The House of Lords Communications and Digital Committee has today
warned that the UK is at risk of becoming an ‘incubator economy'
unless it does a better job supporting UK AI and creative tech
startups to grow into global competitors.
If we do not reverse the trend of innovative British technology
companies moving to other markets or selling to foreign
companies, the UK will see a decline in global competitiveness,
weaker economic growth and a brain drain of talented people
abroad.
The UK has many of the essential ingredients for scaleup success,
but we have consistently struggled to enable our brightest
technology startups to transform into thriving domestic
businesses. In recent months, UK fintech unicorns Revolut and
Monzo have announced they may list in the US rather than the UK
stock market.
Fostering innovative homegrown scaleups will be vital to meeting
the Government's ambitions for growth. AI and creative technology
are two areas in which the UK has existing strengths and
significant opportunities. But urgent and targeted action is
needed to realise this potential and stop us from falling behind.
Barriers to successful scaling up in the UK include limited
access to capital compared to other countries, challenges in
recruiting in-demand tech talent and a business and investment
culture that can be too risk averse.
The Committee concludes that the Government should not be
complacent about the health of the UK's scaleup scene. It
welcomes the Government's recent AI Opportunities Action Plan but
stresses that achieving its ambition of making the UK "the best
place to … scale an AI business" will require concerted effort
and a significant mindset shift across the public
sector.
A complicated ‘spaghetti' of well-intentioned government schemes,
including financial reforms, tax credits, investment incentives,
and innovation focused initiatives, are introducing further
barriers and bureaucracy. ‘Piecemeal' initiatives fail to offer
scaleups a coherent pathway of financial support as they grow.
The Committee calls on the Government to do better by
doing less. It should resist the urge to launch new schemes, and
instead focus on consolidating and streamlining existing
programmes for maximum impact.
The report sets out key recommendations for change
including:
-
Ensure join-up – The Government's industrial
strategy should provide a coherent, cross-sector vision for how
technology scaleups will be supported to drive economic growth.
-
Accelerate financial reforms – Unlocking
domestic growth capital is key to boosting institutional
investment in UK innovation. This needs to happen quickly to
keep up with technological change.
-
Champion entrepreneurial success – We must do
more to celebrate successful wealth creators and foster a
culture where founders are incentivised to stay in the UK to
grow their businesses, or fail and try again.
-
Streamline public support for innovation – The
current regime is too complex and should be consolidated to
provide innovative companies with a clear pathway along their
growth journey.
-
Commit to AI Delivery – The AI Opportunities
Action Plan is welcome, but a plan on its own is not enough.
Delivering the plan will require a laser sharp focus on
removing obstacles to growth for homegrown AI companies and
robust political commitment.
-
Sustain investment in the creative industries
- The sector's growth potential, driven by
creative technology businesses in particular, won't be realised
without longer-term commitments and an increased commercial
focus.
Commenting Baroness Stowell, Chair of the House of Lords
Communications and Digital Committee, said:
“The UK has the potential to be a powerhouse of growth for AI and
creative tech companies. However, we are at real risk of becoming
an incubator economy instead, where UK start-ups develop
innovative products and services before selling out or moving
abroad, so other countries derive the economic benefit. Too often
it's a case of UK begins, other countries cash-in. That has to
change.
“The UK has some great advantages when it comes to AI and
creative tech; a strong university sector undertaking
groundbreaking research and generating commercial spinouts, and a
proud tradition of world-leading creative industries. These
sectors have the potential to deliver the fast-paced economic
growth the Government wants to achieve. But we have a real
problem turning startups into scaleups. Every UK unicorn that
gallops overseas to list, or sells out to foreign investors, is a
blow to UK PLC and our aspirations for growth.
“The Government's new AI Opportunities Action Plan is a good
start, but a plan in itself is not enough. The key is its
delivery. The Government will need to drive through change to
address fundamental barriers such as limited infrastructure and
comparatively low levels of adoption if it is to have an impact.
It must also ensure creative tech is given the attention it
deserves as an area with huge potential for economic growth.
“Action must be taken to unravel the complex spaghetti of support
schemes available for scaleups. Various tax credits, British
Business Bank funds and investment incentives combine to be so
hard to navigate that companies have to employ consultants to
advise them. We urgently need to simplify the help available and
ensure it is set up to support our most innovative scaleups to
grow, while also offering value for money to the taxpayer.
“The Government must be ambitious in its approach for our
brightest AI and creative tech scaleups, ensuring that the UK's
most innovative companies receive the recognition and support
they need and deserve.”
