Disjointed industrial strategy a barrier to UK scaleup success

monsitj – stock.adobe.com

The House of Lords Communications and Digital Committee calls on Labour to join-up piecemeal initiatives and cut bureaucracy

Cliff Saran,
Managing Editor

Published: 03 Feb 2025 14:00

The second report from the House of Lords Communications and Digital Committee has warned that the UK risks becoming an “incubator economy” unless there is greater support for tech startups.

The AI and creative technology scaleup report presents witness statements and oral evidence from industry experts warning that the UK will lose out to other countries, and in particular, the US, unless it provides an environment to support scaleup businesses.

One of the witnesses, Barney Hussey-Yeo, founder and CEO of Cleo AI, noted that the challenge the UK faces is that it cannot scale startup companies. He said it was also challenging listing these companies and capturing their tech value. Hussey-Yo described the UK as “a terrible place to scale and list a business”.

Another witness, Nick Poole, CEO of video games industry body Ukie, described the UK as “one of the worst places in the G7” for scaling games businesses.

While the CBI warned that unless the UK can nurture scaleups and create the environment for them to expand, it cannot hope to approach the level of growth and prosperity it needs.

Written evidence from the British venture Capital and Private Equity Association (BvCA) highlighted the fact that UK science, technology and financial innovation sectors will lose out on opportunities when companies move overseas, taking intellectual property, quality jobs and innovation with them.

Oxford Science Enterprises also submitted written evidence to the committee, arguing that, without urgent action, “the future cascade of value from the unicorns we are building – and the creation of the next generation of entrepreneurs from those companies – will continue to benefit other countries, primarily the US”.

The report describes “piecemeal” initiatives that fail to offer scaleups a coherent pathway of financial support as they grow.

“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,” the report’s authors wrote.

The House of Lords Communications and Digital Committee concluded that the government should not be complacent about the health of the UK’s scaleup scene. While the committee was positive about the government’s recent AI opportunities action plan, it stressed 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.

Tina Stowell, chair of the House of Lords Communications and Digital Committee, said: “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,” she said. “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 committee has called on the government to ensure its industrial strategy is joined up and it streamlines public support for innovation. Other recommendations include committing to AI delivery and accelerating financial reform to unlock domestic growth capital.