Why it makes sense for Uber to redomicile to Britain
Britain’s largest bank, HSBC, is thinking about upping sticks and moving back to Hong Kong. If this happens, it will undoubtedly be a monumental loss to the British economy, but also very much a survivable one as long as the current balance – under which more businesses want to come to Britain than to leave – is maintained. Regrettably, there is reason to worry that it won’t be.
But here’s the good news first. Fortunately, we now have an unashamedly pro-business government, together with a Treasury and business department team which is very much committed to keeping the UK as open and attractive as possible, both to established and start-up companies.
The largely futile “industrial policy” championed by Vince Cable and other former business secretaries, under which certain industries which Britain is supposedly good at were prioritised over others, is to be quietly buried and replaced with a strongly deregulatory agenda which aims simply to remove barriers to entry. This must surely be the right approach.
Yet there is one area of activity where Britain perhaps does need to be rolling out the red carpet – the so-called shared and circular economies. The two things are slightly different – one is about shared use of the same resource, the other is in essence about recycling, so that product components can be repeatedly re-used. Yet they both amount to essentially the same thing, which is to make any given amount of resource work harder and more productively. As such they perhaps provide an at least partial answer to one of Britain’s most entrenched economic weaknesses – poor levels of productivity.
So far, Britain’s approach to these industries has been relatively enlightened. Unlike some European countries, we’ve welcomed the pioneers of the shared economy such as Uber and Airbnb. Vested interest complaint has been resisted.
But we can go further. Last week it emerged that Uber is under attack even in its home state of California, where one of its drivers has successfully managed to persuade the courts that she is technically an “employee” of the company, rather than a self employed contract worker. Like Airbnb, Uber is part of a new breed of “virtual” companies which employ little in the way of either capital or labour, making them quite unlike any traditional corporation.
If hundreds of thousands of drivers across the world are all of sudden made employees it would likely render the whole business model unviable, depriving users and providers of a truly transformational way of delivering a service. And if even California is becoming hostile to the start-ups it gave birth to, there is a big opportunity for Britain in providing a more accommodating, alternative home.
The UK might be carelessly about to lose its largest bank, but with the right policies, it can become a global leader in the shared economy and the technology that makes it possible. Where finance left off, technology can take over.
There is, however, one rather big fly in the ointment, and it’s that most intractable of problems – immigration. At one and the same time, the Government’s immigration policy manages to be both completely ineffective, in that it fails to restrict the numbers to anywhere near the prescribed limits, and economically damaging, depriving businesses of the skills they need to expand.
Even by the standards of public policy, this is an outstanding result. Normally you might expect it to be one or the other – there are always trade offs – but not both.
It’s only June, and already the entire year’s allocation for so-called Tier 2 visas for skilled non EU workers has been used up, creating backlogs and refusals throughout the economy. Lower paid applicants, whether they be nurses or teachers, are the first to be squeezed, but even relatively high earners are now being hit.
David Cameron, the prime minister, has moreover flagged some further tightening of the rules, saying that it is too easy for firms to hire foreign workers, rather than train British ones. The immigration minister James Brokenshire has similarly said that he wants companies to recruit and train British workers first. Others highlight the apparent effect on pay, claiming that lower paid foreign workers depress pay rates in the round.
This sort of populist thinking may have some political appeal, but it is also economically illiterate. Even if based in Turkey, the skilled worker will compete with his UK counterpart. Where the skill is located matters increasingly little in terms of the pay it commands. What does matter for the health of the economy, on the other hand, is having as much of the available pool of skilled labour within your borders as possible, so that these workers can earn and spend, and thereby create demand and further employment. A successful economy attracts these skills, which is why rates of net immigration to the UK are high right now and why the Tier 2 quotas have been exhausted.
Belatedly, the Home Secretary has finally moved to make it easier for high spending Chinese tourists and business people to come to Britain. But there is still a way to go before the UK becomes an economy which is truly “open for business”, or the best place in the world for companies like Uber to want to be based.
[“source – telegraph.co.uk”]