The U.K.’s Chancellor of the Exchequer Jeremy Hunt’s spring budget — delivered on the same day that teachers, transportation workers, civil servants and others were on strike across the country — sought to strike a note of its own: optimism in the face of many signals to the contrary. With the U.K. narrowly predicted to avoid a recession this year and next, but the country inevitably weighed down by inflation, stagnating investment and the ongoing impact of Brexit, Hunt also used the moment to announce a string of funding injections into the country’s technology sector. They include a new quantum computing hub; an annual £1 million prize called the “Manchester Prize” for AI research; and £3 billion in investments in “high growth” business in the next 10 years.
The announcements are coming in the wake of the Silicon Valley Bank crisis — the company’s U.K. subsidiary was snapped up by incumbent HSBC earlier this week as one part of that — and it underscores the potential role government plays to complement and bolster what’s playing out in the private sector. Whether the U.K. sticks to the plans laid out today, how those might shift with a change in government and whether the sums it’s committing make a dent in the global tech economy, remain to be seen.
The government’s been running its own investment operation, called British Patient Capital, since 2018, with a commitment to pump £2.5 billion into high-growth U.K. businesses to boost their fundraising activities and to help close the gap between the U.K. and leading countries like the U.S. when it comes to funding. That has seen the firm, which is part of the British Business Bank, back companies like CyberSmart and Quantum Motion, as well as indirectly in separate funds investing along the same thesis. Today Hunt said that British Patient Capital would get a further £3 billion in funding to invest for the next 10 years, with a focus on R&D-intensive industries.
Alongside this, Hunt said that the Local Government Pension Scheme, which has assets of £364 billion, will be orienting more funds into investing in innovative companies “and other productive assets”. Pension schemes in countries like Canada have been some of the biggest indirect and direct investors in startups (and not just startups in Canada) so this is an interesting development. Hunt also announced “a new Long-term Investment for Technology and Science (LIFTS) initiative,” which is described as a “competition” to encourage other pension fund-related investing initiatives. This seemed a little fluffy, so we’ll have to see what comes of this, and whether others bite at the idea.
Another big tech focus in the budget today was quantum technology — an area full of promise because of the jump that it will offer in terms of computing power; but also elusive, since a lot of its best ideas are still largely theoretical. That makes putting a lot of investment into startups and academic research focused on quantum computing a risky but potentially very lucrative bet, and one perhaps best suited for a public body to be making, given how early but foundational some of the work has been and will be.
To that end, the U.K. is setting some ambitious targets here, with plans to invest up to £2.5 billion over the next 10 years on quantum. That funding will cover not just engineering and research investments, but also funding for businesses that are investing in quantum technologies and pilot projects, as well as investment into the first steps of what quantum technology regulation might look like.
It also plans to put £900 million into the building of what it described as an “exascale supercomputer” to work on research and run projects. It’s notable that this wasn’t described as a quantum computer, and it may well not be. Likely there will be debates and bids for different approaches when and if this project takes shape.
A lot of the heart and soul of how technology has evolved over the last decade has been in the world of startups and technology companies rather than in research labs attached to universities. With the big downturn in venture funding, and the pressure we’re seeing on both private and publicly traded tech companies, it will be interesting to see if the next 10 years’ most interesting innovations are still among those companies, or if they do shift back to the slightly safer terrain of academia.
The government is hedging its bets to some extent with tranches of funding that could see money landing on both sides of that innovation landscape.
Prominent here will be a new £1 million award that it will be given out called the “Manchester Prize,” Hunt said, which will be given out annually for the next 10 years to researchers that “drive progress in critical areas of AI. While £1 million feels like small change in the world of startups, it’s a massive sum for most (not all!) academics and researchers. It’s notable that the idea of the prize is focused on AI rather than other technologies. That really points to what a hold AI has on public discourse in technology and beyond right now.
The U.K. is doing this in part, it says, because it believes it needs to invest in its own “sovereign capability” around its own AI foundation models, which points to what kinds of AI research might be most likely to win the annual prizes. AI feels like a fast-moving target right now, and it’s really not clear what kinds of economic or social implications it will have in the short, medium or longer terms. The government also plans to establish a task force to help advise it on future strategy in this area, too.
Another big area of investment will be accelerators: There are plans to invest £100 million to grow three “innovation clusters” in Manchester, Birmingham and Glasgow, and to specifically tap 26 R&D projects respectively to boost AI, health and medicine and quantum across the three cities.
All in all, a lot of promises, and it will take getting budgets approved and consistent agreement across multiple leaders and stakeholders (and most likely political parties and governments) to push many of these commitments through. And yes, there remains the question of whether state support will give the tech industry the fuel and more importantly the confidence it needs to grow.
Even just out of the gate, the opposition Labour party criticized Hunt’s focus and solutions.
Labour leader Keir Starmer summed up the U.K. as “Stuck in the waiting room with only a sticking plaster,” a reference to the underfunding of the country’s health service, and re-upped the point by describing the country as “The sick man of Europe once again.”