Can Britain break US domination of the Web?

With Bill Gates announcing that he is to leave his job at Microsoft, there will soon be an opening for the title of the world’s leading technology entrepreneur. One person who isn’t expecting any Briton to gain that honour, however, is shadow chancellor George Osborne.

During a tour of Silicon Valley last week, Osborne (pictured) asked: “Why is there no British Yahoo! or Google? Why is the UK not home to fast-growing community websites such as MySpace?” Osborne was visiting internet companies like Yahoo! and Mozilla and the venture capitalists that back them. He is worried that “not one of the leading internet companies is British”.

Politicians seem adept at refusing to let inconvenient facts get in the way of a good soundbite, and Osborne appears no exception. There are indeed some major UK technology success stories online, albeit not on the scale of Google or MySpace.

The UK’s online vacuum

One of them is Tesco.com – the biggest online grocery operation in the world. Another is The Guardian, one of the largest, most innovative newspapers on the Web. Yet neither are start-ups, and there is no doubt that the first generation of blockbuster internet companies has been dominated by the US.

Simon Waldman, director of digital publishing at The Guardian, gives two reasons why. First, the BBC grabs a lot of the UK’s creative talent and is a place where “the idea of wealth creation is an alien concept”. The second reason is that the big portals that gobble up most of the advertising money are repatriating it to the West Coast in the US, rather than keeping it in the UK.

“The combined pressures of the BBC hoovering up people, and Google and Yahoo! hoovering up a lot of the cash drains innovation out of the market,” Waldman adds.

Recipe for success?

Osborne has a wish list he says would help swing fortunes back in favour of the UK. This includes lower taxes, better links between universities and business, stronger protection for intell- ectual property rights and improvements to the venture capital regime.

Lower taxation has certainly helped Ireland turn itself into the world’s biggest exporter of software. And Stanford University – the birthplace of Google and Yahoo! – has highlighted the potential of mixing invention with entrepreneurialism.

But venture capital is certainly not an issue. The UK venture capital industry is the biggest in Europe, and US investors have been more than happy to back local companies like gambling firm Betfair and Zopa, the latest vehicle for Richard Duvall, who created online bank Egg. “There’s plenty of venture capital ready and willing to be invested. What it needs is the right opportunities,” says a spokesman for the British Venture Capital Association. He adds: “The UK is as entrepreneurial as anywhere in the world.”

Doug Richards, a US technology guru and former panelist on BBC show Dragons’ Den, says the problem is not just about universities or taxes – he thinks that the broadband available in most of the UK is still too slow, and that hinders progress.

But while Osborne says: “I have seen the future and, at present, Britain is not part of it”, Richards is more optimistic. “Osborne’s comments are a bit naive,” he says. “We are at the beginning of the internet revolution, not the end. Who will be the great internet companies has yet to be decided.”

Dominic Dudley

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