Lewis James Brown, Web 2.0 Manager at the Centre for Policy Studies, takes a look at the impact of technology companies' rush to choose Ireland as a base of operations, and what the UK can do to stay competitive.
Some will have noticed yesterday the announcement that Twitter has chosen Ireland’s capital Dublin as the base for an international office. While it is true that Twitter has also been operating a presence out of London since earlier this year and has relocated a few staff to our capital, the Ireland move is being seen as part of a wider migration of tech and social media companies to Dublin, with its attractive competitive tax rates and rules for transferring funds.
The move is also being seen as a snub to the Tech City in East London, a flagship project heavily supported by David Cameron to rival Silicon Valley in California as a home to the great technology innovators of the present and future.
Dublin has attracted many of the biggest names from the internet including Facebook, Ebay, LinkedIn and Google, as well as technology giants like Apple, IBM, Intel, HP and Microsoft. Its low headline rate of corporation tax, 12.5% (26% in the UK), would indicate that we are simply not doing enough in the UK to attract these type of companies. While 26% is competitive when compared with the continental Eurozone, we cannot afford to fail to compete with Ireland’s low rate that also offers the twin attractions of a convenient location for access to the UK and a commonly used language. If there is one country in Europe that can claim to share links as close to the United States as we do, it is Ireland – incredibly attractive when relocating employees.
If the Government is serious about areas such as Tech City leading the way as a home to technology and social media companies, an important sector that continues to grow in the face of the financial climate and will only continue do so as the use of technology increases in our daily lives, it must create the tax incentives that will attract the large companies here in the first place. If it cannot afford to do this across the board, an exemption should at least be considered for this important sector – we need the economic boost, we need the employment, and we need the vast international influence these innovators bring.
And once they are here, we need to develop the long term human infrastructure for them to remain. The BBC’s Technology Correspondent Rory Cellan-Jones has said he is sceptical on the outlook for the Tech City because of the lack of a world-class university to supply ambitious science graduates. With less than 3% of all graduates in the UK considering a career in the technology sector, this problem is not confined to East London’s Tech City - UK universities must work hand-in-hand with these companies to ensure the UK supplies the ‘brainpower’ we have so long thought of as one of our top exports to the companies that wish to come here.
Finally, and least obviously, we must enshrine our commitment to freedom of speech if we are to create this technology-friendly business atmosphere. Too often of late we have seen Twitter in the news as a subject of lawsuits – whether they be by councils or footballers, or its users in court facing terrorism charges. Our video games industry – once a worldwide leader – has seen its contribution to GDP drop by £132m according to the sector’s representative body. While the overriding factor in this is lucrative tax breaks for developers offered by countries such as Canada, one cannot underestimate calls for the censorship of video games due to perceived ‘violence’ or ‘distaste’ as a factor in turning off the desirability of the UK to these companies.
The Labour and Conservative Conferences will be awash with talk of the right ‘Plan for Growth’. The economic and employment factors of the technology and internet industry cannot be ignored in any of those plans.