All eyes are on the fate of TikTok as Microsoft (MSFT) confirmed that it’s in fast-track talks with Chinese tech firm owner, ByteDance, to buy the services of social video platform in the US, Canada, Australia, and New Zealand.
The UK has not been included in this statement. It remains to be seen whether Britain will follow in the footsteps of US, India, and other countries by banning the app – or how carving up TikTok outside China will affect plans to make London its headquarters.
TikTok has not responded to requests for comment from Yahoo Finance UK on how Microsoft talks and US government pressure will affect other UK services. But an article in The Sun said that the UK government has reportedly approved allowing TikTok to launch its headquarters in London. (A representative has since got in touch with Yahoo Finance UK and said "ByteDance is committed to being a global company. In light of the current situation, ByteDance has been evaluating the possibility of establishing TikTok's headquarters outside of the US, to better serve our global users.")
However, much like the fallout over China-owned Huawei’s 5G integrations, the UK’s position over TikTok and any decisions it makes will be complex in balancing trade relations with the US.
Why Britain and TikTok need each other
Britain is undergoing a double whammy of impact when it comes to the jobs market and the economy.
First, it’s battling the the coronavirus pandemic. The UK economy shrank by one-fifth under the lockdown and grew by just 1.8% in May as the country’s businesses began to reopen, signalling a slower-than-expected recovery. The International Monetary Fund (IMF) has predicted that the UK economy is likely to shrink by 10.2% this year.
Second, the impending Brexit means that Britain has to go it alone to do trade deals with countries and major international corporations after leaving the European Union. By no longer being part of the 27-nation bloc, UK will have to forge new trade agreements with countries across the globe, the US included, as everything from tariffs, taxes, immigration rules will change. The UK is yet to seal an exit deal with the EU and latest data from the Confederation of British Industry shows that most companies are concerned about a further economic shock if Britain leaves the EU without a trade deal.
TikTok is owned by ByteDance, valued at $78bn (£61bn), making it the world’s most valuable startup.
TikTok is considering London, or Dublin, to be its international headquarters — pledging to create up to 3,000 jobs in the process. In December 2019, TikTok appointed its first general manager, YouTube veteran Richard Waterworth, and since then the group in the UK has been on a hiring spree.
But over the past two weeks, reports surfaced saying that TikTok’s parent company ByteDance made the decision to suspend negotiations with the UK due to the “wider geopolitical context.” It was only on Monday, following the report in The Sun, it came to light that apparently talks were back on track with the UK government.
TikTok establishing its HQ away from China is a complex political move, but one it has already started.
Last month, TikTok pulled out of Hong Kong after China said it would impose a new security law there. A spokesperson said: "In light of recent events, we've decided to stop operations of the TikTok app in Hong Kong.” It is also currently being scrutinised by multiple governments over allegations that the Chinese government has access to personal information of users.
TikTok’s head of public policy for Europe Theo Bertram told BBC Radio 4 in July: “TikTok is not available in China. TikTok data is stored in the US. TikTok is a company incorporated in the US. There is zero truth to the accusations that the Chinese state has access to TikTok users’ data.”
Why TikTok’s London HQ is not completely set in stone
TikTok setting up an HQ in London works well for both the company and the UK. It allows Britain to show it remains attractive to big corporations even as it heads for Brexit. And it lets TikTok nurture other international markets after India, it’s largest growth market where it got bigger than Facebook-owned (FB) Instagram, with 120 million users, before it was banned.
If the Microsoft deal goes ahead, it could lose its ownership and operations for US, Canada, Australia, and New Zealand.
But there is still a rocky road ahead.
US president Donald Trump, and his administration, have been continually vocal in their stance when it comes to TikTok — a move that has closely emulated the treatment around Chinese telecoms giant Huawei.
READ MORE: China's Huawei banned from UK 5G network
History shows that the UK usually relents when it comes to pressure from the US over security issues and those that are intertwined with ‘big business.’ This is likely to be exacerbated when the UK is in desperate need for a US trade deal post-Brexit.
Earlier, the UK had risked defying the US with allowing Huawei into Britain’s 5G network. While intelligence officials from the UK as well as US and other nations raised alarm over what they saw as a security risk, the prime minister at the time (Theresa May) did not ban Huawei. It was only on 14 July that the UK reversed an earlier decision to allow the Chinese company to work on the critical telecoms infrastructure, announcing an “irreversible path for the complete removal of Huawei equipment from our 5G networks.”
Furthermore, Britain’s largest trading partner — the EU — faces new regulatory scrutiny in Europe after the European Data Protection Board (EDPB) set up a taskforce to investigate the app's data processing activities and privacy practices across the bloc.
It is not clear what lies ahead for the UK’s relationship with TikTok or if plans to plough ahead with London as the HQ remains, but, what is clear is that it’s going to be a complex balance between politics and business between the UK and the rest of the world.