How to end the American choke-hold on British tech? Stop ‘acting like an incubator’
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As tech companies flee London in droves, serial entrepreneur William Reeve—whose leadership credits include Lovefilm, a trailblazer in online movie streaming, and Zoopla, a leading real estate portal —has warned the City risks becoming nothing more than an incubator for the US unless it can shift its focus beyond short-term profit.
Since 2019, at least 10 notable UK companies have moved their primary listings from London to New York’s NASDAQ stock exchange, seeking higher valuations and more lucrative capital opportunities.
The trend has raised concerns about the City’s ability to retain its homegrown tech talent and maintain its position as a leading global financial centre.
Reeve, a veteran of the tech start-up world, said he believes the issue lies in the way the City assesses value.
He said: “Twenty years ago, for people in my position looking to grow a London float was an excellent option.
“Now, homegrown companies face a choice: stay and struggle or move to the US, where higher valuations and a more favourable investment environment make expansion more viable.
“Investors here tend to prioritise immediate returns over growth, missing out on the potential of scaling innovative companies.
“The UK risks becoming merely an incubator for US giants if it doesn’t shift focus from short-term profits to supporting long-term growth.”
Reeve added that the UK’s regulatory environment has also hindered innovation, with extensive regulations often diverting resources away from growth and development.
He said: “London has a reputation for tough regulations, demanding high profitability and detailed disclosures, which can be a hurdle for fast-growing tech companies.
“In the US on the other hand, they roll out the red carpet for high-growth firms, focusing more on future potential than immediate profits.
“People are very proud of our governing standards but equally that is coming at the cost of holding onto talent.”
‘The Californians are coming for UK tech’
For Reeve, the issue extends beyond UK firms simply relocating their listings to New York.
He believes a major challenge for the British tech sector is the frequent acquisition of home-grown companies by Californian giants, driven in part by a lack of ambition among local founders.
The tech tycoon, who was behind the £200m acquisition of Lovefilm by Amazon in 2011, said he feels personally connected to this problem: “US firms buying up UK tech firms… is a complex topic, one I can be quite emotional about.
“Other things being equal, an American firm will likely be bigger than a British firm, and bigger tends to buy smaller, not vice versa. So to some extent, one should expect US firms to buy up UK firms.
“That is particularly true in technology where a lot of products and markets are more global in outlook – unlike say retail or manufacturing.
“One thing is to say ‘we don’t care’ – as long as the money is reinvested in the UK system it might not matter.
“There is some truth to this, and the UK does incentivise early stage investment to an impressive degree – which does cause exit proceeds to be reinvested – which is good.
“However at another level we do care – because for instance the likes of ARM and Darktrace were businesses listed in the UK and that leads to expertise in the City about growth stocks – and now both stocks have gone.”
So what can the UK do about it? Reeve said he believes the solution is multi-faceted.
He said: “Firstly, we could make it much harder for overseas firms to buy UK assets. The problem there is that restricting the free market and would depress valuations, and in turn make it even harder for UK businesses to raise money.
“We could also encourage growth investors overseas to invest in UK growth businesses without buying them, via reducing barriers like stamp duty, and perhaps creating matching funds, tax breaks, introductions, and more promotion overseas.
“Another option we could consider is to look for ways to boost ambition so that people who have become a multi-millionaire aren’t tempted to cash out but instead want to push on to become billionaires.
“Mark Zuckerberg turned down an offer to sell Facebook for $5bn – lots of UK companies would have taken up that offer – why? Zuck was more ambitious, and had supportive enough investors.”