There is nothing a politician likes more than a mantra – a phrase that can be repeated over and over until perhaps a thought becomes a reality.
And one of the newest mantras that catches the eye of British government ministers is ‘scientific superpower’. It’s been around for some time. In 2021, former Prime Minister Boris Johnson said his government’s goal was to restore the UK to its position as a scientific superpower. More recently – late 2023 to be precise – Finance Minister Jeremy Hunt told MPs that his goal was to ensure Britain could compete with Silicon Valley. This year, the Prime Minister reorganized the government apparatus and established the Ministry of Science, Innovation and Technology. Naturally, start-ups and scale-ups are expected to play a vital role in the flourishing of commercially exploitable science.
How skeptical should we be? It’s tempting to think of the science superpower’s agenda as a fig-leaf for government at a time when the broader economy doesn’t look particularly healthy.
That would be too cynical. First, the British tech sector is doing quite well. It continues to attract high levels of foreign and domestic VC cash. In the first half of 2022, £14.7.7bn of VC capital flowed into the UK. And although investment fell sharply to £8bn between July and December, the UK tech sector continues to attract capital. Perhaps more importantly, from an economic point of view, the UK should ensure that it does not lag behind in the commercial development of key technologies. So no one should question ambition.
But as science minister George Freeman has admitted, the UK is not yet a science superpower, but rather what he puts it as a “scientific powerhouse”. Reaching the previous status would mean becoming an “innovation nation”. Essentially, he meant creating an environment where scientific research could be successfully industrialized.
How to achieve it? I spoke with two CEOs of scaleups at the heart of the science and technology sector to get their views on the measures needed to support their industries.
Scott White is the CEO of Pragmatic Semiconductor. Founded twelve years ago, it has developed microchip technology that does not require silicon. It now produces cheap and flexible integrated circuits that can be used in many contexts. Its business model is centered around manufacturing – with a facility in the North East of England – but it also plans to offer customers compact production facilities. In addition, it designs its own RFID chips for tracking goods in transit.
Pragmatic just commissioned a survey of 250 tech business leaders. When asked if the government could achieve its goal of being a science superpower by 2030, a healthy 68 percent said yes, but only 40 percent felt that sufficient government support was being offered.
An unsustainable investment
According to White, the UK’s cash-rich ecosystem remains unsustainable, with most funds going to early-stage companies rather than scale-ups. Most of the capital invested in the later stages comes from abroad. “We did Series C in 2021, 2022 – that was $125 million. Eighty percent of the investment came from outside the UK,” he says.
As such, capital is needed to allow tech companies to stay in the UK both in terms of location and control as they grow.
But what can the government really do? Well, one way forward is to make it easier for institutions to invest. White welcomes changes to insurance industry regulations that will allow pension funds in particular to allocate money to technology.
It also recognizes the progress made in securing public funding through British Business Bank and its venture arm, British Patient Capital. In addition to investing alongside VC funds, the organization has created the Future Fund: Breakthrough, with £375m earmarked for deep technology ventures. “That’s good, but the scale needs to be much bigger,” says White.
Mostafa ElSayed agrees. He is the president and co-founder of Automata, a company providing automation technology for laboratories, mainly in the life sciences sector. The company’s products are designed to speed up processes such as diagnostics and clinical trials, while reducing human error. He argues that some sectors are better served with others when capital is allocated by VC, with deep technology having a particular problem. “We all talk about the importance of deep technology, but access to finance in the deep technology sector is difficult.”
And the UK may be lagging behind its European competitors. “The biggest supporter of deep tech is BPIFrance (sovereign wealth fund), followed by Germany and then Scandinavia,” says ElSayed.
ElSayed says change may be coming. He cites comments from the new head of British Business Bank, who recently introduced the idea of creating a sovereign growth fund to support innovation.
Relatively small changes can also bring benefits. White points to existing schemes such as the Enterprise Investment Scheme (EIS) and Venture Capital Trusts. By offering tax breaks to those who support eligible companies, these vehicles have encouraged investors to support startups. However, once companies reach a certain size, the tax credits disappear, meaning the schemes do not benefit scaleups.
It’s not just about money. “There is also a need to support domestic demand,” says White. “For example, you can use government procurement to speed up adoptions.”
Indeed, in some sectors, the government has tremendous power to make things happen. ElSayed uses the example of clinical trials. The UK has an extremely important resource in the form of the National Health Service, which serves more or less the entire population and can collect data accordingly. This potentially makes the UK one of the best countries in the world to conduct clinical trials. However, although it is a national service, most decisions are made at the level of local health trusts. “We need a national strategy,” says ElSayed. There is a precedent that the UK already has a national genomics research strategy.
Visa policy is another important piece of the puzzle. ElSayed emphasizes the need for a system that will enable scientific companies to quickly recruit. “When the company is growing at our pace, it’s hard to find people who have the right to work in the UK,” he says.
Scott White says the UK has the potential to become a science superpower, but clarity is needed on what that actually means. When it comes to government support, not all the pieces of the puzzle are in place.