04 May 2016

Decisions Deferred. The secondary consequences of the EU referendum date choice

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Politics Insight


To describe the EU referendum as dominating life within Whitehall and Westminster would be, if anything, an understatement. It is sucking the oxygen out of almost everything else. The contests tomorrow for the Scottish Parliament, National Assembly of Wales, the Northern Ireland Assembly, the Mayor of London and Greater London Authority and a number of other English councils have been completely overshadowed.

The civil service finds itself in a state close to that which it would experience during a general election campaign as it awaits not only the outcome of the referendum but the subsequent implications for who is Prime Minister and a summer Cabinet reshuffle. Ministers are going through the motions of business as usual but this, much more so than in June 1975, is manifestly business as unusual. A similar sort of event may never be seen in our lifetimes. There are plenty of politicians and, especially, senior officials, who would be very pleased indeed if it were not.

The impact is partly through the choice of date and the secondary consequences of this. In truth, no ‘easy’ date for a referendum whose implications are of this magnitude was ever available but some dates have more disturbing effects across the system than others. Until around the Christmas break, the working assumption in Downing Street was that the referendum would be on 15 September. This would allow for David Cameron’s negotiations with his 27 EU partners to continue over the first four months of this year, followed by the formal announcement of the referendum day to take place just after the various elections this week. The campaign would then mostly have taken place during the relative quiet of July and August, coinciding largely with the parliamentary recess and so thus minimising the public hostilities within the Conservative Party in the House of Commons. This would then allow the Prime Minister, if he prevailed in the referendum, to use the Conservative Party conference, due to be held in Birmingham in the first week of October, as a ‘healing exercise’ in terms of his party management.

At some point when the Christmas festivities were taking place, a relatively late change of heart was undertaken. The Prime Minister’s inner circle became convinced that the September scenario was too risky in that if Europe experienced another summer dominated by the migration crisis similar to that which it had witnessed in July/August 2015 then immigration could become the overwhelming issue in the referendum debate rather than national and personal economic self-interest.

Faced with this prospect, Mr Cameron engaged in a crash-bang-wallop set of discussions with his EU peers in a determined drive to come up with some sort of deal that was credible enough to allow for a ballot to be held in June rather than September. This stark shift of gears largely explains the near chaotic start to the campaign, especially from the Remain camp perspective. A more measured approach may just (but only might) have limited the number of prominent Conservative defections to the Leave side.

The irony of all this is that, on current evidence which could change, the feared migration effect may not materialise this July and August. The EU’s deal with Turkey which virtually no one thought would actually work in stemming the flow of refugees from Syria appears to have been stunningly effective. This has been assisted, although it is not deemed polite to dwell on it, by the fact that the Russian-led intervention in the Syrian Civil War has turned the tide in favour of President Assad. Whatever the reasons, we are stuck with 23 June as the referendum date and that has serious side-effects.

The Government’s legislative agenda and timetable has been compromised

The date of the referendum has thrown the schedule for the House of Commons out of kilter. MPs returned yesterday from a Bank Holiday mini-break. They will have another few days off before the Queen’s Speech which will be delivered on 18 May. After a week or so discussing what has been set out in the Address, the House will rise on 26 May and not return until 6 June (the Whitsun recess). Honourable Members will be back at work for all of nine days before a ‘referendum recess’ between 15 June and 27 June, and whose single purpose seems to be to ensure that a parliamentary Conservative Party, which by that stage will be at boiling point, is dispersed out in to the country rather than allowed to collect itself together in one place and conspire about its leader. The House then comes back for less than a month before the summer recess starts on 21 July and continues to 5 September. Parliament will reassemble for 10 days before allowing itself more than three weeks off to enjoy the party conference season (this includes the curious state of affairs that 642 MPs are rendered idle for a week so that eight Liberal Democrat MPs can be in Brighton). Having finally come back together again on 10 October, the House can then move to full legislating mode until the Christmas recess on 20 December (bar another break held from 8 to 14 November).

This process of slow-slow-quick-quick-slow makes the management of parliamentary business far more complicated than is conventional. To take one important illustration, in a normal calendar the Budget, which was outlined in March, would lead to a Finance Bill that reached its committee stage not long after Easter and was finally enacted by MPs and received Royal Assent by the end of July. This year, purely because of the referendum date, the committee stage is unlikely to start before the end of June and the last vote on the Chancellor’s measures may not be witnessed until mid-October. This means that, from a purely private equity and venture capital perspective, the crucial Guidance that will be required to make ultimate sense of some of the changes affecting carried interest dating not only from March this year but also July 2015 and even December 2014 will not be available for ages.

A decision on airport capacity in the south-east of England is in a circling pattern

It is now almost 10 months since the Davies Commission firmly recommended an additional runway at Heathrow (while not shutting the door entirely on the Gatwick alternative). It was thought then that ministers would make a decision by December (2015). When that moment came, however, a series of essentially shameless reasons were found to put that declaration back until June which, by a miraculous coincidence, meant that the Conservative Government was not set on a collision course with its own candidate for Mayor of London, Zac Goldsmith, who opposes the Heathrow idea.

With the referendum date as it is, ministers now have every incentive to avoid further controversy by deferring their determination once again at least until July, probably until September and perhaps longer still depending on the wider state of the Conservative Party and whether there is an entirely new Transport Secretary who will (obviously) need time to familiarise himself with all of the issues. It could be a whole year after the decision was originally thought to be imminent before it is stated. At the end of which it is far from impossible that the advice of the Davies Commission will be rejected.

An £18 billion wager on nuclear power station Hinkley Point C has also been delayed

Finally, although it has attracted far less attention than airport expansion, there is the decision as to whether the UK will order its first new nuclear power station in more than 20 years to be built at the Hinkley Point C site by the French electricity firm EDF (whose main shareholder is the French Government), assisted and co-funded by Chinese state-owned companies. This £18 billion project has also been delayed by the referendum, although to a degree this might be an alibi as EDF seems to be somewhat short of cash and there are severe worries at the highest levels in Paris about the whole exercise. Were it to be abandoned then UK energy policy would be in tatters. Whether it may yet be salvaged if Britain decides to remain within the EU now appears to be the best hope of its advocates.

Tim Hames, Director General, BVCA

Sector Insight

The education and learning technology sector

The global education technology sector is currently worth £45 billion and is poised to reach £129 billion by 2020. The creation in October last year of a strategic body dedicated to the sector, EdTechUK, as well as the funding competition for learning technologies launched by Innovate UK, are both testament to the growth prospects of the UK’s education technology sector.

The UK is home to a range of high growth companies that are applying technology to disrupt and enhance the traditional education sector for the benefits of learners, educators and employers. At the crossroads of social impact and digital disruption, education and learning technology is defined as the broad range of communication, information and related technologies that can be used to support learning, teaching, and assessment. The EdTech sector encompasses fast growing technology-based solutions and services applied to a range of subsectors, from special education needs, where assessments tailored in real time cater well to the needs of such students, to higher education institutions through distance learning programmes.

Investments in educational technology are fuelled by several major trends: the outsourcing of ancillary services by traditional higher education institutions in a context of increased budgetary constraints, the dramatic culture shift toward ubiquitous computing on mobile devices, an emphasis on outcomes-based learning and assessment in the education system, and a search for alternate opportunities to overcome the political and regulatory risks of investments in traditional education.

The UK EdTech ecosystem

“There is undoubtedly a place for technology in helping to raise standards, whether it is helping teachers plan lessons or allowing schools to better measure pupil progress”, Education Secretary Nicky Morgan said at the BETT 2016 Conference.

As with any other disruptive technology, education technology offers a broader choice, often at a lower cost and reaches a wider audience. The Massive Open Online Courses initiative provides a good illustration of the democratisation process under way in the world of education, as they open world-leading courses at highly prestigious universities - previously only available to a privileged few - to anyone in the world. As such, education technology businesses could well be a catalyst to deliver the social mobility and life chances strategy outlined by the Prime Minister David Cameron. The OECD Director for Education and Skills recently stated: “Technology is the only way to dramatically expand access to knowledge. To deliver on the promises technology holds, countries need to invest more effectively and ensure that teachers are at the forefront of designing and implementing this change.”

Building on the world-class reputation of British education, the education technology sector constitutes an opportunity to enhance the global competitiveness of the UK and is therefore an area of focus for UKTI. The Department for Business, Innovation and Skills estimates that annual UK education sector exports (including EdTech and e-Learning) are worth an annual £17.5 billion.

With the Government’s priority to place computer science at the heart of the new computing curriculum to address the current skills shortage, further opportunities lie ahead for the EdTech sector which provide innovative and integrated approaches to science, technology, engineering and mathematics learning and teaching.

The EdTech ecosystem in the UK is also supported by the Department of Education’s plans to introduce new systems for data collection and data exchange that should make it easier for education technology platforms to share data within and between schools. Another policy area for EdTech investors to consider is the deployment of broadband networks in education institutions. In this regard, the planned delivery of a 5G strategy in 2017 in UK is to be welcomed.

Opportunities for private equity and venture capital

The hallmarks of private equity and venture capital are particularly well suited to the needs of the education sector, where a significant holding time commitment is appropriate. The use of efficient digital solutions also makes it particularly attractive for venture capital investments.

Recent examples include the funding provided by Nesta to the technology-enabled learning project in Neath Port Talbot Colleges (NPTC) Group, as part of the Y Labs Digital Innovation Accelerator. The group will develop educational resources that use technology and offer new ways for further education students to learn. Another example is Accel Partners, which along with venture capitalist peers Meritech Capital Partners and Spectrum Equity, invested in Lynda.com, an online education company providing training videos in technology, business and creative skills, in 2013.

However, local contexts should be borne in mind. In contrast to the US where the K-12 market (representing the sum of primary and secondary education) is quite centralised through school district authorities, there is greater freedom in the decision making-process in UK when it comes to school suppliers, which may make it easier for education technology providers to secure first sales but also makes it harder to achieve scale. This makes the expertise and network of investors backing EdTech businesses all the more vital.


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