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Following a Microsoft attack, No. 10 declares the UK to be \”extremely attractive\” for business.

Photo by Annie Spratt on Unsplash

Downing Street has defended the UK as an “extremely attractive” place for tech startups after Microsoft’s president said Brexit Britain was worse for business than the EU, in a stinging attack on the UK’s decision to block a $69bn (£55bn) deal to take over Activision Blizzard.

Microsoft rounded on the Competition and Markets Authority (CMA) on Thursday after a surprise decision to block its planned takeover of the Call of Duty games developer, with its president, Brad Smith, describing it as the “darkest day in our four decades in Britain”.

“We’re, of course, very disappointed about the CMA’s decision, but more than that, unfortunately, I think it’s bad for Britain,” Smith told the BBC. “There’s a clear message here: the European Union is a more attractive place to start a business if you want some day to sell it. The English Channel has never seemed wider.”

A spokesperson for Rishi Sunak said Smith’s claims were “not borne out by the facts”. He said: “Last year the UK became the third country in the world to have a tech sector valued at $1tn, behind only China and the United States in terms of investment, and the first in Europe by some distance. We continue to believe that the UK has an extremely attractive tech sector and a growing games market. We will continue to engage proactively with Microsoft and other companies. That won’t change.”

Smith attacked the government’s failure to deliver on the claimed benefits of Brexit. He said: “For all of us who had some hope that post-Brexit, the UK would construct a structure that would be more flexible, be better for investment, be better for technology, we’re now finding that the opposite appears to be true.”

He said the CMA decision would “discourage innovation and investment in the United Kingdom. And I think in that sense, the impact of this decision is far broader than on Microsoft or this acquisition alone. People’s confidence in technology in the United Kingdom has been severely shaken.”

The dispute marks the biggest test of the CMA’s authority since the UK’s departure from the EU, when the regulator assumed powers previously held by the European Commission, and it is the first major decision under its newly appointed chief executive, Sarah Cardell, who was confirmed in post in December.

The regulator said it was blocking the deal over concerns it would harm competition in the cloud gaming market. The tie-up would have created a gaming behemoth, merging Activision’s titles such as World of Warcraft, Hearthstone, Candy Crush Saga and Overwatch with Microsoft’s first-party developers, its Xbox consoles and its control of PC gaming.

Smith said: “Microsoft has been in the United Kingdom for 40 years. And we play a vital role not just supporting businesses and nonprofits but even defending the nation from cybersecurity threats. But this decision, I have to say, is probably the darkest day in our four decades in Britain.”

The European Commission recently delayed its own findings until May to consider the effects of remedies proposed by Microsoft.

Smith said he expected Brussels to approve the deal, saying its regulators were far more interested in having conversations and finding “solutions rather than reasons to block people from moving forward”. He criticised the fact that the bosses of UK regulators were largely independent, calling them “unaccountable”.

Responding to Smith’s comments, Cardell defended the ruling, saying: “I think this decision shows how important it is to support competition in the UK, and that the UK is absolutely open for business. We want to create an environment where a whole host of different companies can compete effectively, can grow and innovate. That’s the best thing for UK consumers, and the best thing for UK businesses.”

Despite Smith’s claim that the UK would find itself an outlier, other regulators in the US and EU have voiced concerns about the merger. “We also have concerns, as explained in our complaint, about the anticompetitive effects of this deal,” said Holly Vedova, the director at the Federal Trade Commission’s Bureau of Competition in the US.

Sunak on Monday declared Britain the “Unicorn Kingdom” in an appeal to tech startups to head to Britain. On Wednesday, hours after the CMA reported its decision, he hosted a meeting of UK gaming leaders in which he said: “Our globally renowned video games sector is attracting investment, creating skilled jobs and opening up exciting new opportunities for growth.”

Activision and Microsoft have the opportunity to appeal to the competition appeal tribunal. If they do, the body would be expected to make a final decision before the end of the year.

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