First contact between a new government and key industries is critical. This is true now more than ever, as the new Labour government has made economic growth its core mission. Building strong relationships with the potential drivers of economic growth into the future will be vital to their success.
Considering Labour’s ‘growth agenda’, last week’s news that the government intends to shelve £1.3bn of funding promised for tech and AI projects came as something of a shock across the tech sector. Projects on the chopping board include £800m for the creation of an exascale supercomputer at the University of Edinburgh and a further £500m for the AI Research Resource.
These cutting-edge, deep-tech projects should be at the heart of the UK’s economic growth. They require the exact kind of expertise and technical knowledge that this country specialises in and they’re magnets for the foreign investment that the country so desperately needs. Aborting them like this spooks investors and immediately sends the wrong message to the UK’s tech ecosystem. The result will likely be more of a brain drain to the US.
Parking these projects is undoubtedly a step backwards in the UK’s pursuit of growth. Fortunately, Labour still has options to rectify the situation and reassure the UK’s tech sector that it’s here to help them. These include supporting public-private-university partnerships, and streamlining compliance procedures and bureaucracy. First though, the new government need to recognise the centrality of the tech sector to any ambitions for UK economic growth.
In Q1 this year, the UK tech sector had a market value of £863bn. The UK has established itself as a global AI hub, with multinationals like Microsoft setting up shop here, and our spin-outs and scaleups have led Europe in the AI frenzy. University of Cambridge startup, Wayve, which uses embodied AI to train driverless cars, recently secured Europe’s largest-ever funding round, securing over $1bn.
The tech sector, especially its cutting-edge and research-led end, is one of the few areas where the UK remains a genuine global leader. And it has reaped the rewards of its deep knowledge and expertise over the years as investment has flooded in. It should be a central pillar of the new government’s attempts to stimulate economic growth and serve as a lightning rod for the vital foreign direct investment that Rachel Reeves needs.
To do this though, the government must be constructive with the private sector. No one in UK tech is asking for large-scale handouts – the public finances are too strapped for this to be viable, and our tech leaders have the innovative drive and entrepreneurial chops to do it on their own. But what they do need is the government to create the right environment for them to thrive. It goes without saying that jettisoning high-value projects like the UK’s first next-gen supercomputer does not achieve this. So, what can the government do to repair the relationship and help stimulate growth in UK tech?
The first step must be to strengthen the connections between the private and public sectors with joint engagement. The government can show its support for the ideas and technologies of the future in their nascent stages with an incubator – a kind of Y Combinator equivalent that specialises in nurturing UK companies and talent and serves as a draw for investors and founders across the world. Also, they can bring higher educational institutions into the equation, actively facilitating partnerships with the public and private sectors. As the example of Wayve illustrates, much of the UK’s success in emerging fields of tech can be directly linked to the quality of its universities.
By co-funding research grants, offering loans and launching development projects, the government can solidify these bonds and smooth the transition from university spin-out, to profitable scaleup. Whilst supporting the traditional hubs of innovation in the UK’s golden triangle between London, Oxford and Cambridge is important, the government can go further and start to build tech ecosystems in other parts of the UK.
This is why the next-gen exascale supercomputer in Edinburgh was so exciting – it signalled the potential of tech to drive growth across the whole of the country. Labour must now find an alternative way of showing their commitment to UK-wide tech growth.
Labour’s intention to scrap £1.3bn of funding promised for tech and AI projects is a step in the wrong direction if they want to reinvigorate the UK’s ailing economy. Cutting-edge tech projects play into the UK’s natural expertise and draw in life-giving direct foreign investment. But this misstep can be remedied, and Labour still has several cards to play to signal to UK tech that the new government is an ally. The two sides can then start to work together to draw capital into the UK and drive growth across the country.
Tim Levy is Founder & CEO at Twyn
