UK Government Report Card On Tech Support ‘Could Do Better’

By John Mullins, Associate Professor of Management Practice in Marketing and Entrepreneurship, London Business School

Sage Group, Computacenter, Dyson, DeepMind, McLaren, Endava. This world-leading mix of software, Cloud services, data center and engineering companies share a common British ancestry giving the lie to the idea that the UK is unable to produce world-beating tech and engineering companies.

Technology is at the heart of the UK economy according to the latest report from data provider on start-ups, growth companies and tech ecosystems, Dealroom. The next generation of tech ecosystems report (DealroomDecember 2022) reports that a combination of factors, including early, breakout and late-stage funding, university talent, patents and unicorns, combined with $1 billion plus exits, means that London is now the top tech ecosystem outside of the US.

The report goes on to say that with respect to ‘science hubs’, “while the Bay Area still tops [the global rankings list] … due to its sheer scale [and] massive patent and deep tech footprint, it is, however, closely followed by Cambridge [in the UK]”.

However, not unlike the wording of so many school reports, the UK could do better. In particular, support from the UK government could be more effective. For example, the public sector uses preferred supplier lists which are made up of mostly large companies, while promising smaller companies rarely have the opportunity to get anywhere near the tendering process.

Furthermore, the UK is not always known for its alchemical ability to blend private investment and government support with the incubation and manufacture of new technologies. As previously illustrated, the US is the best-known leader in respect of their support for innovative businesses, combining as it does the Build to Scale (B2S) program from The Economic Development Administration (EDA), with the financial capabilities of Wall Street and the concentrated power of Silicon Valley.

This ‘Valley’ model has spawned a raft of imitators the world over, and while the UK is no slouch in terms of start-up accelerator programs – Bethnal Green Ventures and Techstars London Accelerator come to mind in this respect – the years of austerity and the UK government’s restrained approach to research and development (R&D) funding has not always produced the best environment with which to support promising new technologies.

To illustrate the point further, the country’s expenditure on R&D rose by £1.3 billion (3.4%) to £38.5 billion in 2019, the lowest percentage growth since 2013 according to the Office for National Statistics. At 1.74%, the UK’s gross domestic expenditure on R&D remains well below the 2019 OECD average of 2.5%, although one should note the present ambition to increase total R&D investment to 2.4% of GDP by 2027.

With the recent failure of start-up manufacturer Britishvolt in mind, and the promise of a ballooning tech revolution in the world’s transport systems, from electric cars to UAVs, to self-driving vehicles, growing publicly-funded research must be considered an imperative. In particular, further research and development tax support for small companies (UK government admits R&D-heavy small companies need more tax help, FT, January 13, 2023), must surely be at the forefront of the present UK government’s ambitions in the year ahead .

In postscript, Australian battery company, Recharge Industries, has made a preliminary bid for Britishvolt, the start-up that collapsed earlier in January. One wishes every success to the new bidder, but then might add the thought that Britishvolt’s travails might never have occurred had the UK government’s new Advanced Research and Invention Agency (ARIA), a new independent research body to fund high-risk, high-reward scientific research announced by Science Minister George Freeman on January 26, has been up and running.

Even greater and more welcome support for start-ups like Britishvolt might also have benefitted from earlier intervention from the most senior levels of the British government. The UK Chancellor of the Exchequer Jeremy Hunt’s speech to tech investors concerning growth and opportunity on January 27 is a case in point in terms of welcome advocacy, playing as it did to several very familiar but also extremely important themes. Speaking about a more positive attitude to risk in the UK, and citing Edison’s well-known maxim, “I have not failed. I’ve just found 10000 ways that won’t work”, he went on to challenge businesses to help make the UK more “innovation friendly and growth focused”.

With the UK now the third largest $1 trillion dollar tech economy after the US and China, the promise is all there, although more could be done by government and the business community to work together in order to bridge the gap between ambition and necessary action.

John MullinsAssociate Professor of Management Practice in Marketing and Entrepreneurship, London Business School is author of a new book launched in January 2023, Break the Rules! The Six Counter–Conventional Mindsets of Entrepreneurs That Can Help Anyone Change the World’