Palantir isn’t the real problem
The question is why the UK has been so poor at nurturing alternatives
(Hiroshi-Mori-Stock/Shutterstock)
One of the certainties of British political life is that someone, somewhere, will be arguing about Palantir. Louis Mosley, the tech firm’s UK CEO, has become an inescapable media presence as he fights a rearguard action against critics.
The latest row was triggered by the Commons Science, Innovation and Technology Committee, which argued that the government should trigger the break clause on Palantir’s seven-year, £330m contract to run the NHS’s Federated Data Platform (FDP), a project that aims to connect fragmented health records. Whether the US firm is deemed a worthy beneficiary of public contracts – it also holds a £240m Ministry of Defence deal – often comes down to politics. The company published a “manifesto” of sorts in which it railed against cultural inclusivity, celebrated American might and called for universal national service.
Denouncing Palantir, however, is simpler than finding an alternative. The NHS, you might recall, failed spectacularly when it sought to create an electronic patient record system, spending more than £10bn of public money on the abandoned National Programme for IT. Patients would suffer if the state simply cut ties with Palantir tomorrow, as Wes Streeting consistently warned during his time as health secretary.
Yet the question the media rarely addresses is why Britain has failed to produce an AI or govtech company of comparable size and institutional depth. While successive governments have rhapsodised about the importance of technology, they have failed time and again to provide British start-ups and scale-ups with the markets they need.
Palantir became a successful company because both federal and state authorities in the US are far more willing to buy from start-ups, providing them with proof of concept and building economies of scale. They offer a domestic market large enough to turn promising firms into national champions; the British state does not. Figures from the British Chambers of Commerce and Tussell show that direct public spending with small firms reached a six-year high of 21 per cent last year – yet central government’s share fell to 10 per cent, below its 2020 level, while defence and aerospace spending stood at just 3 per cent.
Successive UK governments have tried to deal with the thorny issue of procurement through changes in the law, but this is not necessarily the solution. Many start-ups, for instance, are granted pilots but rarely see this materialise into a contract. Procurement rules create a bizarro world in which the government is barred from taking into account successful pilots for fear of judicial review.
The state also tends to move too slowly for new firms with less in the bank to hold out, handing incumbent companies an inherent advantage. There is something deeper here: an embedded risk aversion among officials that no statute has been able to repeal, born of one of the world’s most restrictive public law systems.
At heart, the absence of a British Palantir is a problem of state structure. Saul Klein, the entrepreneur and co-founder of Phoenix Court, has written of how many scaling companies “hit the wall of slow regulation, inaccessible procurement, and absent growth capital, and are forced to relocate, sell, or simply fail to reach the scale their science and commercial traction deserve”.
Changing this, and nurturing serious competitors to Palantir, will require a whole-of-government approach and a whole-of-society approach. Market dysfunction is downstream of state dysfunction here as elsewhere – courts taking it upon themselves to be the arbiters of government procurement strategy is as absurd as them setting wages.
The creation of larger regional authorities would offer more freedom for public policy experimentation, as in the US, but we also need a ring-fencing of budgets for start-ups and a fundamental cultural shift. It is by no means an easy feat, but it’s the only route out of eternal Palantir rows.