As UK government turns to tech, investors threaten to ‘pull capital’ on M&A regulator’s overbreadth – TechCrunch

UK competition regulators are scaring tech investors in the country with an implicit threat to crack down on startup mergers and acquisitions, according to a new industry survey.

While the British Chancellor of the Exchequer engaged with the tech industry today at a Chatham House style event, the Coalition for a Digital Economy (Coadec) think tank has published a survey which found that early stage investors are ready to withdraw capital on the prospect of the new Digital Markets Unit (DMU) of the Competition and Markets Authority (CMA) becoming a ‘regulator of the whole economy by accident ”. Investors are concerned after the CMA recommended that the DMU be given “expanded powers” over its investigations into merger and acquisition transactions.

Controversy has erupted around the DMU, ​​as the prospect of blocking acquisitions of tech startups – especially by US companies, sometimes for national security reasons – has gradually increased.

In the Coadec survey, half of investors said they would significantly reduce the amount they would invest in UK startups if exit capacity was restricted, and 22.5% said they would stop investing altogether. in British startups in a stricter regulatory environment.

Additionally, 60% of investors surveyed said they believe UK regulators only have a ‘basic understanding’ of the startup market, and 22.2% believe regulators have no understanding of the market at all. tech startups.

Coadec said his conservative estimates showed the UK government’s DMU proposals could create a £ 2.2bn cut in UK inward venture capital, potentially reducing UK economic growth by £ 770m. pound sterling.

Commenting on the report, Dom Hallas, Executive Director of Coadec, said: “Startups thrive in competitive markets. But nurturing an ecosystem means knowing where to intervene and when not to. The data shows that not only is there a risk that the current proposals will miss some bad behavior in some areas like B2B markets while creating unnecessary barriers in others like mergers and acquisitions. Just as crucially, there is frankly not much trust in the regulators who offer them either. “

The survey results emerged just as Chancellor Rishi Sunak today called the Treasury Connect conference in London which brought together some of the CEOs of the UK’s biggest tech companies and VCs in a “process of ‘listening’ designed to reach the industry.

However, during a press conference after the event, Sunak pushed back the results of the investigation, citing research by Professor Jason Furman, chairman of the Digital Competition Panel, who found that “not a only acquisition “had not been blocked by the DMU. , and there are no “false positives” in the decision making to date. Sunak said that “the system is looking at this in order to strike the right balance.”

In addition, a Treasury statement released today said more than a fifth of people in the UK’s largest cities are now employed in the tech sector, which has also invested $ 11.2 billion. pounds sterling last year, setting a new investment record, he claimed.

Sunak also said the Future Fund, which has supported UK-based tech companies with convertible loans during the pandemic, has handed UK taxpayers stakes in more than 150 high-growth companies.

These include Vaccitech PLC, which co-invented the COVID-19 vaccine with the University of Oxford and is better known as the AstraZeneca vaccine which has gone to 170 countries around the world. The Future fund has also invested in Century Tech, an EdTEch startup that uses AI to personalize children’s learning.

The UK government’s £ 375million Future Fund: Breakthrough initiative continued from July this year, targeting high growth, R&D intensive companies.

Coadec’s survey also found that 70% of investors believe UK regulators “only think about big incumbents” when designing competition rules, rather than startups or future innovation.

However, the survey found that London was still rated as high as California as an attractive destination for startups and investors.

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