The British tech sector is growing significantly faster than the rest of the economy and makes a hundred billion pound plus contribution to the economy each year.
London in particular has established itself as one of the world’s leading FinTech hubs – figures released in June by TechNation and Dealroom indicate that one unicorn (a start-up valued at over $1billion) has been created every month for the past year in London. London has 45 unicorn firms out of 72 based in Britain, making the UK the third most successful for unicorns in the world behind the USA and China. Eighteen of these are FinTech companies. Perhaps surprisingly London has more unicorns than San Francisco.
The Government wants to ensure the UK remains a very attractive place to build a global tech business. In one of the last acts of her premiership, in June Theresa May highlighted that the UK is one of the best places in the world to start and grow a tech business. She also announced a number of initiatives as well as new investments worth more than £1.2 billion.
Sustaining growth will be a challenge, as will ensuring the benefits of tech are spread across the UK and not just confined to London and the South East. UK Government’s support for the sector is arguably modest compared to a number of other leading industrialised nations.
While the UK is excellent at science and technology research and early stage innovation, often what we invent is exploited commercially elsewhere in the world. Post-Brexit we need an environment which continues to attract the best global talent, and we need to ensure we train our own technologists of the future. The 2,500 places for AI and data conversion courses announced by the Government in June is to be welcomed.
There’s an ongoing debate among lawyers around whether the legal framework underpinning two technologies with great potential –- blockchain and smart contracts – is clear and fit for purpose. A number of countries have decided to take the lead in legislating in these areas and there is a fear in some quarters that the UK may get left behind.
In some ways this mirrors the legal debate of the late 1990s and early 2000s, when there was a concern that electronic signatures and contracts would be unenforceable, stifling e-commerce as a result. Those fears proved groundless to a large extent; the law of England and Wales is remarkably flexible and in this area largely judge made. However laws were still introduced to clarify certain areas, largely as a result of EU legal developments.
Some very senior lawyers and judges have raised concerns that the lack of a clear legal framework around blockchain and smart contracts will dent investor confidence. As a result there was a recent Government-supported consultation by the UK Jurisdiction Taskforce (UKJT) about ensuring the law in England and Wales provides the legal certainty needed to support cutting-edge technologies such as blockchain and smart contracts, where the code IS the contract.
The consultation closed on 21 June and will explore whether the law needs revision or whether it is already fit for purpose. The UKJT will report in late summer of this year.
Basic questions are being asked about what we mean by “property” when we talk about blockchain and cryptoassets, and about whether smart contracts can be legally binding and enforceable. It is important to note that the legal review here is at a very basic and fundamental level – it will not lead to laws regulating cryptocurrencies which use blockchain, or to regulation of initial coin offerings (ICOs), for example. But the outcome of the review will inform future regulation of this area.
One challenge will be for the lawyers involved to understand the technology so that any analysis is both legally correct as well as properly reflecting the underlying technologies. This is a fast-moving area so there is a risk that a snapshot of the law in August 2019 could quickly become out of date.
One factor behind tech’s rise and the growth of unicorns is that many successful tech innovators have, to paraphrase Mark Zuckerberg of Facebook, “moved fast and broken things.” The law in a range of areas – including data privacy, consumer law and competition law – has been struggling to catch up. But there is a growing realisation amongst tech companies that regulation is required and in the EU at least, lawmakers seem keen to oblige.
The hope is that the current legal review of smart contracts and blockchain will assist not hinder the already rapid growth and deployment of such technology in the UK. The USA has traditionally taken a light touch approach to tech regulation, and its companies have become dominant players globally – some see these two factors as intertwined. How to legislate and regulate without curtailing innovation is quite a challenge. Watch this space.