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Die if you don't, die if you do
Internet start-ups in the UK are massively hindered by mountains of red tape which simply do not exist in America. Peter Cochrane is not impressed

FROM the recent high-profile government media activities related to the .com world, you might be forgiven for thinking that someone had finally got the message. But I'm not so sure. Just as the electronic economy appears to be taking off, along comes IR35 tax legislation threatening to stultify the information technology workforce and switch the expansion into reverse. Ironically, and as if by design, the American economy is close to the limit, due to a dire shortage of skilled people. So if computer-skilled people don't soon start leaving Britain in droves it will be a miracle. At the same time, British industry is being warned that those who do not embrace technology and the Internet are doomed to failure.

Unfortunately, the bad news does not stop with government and industry managers who merely use ecommerce as the latest buzzword, it extends to banks and merchant services. They are either happy to remain on the sidelines or blissfully unaware that they are handing over a complete sector to competitors in America. To quote one industry observer: "While the porn sites in the US get credit card acceptance immediately, in Britain start-up companies trying to embrace the Net are being left to die by the banks."

The following experience seems to be fairly typical of the confused and disabling situation. "Starting two years ago with private investment, the road ahead seemed to be quite clear. We had identified a vigorous demand for low-cost training of IT staff throughout British industry and had developed solutions to satisfy that need. The next step was to market our services and process the orders. Because of the nature of our target audience, processing orders on the Internet was an integral part of the business solution and how could you not do it? Our vision was for customers to visit our Web pages, identify the particular training courses they required and then enrol by filling out an online order and paying by credit card at the same time. Of the banks we approached the answers ranged from 'we require a bond and you are not allowed to process credit cards on the Internet' to 'this is purely a business decision not to allow you to process credit cards on the Internet'."

In this particular case it took each bank at least four weeks to contemplate the request and reach its decision, and in the meantime, the start-up continued to take orders over its website. But this involved the sending of an invoice for a cheque payment. Can you imagine the overhead costs for a small business? Have the banks and financial institutions never heard of dog years or Internet speed?

Now for the good news. If any company out there is suffering this problem you will find a host of American banks that will provide you with an Internet payment service in less than 80 hours from first application. Slow, I know, but at least they will do it. Moreover, in many cases it is also possible to outsource the whole business operation to America or some other flag of convenience. Major tax problems can then be avoided by trading offshore. No doubt the EU will have a go at closing down every possibility of free trade as it tries to prop up ailing economies with even more taxes. Do you suppose the solution is so counter-intuitive that they just never seem to get it?

Peter Cochrane holds the Collier Chair for the Public Understanding of Science & Technology at the University of Bristol. His home page is:
http://cochrane.org.uk