UK’s failure to retain and scale science and technology causing economy to bleed out, warns Lords Committee

The House of Lords Science and Technology Committee has published a damning report Bleeding to death: the science and technology growth emergency warning the Government that the UK's failure to retain and scale its science and technology companies has now reached crisis point and is causing the UK economy to bleed out.

The Committee has warned that without urgent and radical reform, the Government risks acting too late to fix long-standing failures to scale, to retain the economic benefits of R&D in the UK, and to seize the enormous opportunities for technological and economic growth that are currently slipping through its fingers.

Key conclusions and recommendations include:   

• Calls for clearer leadership from the Prime Minister and Chancellor through a new high level National Council for Science, Technology and Growth (modelled on the National Security Council), attended by the PM, to drive through reforms supporting science and technology growth and the scale-up of UK companies.  

• Reforms to counter-productive visa policies for global talent. The Committee says a government serious about growth and wealth creation cannot keep in place costly visa barriers to the scientists and entrepreneurs it hopes to attract to the UK. It says that when talented scientists and entrepreneurs want to move here, the UK should be rolling out the red carpet rather than red tape. Nor can it allow the life sciences industry to collapse because of short-term fiscal considerations. The fact these issues remain unresolved is indicative of tensions and a lack of coordination at the heart of government.  

• The Committee highlights a substantial decline in domestic pension fund investment in the UK over decades as a significant factor behind the economic malaise, as it leaves promising science and technology companies starved of scale up capital and forced to go overseas for investment.   

• The Committee strongly supports the Mansion House Reforms, and calls for them to go further and faster. It suggests the Government consider mandation, and measures short of mandation such as clawbacks on tax reliefs, to incentivise pension funds to invest in UK science and technology companies. Consolidation of defined contribution pension funds, as well as the large number of Local Government pension funds, should be pursued vigorously, and investment in UK-based technology companies should be tracked to ensure the reforms are benefiting the sector.  

• The Committee recommends reforms to public procurement including a mandatory target for Departments to spend with innovative UK based SMEs, emulating the US SBIR Initiative. Ministers need to empower their officials to take risks on new technologies and provide the contracts to companies that can help them grow and anchor them in the UK.   

• The Committee says there is a strong argument for the consolidation and scaling of public investment bodies, Innovate UK, the British Business Bank (BBB), and the National Wealth Fund (NWF) into a single body to compete with sovereign wealth funds overseas. These bodies need to be significantly scaled up and reformed in order to have a coherent and effective system for providing the domestic scale up capital and technological due diligence that is missing.  

• The Committee says changes to career structures, pay and incentives must occur to enable easier movement between academia, business, and government so that each of those sectors acquires ready access to the skills and networks of the others.  

The full conclusions and recommendations are available from page 78.

Lord Mair Chair of the House of Lords Science and Technology Committee said:   

“The UK's failure to scale its science and technology companies has reached crisis point.  

“The UK has experienced sluggish productivity growth and near-flat real wages since the global financial crisis. Its inability to retain more of the economic benefits of its science and technology R&D endeavor is a fatal flaw in any growth strategy.  

“We have witnessed a procession of promising science and technology companies choosing to scale overseas rather than in the UK. Even during our inquiry, several significant companies including Oxford Ionics, Deliveroo and Wise have relocated or expanded abroad, and even life sciences stalwarts like AstraZeneca are eyeing the exit.  

“The UK economy is simply not working, and the consequences are clear for all to see. If the UK is to arrest its decline, leadership and coordinated action is needed to rescue and strengthen its science and technology sector.  

“While the issues facing the UK economy are grave, with decisive and speedy action from the Prime Minister and the Chancellor, our Committee believes challenges can be overcome. There is enormous potential to seize this moment of technological and geopolitical opportunity and catalyse the growth that the UK badly needs.  

“The Government will need to use every lever it has to support UK based science and technology companies and entrepreneurs, and to encourage private investors to do the same. By unlocking institutional investment, changing the culture around innovation, and organising its efforts in procurement, public investment bodies, and regulatory reform, the UK Government can still stop the bleeding and reap enormous rewards for the nation.”