The fight to save Britain's hi-tech industries

The Johnson government was in chaos, but in the midst of resignations and leadership bids it still managed to give its blessing to the takeover by an American venture capital company of one of Britain’s most important technology companies – Ultra Electronics.

Ultra has been in business for over a century (it used to be based in the Harrow Road, in west London), and most notably provides sonar technology for Britain’s Trident nuclear submarines.

It has now been bought by Cobham, a long-established British firm that itself is owned by Eaton Corporation, a US company. Cobham has a history in flight and especially refuelling technologies going back to 1934 but which has branched out. Just three years ago Cobham was sold to an American venture capital company, Advent, which promptly sold it on to Eaton. 

Consultation on the takeover of Ultra was launched on 23 June 2022, and closed just six working days later, on Sunday 3 July. 

The government insisted there would be no decision until the consultation had ended – and then only “after representations had been carefully considered”. That decision was announced on Wednesday 6 July – just two working days after the end of the consultation. When it comes to the national interest, that’s what counts as careful consideration, apparently.

Feeding frenzy

Last year the union Unite called on the government to put a stop to what it called a “feeding frenzy” by US investors on British technology companies that put at risk not only jobs but also the national interest. Some hope. The government responded to the frenzy by pouring blood into the waters. 

Boris Johnson set out the ground rules while visiting British troops in Estonia in 2019: “I think it’s very important that we should have an open and dynamic market economy,” he said. He was telling the world’s profiteers to come on in and take what they want.

‘Johnson was telling the world’s profiteers to come on in and take what they want…’

Unite – which has yet to issue a statement on the Ultra takeover approval – took a different view. Steve Turner, its assistant general secretary, spoke of a feeding frenzy “with good UK companies on the menu” but with “longer-term stability and investment at risk”.

Is the expression “feeding frenzy” an exaggeration? Hardly. A week before the Ultra announcement, the government said it was “minded” to accept the takeover of Meggit by the US motion and control technology company Parker Hannifin. 

Meggit’s brakes are in 73,000 aircraft worldwide. It also supplies ammunition systems for jet fighters and land-based artillery. It’s being sold for £6.3 billion. Clearly, British technology is up for grabs. That matters for jobs and skills, but it also matters for technology sovereignty.

What is technology sovereignty? Technology entrepreneur Hermann Hauser, writing to the House of Commons Foreign Affairs Committee in 2020, called it “the defining issue of the decade”. 

“Countries used to perceive sovereignty mainly in terms of defending its borders,” he said. “Given the importance of our IT infrastructure which is correctly compared with our water and electricity infrastructure, it [technology sovereignty] clearly relates to national security as well as the basic functioning of our society.”

Unite raised precisely this point in 2020 when it said that the government had to invest in the British space programme or lose skills and put our security at risk. 

“A sovereign satellite system will not only defend the UK it will defend the economy post-pandemic,” said Rhys McCarthy, the union’s national aerospace officer. That’s because satellites not only tell cars (and jet fighters and warships, for that matter) their location, they also underpin all communications.

“Sovereign” in the satellite world means independent of the US, Russia and China, and also of the EU’s Galileo system (the EU has already locked Britain out of this). And a sovereign satellite system is precisely what the government won’t commit to. 

Britain-based Inmarsat announced in June that it had developed a highly accurate satellite system (rivalling that sought by the EU’s Galileo) that can give a position to an accuracy of a few centimetres, rather than the two metres of GPS. 

That shows what could be done with sufficient government support, but it’s not yet a sovereign system since it currently works by augmenting the basic GPS signal, and GPS, the Global Positioning System, is owned and operated by the US Department of Defense.

Inmarsat is a British company. At least it is for the moment. It’s in the process of being taken over – for £5.4 billion – by its US rival, Viasat. That’s not technology sovereignty, it’s technology serfdom.

And now the government – or what there was of one in what was effectively an interregnum between Boris Johnson and his successor – has given its approval for the takeover of another satellite company, OneWeb, this time by a French rival, Eutelsat. What’s particularly galling about this is that OneWeb was bailed out by the Treasury as recently as 2020, to the tune of £400 million.

No country is safe from blackmail by another state if it cannot secure its infrastructure. That goes particularly for communications, and also for energy: paying a fortune to China or France to build nuclear power stations is the opposite of technology sovereignty. 

Crown jewel

Devastating as all these sales are, they are dwarfed by the threat to what the Unite union’s national IT officer, Louisa Bull, called – without exaggeration – “the UK tech sector’s crown jewel”: Arm.

Arm’s name reflects its origin in the Acorn Risc Machine, a computer spun out of the 1980s BBC computer project. It is probably the most important British company most people have never heard of.

Arm was founded by a group of people including Hermann Hauser, a major shareholder until six years ago. In 2016 the company, whose chips are crucial to new developments in electronics and communications, was bought by a Japanese investment and banking company called SoftBank, for £24.3 billion.

Hauser opposed the deal, calling it “a sad day for me and technology in Britain”. The government was more than relaxed about handing over a cornerstone of technology sovereignty. Chancellor Philip Hammond said it showed that Britain had “lost none of its allure to international investors”. A spokeswoman for Theresa May called it a “vote of confidence in Britain”.

So the deal went through, and sure enough, eventually, like most booming investment banks, SoftBank got into financial trouble. And it then tried to sell Arm to the US video chip maker Nvidia. It was this proposed sale that prompted Hauser to write to MPs about technological sovereignty. Separately, he described it as a “disaster”.

Consider this: technologies developed by Arm – in particular its new V9 chip architecture – will be at the centre of emerging artificial intelligence, quantum computing, 5G and smart car technologies, as well as the Internet of Things. 

These technologies herald a world where big data centres, which use vast amounts of energy and place a huge demand on the Internet, are replaced by billions of tiny chips in local devices doing their own machine learning and communicating with other chips as needed.

Central

Arm is central to this and more. In the year to April 2022, 29.2 billion chips based on Arm architecture were shipped – used in a quarter of all cars made, almost two-thirds of “Internet of Things” devices and, almost unbelievably, 95 per cent of all mobile phones produced.

One consequence of a sale to Nvidia, said Hauser, would be that “The decision on whether hundreds of UK companies that use Arm processors can export their products anywhere in the world will be made in the White House, not in Downing Street.” That’s what happens when you lose technology sovereignty.

The sale of Arm to Nvidia was only stopped by the action of the US government, when in December 202 its consumer agency, the Federal Trade Commission, filed a lawsuit to block the merger. In February 2022, Nvidia abandoned the deal. For the time being, we have been saved from the kind of cobbled-together approval studded with so-called “guarantees” – all useless in the long run – which we saw with Ultra Electronics.

Planning

“Healthcare threats are just as serious as national security and defence and should be treated with at least the same importance,” said Kate Bingham speaking in Oxford last November. Bingham headed up the Vaccine Task Force that led to Britain being the first Western nation to start Covid vaccinations.

She went further, saying that the most likely threat to Britain is another pandemic – and that the government was neglecting it. Britain, she said, would need to continue to invest in the capability to design the next generation of vaccines and antivirals.

That, too, is technology sovereignty. Yet the government’s actions in healthcare tech have been particularly shameful.

In her Oxford talk Bingham described the careful planning, right through the manufacturing chain, to ensure that Britain could make the vaccines it needed. But even by November 2021 the government had different priorities. It began a series of disastrous steps that asserted not the sovereignty of the nation but the sovereignty of private capital, of the free market.

Bad faith

First, against Bingham’s clear advice, it drowned in a sea of red tape a proposal to bring to Britain virus-like peptide vaccines – a process that could produce effective vaccines at unparalleled speed. Then in September 2021 it dumped Valneva, a vaccine company it had encouraged to invest in a plant in Livingstone, Scotland, an act of staggering bad faith that handed a gift to the SNP, which promptly offered to step in with devolved support.

As if that weren’t enough, the government then sold its stake in the much-trumped Vaccine Manufacturing and Innovation Centre at Harwell, Oxford. It’s now owned by an American company, Catalent. (See Workers, July August.) 

‘The government is abandoning sovereignty in one area after another…’

For 15 months or so of the pandemic the government had resorted to the planned economy to maintain sovereignty and protect the people, and, embarrassingly for it, the planned economy had worked. It was time to stop this flirtation with planned self-reliance.

When the Arm sale was announced in 2020 Unite’s Louisa Bull, commented, “The fact is that without a cohesive industrial strategy from the government, and one that supports and invests in innovation and manufacturing across the UK tech sector, we will be overtaken by other nations.”

She added that an industrial strategy must include keeping Arm and steering Britain’s public procurement budget “towards supporting UK manufacturing and the jobs that come with it.”  

Yet everywhere you look, the government is abandoning Britain’s sovereignty in one area of technology after another. And don’t look to the Labour Party for salvation: it finds terms like British sovereignty plain embarrassing, as do some unions. 

Technology sovereignty does not mean that every single technology we use needs to originate in Britain. That’s clearly impractical. But it does mean that we cannot be reliant on one or two foreign governments for the technologies we use.

Hauser put it simply in his letter to the House of Commons Foreign Affairs Committee, posing three questions: Do we have the technology here? If not, do we have several suppliers from different stable reliable countries? If still not, and the technology is only licensed by one or a handful of companies, do we have unfettered guaranteed long-term access – for at least five years?

If Britain can’t say yes to at least one of these questions, he said, then we can be blackmailed and coerced by other countries – in much the same way reliance on imported natural gas allows other governments to turn the screws on us.