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The vital role of tech SMEs in boosting UK productivity

Following its recent partnership with the Business Growth Fund to support UK SMEs pioneering the hottest new technologies, Kx’s Kevin McGivern talks the importance of these young companies in underpinning UK productivity.
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(1) Given the abundant interest in this area, what is the funding landscape currently like for tech SMEs?

Last year, the Business Growth Fund provided £387m in funding to UK SMEs alone, but burgeoning tech SMEs still need improved access to the resources that will help them to grow into large, sustainable businesses.

The potential for increasing productivity rates across the UK if these technologies can be harnessed successfully is large.

Disrupting existing business models and enabling companies to work smarter will act as the catalyst for broader economic transformation. The lack of technology companies in the FTSE 100 is a clear indication that a change in approach may be necessary.

Interest in tech SMEs is growing fast and we are seeing funding options improving. There is a need for more investors providing long-term, patient capital on terms that incentivise and reward growth. I’d also like to see a government procurement programme (ideally worth over £250bn annually) that supports innovative technologies.

(2) Is the government doing enough to support young companies alongside established players?

Initiatives like the government’s Industrial Strategy are steps in the right direction for supporting emerging tech SMEs, but we still need more input from established firms and a greater willingness from them to experiment and trial new technologies.

There also needs to be more advocates for increased collaboration between traditional players and new entrants, which would open up access to further resources and expertise for SMEs.

The government is right; the only basis on which we can produce an enduring programme of action and arrive at a more innovative economy, is with the full involvement of innovators, investors, job creators, workers and consumers in the UK.

(3) Why is now such an important time to invest in tech SMEs?

The choices we make today around innovation and investment will determine our ability to deliver a more productive economy, both now and in the future.

As a country, we have the advantage of a natural ecosystem in which, by virtue of our size, innovations can be expanded into different regions and sectors with relative immediacy.

However, to capitalise on this and ensure that more businesses grow from ‘fledgling firms to vigorous competitors’ we need to keep partnering, investing and supporting. On average, the UK is still one day a week less productive than France, Germany and the US.

Whilst Britain is good at spotting new technologies, we are falling short in our ability to turn these discoveries into businesses that last. We need to get the pieces in place now to create a functioning, commercially sustainable and well capitalised system that can deliver a more innovative and competitive economy – and hopefully claw back that, so far, elusive, extra day.

(4) What areas of disruptive technology application are you most excited about?

Developments in the areas of AI, block chain, robotics and machine learning are really taking off at the moment, and we’re already seeing them achieve tangible outcomes in the context of productivity.

Vanson Bourne research has showed that businesses who have taken the leap and adopted AI technologies expect their revenues to increase by 39 per cent by 2020, with costs dropping by as much as 37 per cent.

One sector where we’re seeing a great deal of progress is in financial services. A shift to machine learning for some European banks has already led to capital expenditure declining by as much as 20 per cent.

We’re also excited about the potential for growth in other areas such as life sciences. Last summer, the Earlham Institute in Norwich began using Kx technology to study crop growth patterns, developing a completely new approach to analytical processing in bioscience. This is a sector we’re really interested in exploring more.

Our recent collaboration agreement with Airbus Defence and Space is an example of two established firms working together to develop an innovative approach for large-scale processing of geospatial data.

We anticipate that this will enable large corporates, research bodies and startups to exploit this ground-breaking technology.

(5) How is Kx helping businesses to harness their ideas and technology?

Through our technology fund, entrepreneurs seeking to build disruptive technology and bring it to market quickly have the opportunity to access the Kx platform, business advice and funds of up to £10m.

Our relationships with VC firms, private investors and accelerators means that we’re well placed to get tech SMEs access to the right funding for them, accompanied by logistical support, allowing founders to concentrate more fully on building their world-class technology.

Recently, a fintech firm chose to work with Kx and distributed ledger technology to cut post-trade cost and risk, a move which will revolutionise the FX market. In years to come, we hope to say that we’ve played an integral role in developing the technology that has revolutionised how businesses work, impacting the UK economy for the better.

More on the Kx and BGF funding scheme.

Image: Shutterstock

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About Author

Zen Terrelonge

Zen Terrelonge is the deputy editor of Real Business, specialising in media, innovation, technology and the digital sector. A media professional with eight years worth of experience he has worked for both startup and established publications.

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