UK must catch next tech wave, says HAMISH MCRAE

Big Tech withdraws. Hardly a day goes by without an announcement of further job losses on the west coast of America. On Friday, it was Google that cut about 12,000 jobs. A few days earlier, Microsoft said it would scrap 10,000 messages this year. Just before that, Amazon announced it would lay off 18,000.

Meta, Facebook’s parent company, cuts 11,000. Twitter, rather a special case after the acquisition by Elon Musk, has lost 3,700. The list goes on. Indeed, the one major company that didn’t announce layoffs was the most valuable of them all: Apple. However, it has paused hiring and markets are awaiting an announcement on headcount, perhaps when it next reports earnings, on Feb. 2.

As investors around the world, including here in the UK, are sadly aware, their share prices have fallen. They have stabilized somewhat in recent weeks, but are down massively from a year ago. Even Apple is down 18 percent, while Alphabet (Google’s parent company) is down 28 percent and Meta is down 56 percent. It could be argued that the values ​​at the end of 2021 were hugely inflated and at least investors have not been largely wiped out.

But the truth is that a lot of people lost money last year and now a lot of people – including in the UK and Ireland – are losing their jobs.

So what now? I think the best starting point is to recognize that Big Tech, taken as a whole, is moving from a big bang to a steady state. The disruption caused by companies like Uber and Airbnb has happened, and while both companies (and their competitors) may still be growing a bit, they now need to find ways to make more profit, as any normal company should.

Social media may have reached its peak, and it is possible that it will decline. And there’s always the possibility of another disruptive technology emerging that hurts the business of what will become legacy players. For example, can artificial intelligence undermine the primacy of search engines? Big threat to Google if that was the case.

The markets understand all this and rearrange the companies accordingly. Is this downgrading over? Intuitively I don’t think so. There will be another floor but I don’t think we’re there yet. But we know that advancements in technology, especially AI, will race forward and the really interesting question is where the winning applications might be.

I suspect that they will not be so much concerned with creating new services, but with making existing services cheaper and better. It’s impossible to see the details, but we can glimpse the direction of travel.

Think about something we really need: maybe cheaper personal pensions. If anyone could figure out a way to make those without the jargon and fees, they’d be doing both a social service and a financial service. And if they succeeded in making internet banking more secure and accessible, that might compensate a bit for all those closed branches.

Or look at medical diagnostics. Enormous progress is being made, but there are also enormous efficiency gains to be made. Or in public sector services such as the tax authorities, AI could certainly improve the quality and speed of the response.

All this is important from a British perspective. We missed the latest tech boom. America shoveled the pool. But now we’re doing well in tech startups, and there will be opportunities for the city to support the next generation of ventures. That requires both self-confidence and money. I hope we will have both.

The Lasting Legacy of Sir Alan Budd

A sad note. Sir Alan Budd, the economist known, among other things, as the founding chairman of the Office for Budget Responsibility (OBR), died just over a week ago. That was his last major public office, a hugely important one as he established his true independence as a watchdog over our public finances. We were reminded of that importance last September, when then-Chancellor Kwasi Kwarteng launched his ill-fated budget without oversight from the OBR.

If Alan Budd was hugely instrumental in restoring fiscal discipline after the excesses of Gordon Brown as Chancellor, he was also a major influence in restoring monetary discipline after the inflationary catastrophe of the 1970s.

He then became a professor of economics at the London Business School, before leaving in 1991 to become Chief Economic Adviser to the Treasury. There he helped create the current system of inflation targets, with an independent Bank of England setting interest rates. He was one of the founders of the Monetary Policy Committee.

Governments always need wise advice. And the fact that the British government now operates with reasonable financial discipline is largely due to his wise advice.