Steve Hare, the boss of one of Britain’s largest technology companies, takes a deep breath as he prepares to answer one of the great conundrums about his sector: how can the UK create its first trillion dollar tech giant?
The chief executive of Sage, the FTSE100 business software company, responds to the bold plan being dreamt up behind the scenes by Dominic Cummings, the Prime Minister’s chief adviser, to create Britain’s own tech behemoth with a question of his own.
‘Does it need to be a trillion dollars?’ asks Hare in his first newspaper profile interview since being promoted to the top job two years ago. It’s a fair question. Sage is worth around £8billion and is the UK’s largest listed technology company, worth a similar amount to another FTSE100 software firm Aveva.
And, of course, there’s Arm, the Cambridge-based computer chip designer which is being sold to America’s Nvidia for $40billion (£31billion) and is probably the UK’s most valuable tech asset.
Hare, 59, says: ‘I’d like to see more providers of technology and scale is important. But does it need to be a trillion dollars? You just need scale. Our market cap is about £7billion or £8billion. It would be good to have companies that were up at £50billion or £100billion, but I think the way you do that is you make it attractive to invest. That’s how technology companies are built. They’re built through investment. We spend 17 or 18 per cent of our revenue on R&D [research and development]. These are intensive investments.’
He says attractive tax breaks such as R&D tax credits have worked well in recent years, allowing tech companies to plough money in and reap the rewards in the years to come.
‘You can use the tax system to help incentivise longer-term investments because some of these investments do take a long time to pay off,’ Hare argues.
There are other things too though that need fixing before Britain can think about building a £50billion company, let alone a trillion dollar one, he says. The main problem is there is only so much tech brainpower to go around.
‘We need to produce more engineering graduates, more technical graduates. There aren’t enough technically qualified graduates. We have a lot of engineers in the UK but it’s hard work finding that talent,’ he explains. ‘Secondly, if there isn’t enough talent you need to make frictionless movement across borders. Regardless of your views on immigration, we need to be able to move talent freely across borders to move them to the place they need to be.
‘So to increase investment in the UK this is all about people – you need the talent. If you haven’t got the talent you can’t invest.’
Should the Government block the takeover of Arm, seen as a key British tech asset because its chips are used in most smartphones, to help create the trillion dollar company as some have suggested?
‘I’m not a big fan of government intervention in these types of things unless it really is a question of national interest,’ he says with a shake of the head.
Hare is talking over video from his home in his native Yorkshire as the nation continues to grapple with fresh coronavirus restrictions. He says Sage has managed to work from home and will continue to do so, but is experimenting with a phased return to work at its office in Poland.
His first chief executive role has proven to be a baptism of fire. Hare is a technology veteran, having worked his way up through Marconi, the telecoms company, where he became chief financial officer before taking on the same role at two other British tech companies Spectris and Invensys.
There was also a stint at private equity outfit Apax Partners before he moved to Sage. He got the top job in 2018 after the company sacked former chief executive Stephen Kelly.
Though Hare wants the Government to lay the groundwork now for the future of the UK tech sector, he is by no means oblivious to the turmoil going on at businesses up and down the country, with so many reeling from the pandemic and in need of urgent support. Many of them are Sage customers and use its software to manage their accounts or finances.
And Hare says the Government must back small and medium-sized businesses, which he says will be crucial to the recovery.
‘After the financial crisis, over 70 per cent of the jobs were created by SMEs. We need an SME-led recovery. They just need confidence to invest through what will be a tricky time,’ he says.
Hare thinks Chancellor Rishi Sunak’s plans to keep the economy running were a ‘missed opportunity’ and says the Government should be encouraging business to embrace technology now or face more problems down the line as firms struggle to adapt.
‘Where government can help is we need to give small and medium business owners the confidence to invest through what is undoubtedly an uncertain period. You can be optimistic about the long term but you need to be given the confidence to invest in the short term,’ he says.
He also wants businesses to think about expanding globally and urges the Government to make it ‘as easy and frictionless as possible’.
‘For the UK to be successful from an economic perspective we need to be a player on the world stage and we need to invest for the long term. Anything that governments can do to help businesses take that longer-term view can only be a good thing,’ he says.
‘Obviously there are short-term measures which are very important. But I don’t run Sage for the next quarter – I run Sage looking at where we want to be in 2025 or 2030 and what foundations do I need to lay now to ensure in five years’ time we’re flourishing.
‘Because the decisions you make now are critical from a technology perspective.’
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