation break $1 trillion, as a result, this led to NASDAQ seeing a 6% increase last quarter. In comparison, the UK continued to struggle last quarter, while the FTSE 100 finished up at 0.02%, the FTSE 250 midcap index ended down at 0.77%, due to another hike in interest rates and ongoing inflation.

Claire Trachet, tech industry expert and CEO of business advisory, Trachet, comments on the need for the UK to balance creating effective regulation and continuing to drive innovation within the tech sector:

“Despite the CMA’s decision to block deals in its attempt to foster a competitive space for innovative startups to thrive and protect consumer interests, it appears this may be causing reticence amongst tech giants in terms of their plans to expand their businesses in the UK. As a result, the UK needs to be careful when creating and implementing effective regulation to ensure it is still being viewed as a leading contender in the global tech race.

“Increased regulation and red tape for big tech firms could also shape how attractive the UK is as a hub for tech companies, as founders and investors may become reluctant to capitalise on a market with stricter guidelines. The need to create regulation which protects the public is vital, but there is a view that in their current form some of these laws may stifle innovation and reduce consumer access to technology which forms a key part of their day-to-day lives. Without a clear balance between regulation and innovation, the UK risks alienating some of its most influential tech allies at a time when economically it most needs them.

“I’ve always felt very positive about the UK remaining a central place for tech, however, a lot needs to be done currently to ensure it retains this spot. It needs to be properly cared for and not taken for granted. That means that investment needs to be distributed into the tech system. It’s quite surprising, traditionally the UK is seen as pro innovation and investment, and now we’re seeing that there are other European countries like France and Germany who are taking a greater role in distributing investment into this area. As a result, it is crucial that the government is actively pushing investment into the tech industry.”