The sale of Arm, Britain’s homegrown chip designer, to Japan’s SoftBank in 2016 triggered an outbreak of political angst over the future of the country’s industrial strategy. Ministers in Theresa May’s government tried to allay fears about the foreign takeover of one of Britain’s few top-class technology companies by spinning it as a vote of confidence in the UK as a great place to do business, despite Brexit. There were also assurances Arm would keep its British headquarters and double its UK-based staff over five years.
But the Arm deal highlighted a frequent and still valid criticism of the government’s involvement with business: its industrial policy is too often ad hoc, and lacks a strong set of principles guiding which industries and companies are important for the future. The issue has become even more pressing in the era of Big Tech as US technology companies have sprung up rapidly and come to dominate whole sectors of the economy, often in the process destroying the commercial prospects of older competitors. It is no surprise that the drive for “technological sovereignty” — the need to foster homegrown technology champions — has become the ambition for Europe’s policymakers in particular, one given even greater urgency in the wake of the pandemic.
Today, it is again the future of Arm that is drawing attention to the gaps in Britain’s industrial strategy. SoftBank is considering a sale to the US chip company Nvidia. The proposed deal has sparked calls, including from one of Arm’s founders, for the UK government to intervene. Ownership by Nvidia, critics have claimed, could see its headquarters moved to America, making the company subject to US foreign investment regulations. It would also threaten the neutrality at the heart of Arm’s business model which has allowed it to license chips to a range of customers.
Successive British governments have been reluctant to intervene in company transactions. But in this case, Boris Johnson’s government has a role to play. In the event of a deal, he should at the very least insist on a continuation of the commitments given by SoftBank — and take the opportunity to make them legally binding. Foreign bidders have all too often promised much, only to renege on the very same promises.
At the same time, Mr Johnson’s government should use the opportunity to spell out a coherent approach to industrial policy. While his government has identified science as a key driver for future economic growth, recent actions — notably the decision to spend about £500m of taxpayer’s money on a stake in OneWeb, the collapsed satellite operator, and talk of forming a new agency to promote frontier technology modelled on America’s Advanced Research Projects Agency — do not suggest a coherent strategy. Indeed, if the interventionist approach towards OneWeb were taken as a yardstick, Mr Johnson’s government could justify a similar action in the case of Arm given its importance to the UK’s technological base. Dominic Cummings, his chief adviser, has been clear on his ambitions to build world-class tech champions. Wholesale nationalisation, however, would be a mistake.
Whether Britain can retain and foster a viable industrial and technological base will, ultimately, be determined by its sovereign capabilities, the skills of its workforce and key infrastructure. All of this will require ministers to set out clear goals. A much-vaunted industrial policy set out in 2017 has languished, in part due to Brexit and the pandemic. It is time for Mr Johnson to put his government’s rhetoric into actionable policies.