Categories: ProjectsPublic Sector

Does £24bn ARM Sale End UK’s Last Hope Of Creating A Tech Giant?

Government ministers past and present have declared the £24 billion sale of ARM to Japanese giant Softbank as evidence of the UK tech sector’s success and that Brexit isn’t the doomsday scenario we all feared.

But should we really greet the takeover with such fanfare?

“This £24 billion investment would be the largest ever from Asia into the UK,” declared Philip Hammond, the newly installed Chancellor.

“It would guarantee to double the number of jobs in ARM in the UK over the next five years and turn this great British company into a global phenomenon. Just three weeks after the referendum decision, it shows that Britain has lost none of its allure to international investors.

Government joy

“Britain is open for business – and open to foreign investment. Softbank’s decision remains one of the most attractive destinations globally for investors to create jobs and wealth. And as ARM’s founders will testify, this is the greatest place in the world to start and grow a technology business.”

He was not alone.

“Amazing news about ARM takeover, one of our truly global tech manufacturing companies,” said the recently departed Digital Economy Minister Ed Vaizey, ignoring the fact ARM doesn’t actually manufacture chips, it designs and licenses them to third parties.

“The proposed investment of £24bn in ARM by SoftBank highlights Britain’s capability to grow & build world-beating Tech companies,” added his successor Matthew Hancock on Twitter.

British tech

It is true Softbank will keep ARM’s headquarters in Cambridge and double its UK workforce from just under 1,500 but the government’s apparent joy at securing such high profile investment in the weeks following the EU referendum doesn’t conceal the fact the UK has just lost its best chance of creating a true tech giant.

For all Huawei and Cisco’s investments in the UK, the country has never produced a company to rival IBM, HP or Intel. If you have a smartphone, it’s almost certain an ARM-designed chip powers it. As IT becomes increasingly mobile, that makes ARM incredibly influential and it’s now in foreign hands.

Autonomy was sold in a calamitous £11 billion deal to HP five years ago and Imagination Technologies share price has risen by 12 percent on news of the ARM deal amid speculation it could be next. Other than BT and Vodafone, both of which could be targets for foreign telecom firms, there are few British-owned tech firms of significance.

The UK might be great at building up technology firms, but it’s also excellent at selling them too. Without home-grown capital to fund expansion, companies like ARM have no choice but to look abroad and the weakening pound could have encouraged Softbank to pounce.

Loading ...

Government ambitions

‘It’s likely that ARM Holdings has been a takeover target for some time, but the recent depreciation in the pound following the EU referendum may have been the tipping point which has encouraged Softbank to make its move,” said auditing firm RSM.

The government has been so keen to promote the tech sector – especially Tech City – but far from being nationalistic, the inability to keep the country’s brightest prospects British-owned undermines that ambition. Not all takeovers will see British firms stay in the UK and new jobs created.

One area the UK has led the way is fintech, supported by the banking industry that has for so long been a pillar of the economy, and it could be that the UK giant emerges there.

But with uncertainty surrounding London’s position as a financial centre following the referendum, this could have a knock on effect. Berlin is already eyeing up British startups, especially those in fintech.

There is also the possibility that the takeover will see funds trickle down into other startups in the Cambridge area and beyond. Many ARM investors will be British and could choose to reinvest in technology, but even if they do, it could take years, if not decades for a giant to emerge.

Softbank’s decision to keep ARM in Cambridge and double its UK workforce should be welcomed, but whether we should be celebrating yet another British technology firm, and in this case our biggest, falling into foreign ownership remains to be seen.

Quiz: What do you know about London’s tech scene?

Steve McCaskill

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

Recent Posts

Ericsson To Cut 1,200 Jobs in Sweden Amid ‘Challenging’ Market

Swedish telecoms giant Ericsson blamed “challenging mobile networks market” and “further volume contraction” for job…

8 hours ago

FTX’s Sam Bankman-Fried Sentenced To 25 Years In Prison For $8bn Fraud

Dramatic downfall. Sam Bankman-Fried sentenced to 25 years in prison for masterminding $8bn fraud that…

8 hours ago

Elon Musk Orders FSD Demo For Every Tesla US Sale

Fallout avoidance? Tesla buyers in the US must be shown how to use the FSD…

9 hours ago

Amazon Pumps Another $2.75 Billion Into Anthropic

Amazon completes its $4bn investment into AI firm Anthropic, after providing an additional $2.75bn in…

11 hours ago

The Sustainability of AI

While AI promises unparalleled efficiency, productivity, and innovation, questions regarding its environmental impact loom large.…

14 hours ago

Trump’s Truth Social Makes Successful Market Debut

Shares in Donald Trump’s social media company rose about 16 percent after first day of…

14 hours ago