Though the Labour Government campaigned on growing the UK’s AI industry, its early decision to cut public investment in the sector sends a mixed message
Committee launches an inquiry into how to best support AI and creative tech scale-ups
On 4 September 2024, the House of Lords Communications and Digital Committee launched an inquiry and initial call for evidence into growing artificial intelligence (AI) and creative technology markets in the UK. The Committee is particularly interested in the challenges tech start-ups face in scaling up their businesses and in understanding the support that the Government has or can offer to support growth in these industries. According to the call for written evidence issued by the Committee, scale-ups accounted for only 1% of SMEs in the UK in 2023, but contributed 22% of domestic turnover, equalling approximately £497bn. Given scale-ups’ disproportionate economic impact, the Committee is seeking insight on how to not only support their continued growth but also secure the UK’s globally competitive position in the key economic sectors identified. Interested stakeholders are invited to respond by 16 October 2024.
The call for evidence seeks feedback on common competitive barriers for AI firms, as well as concerns with the UK’s investment culture
The call for evidence identifies both the rapid growth of international competition in AI and creative tech, as well as the continued focus of start-ups on seeking foreign buy-outs and scaling businesses overseas as cause for concern. Similar to the assessments offered by the EC in follow-up to its consultation on competition in generative AI, the Committee identifies a lack of funding, a skilled workforce, quality data sets and network infrastructure as common but key constraints on the growth of domestic tech scale-ups. However, the call for evidence also points to the UK’s investment culture and limited risk appetite as additional hurdles for tech entrepreneurs seeking to grow their business within the country. In light of these barriers, the Committee is seeking feedback on existing programming – including through UK Research and Innovation (UKRI), other government investments, industry schemes and programming in coordination with universities – to support SMEs in the tech sector. Respondents are also invited to provide suggestions of international examples for growth sustaining policy from which the UK could learn.
The Labour Government announced it would not follow through with planned AI spending in apparent contrast to its campaign focus on growing the sector
The launch of the inquiry is unsurprising in the context of the Labour Government’s campaign pledges around growing the AI sector in the UK and supporting the start-up economy. The party broadly set the aim of “making Britain the best place to start and grow a business” and described its plans to reform government procurement processes to support SMEs and start-ups seeking to bid for public contracts. Specific to the tech industry, Labour also announced plans to reform zoning restrictions on the development of data centres to improve the supply of computing infrastructure needed to scale digital services, including AI and cloud computing. However, since taking office, the Labour Government’s first major policy move on AI included plans to cut approximately £1.3bn in public funding in industry-related investment. Among the more innovation-minded governments around the world, the UK’s rollback of planned investment in AI stands apart from other growing ambitions to invest in domestic industry, including through improving computing infrastructure, leading the development of technical standards and supporting open access to other key inputs such as data sets and foundation models. Though sums of public funding around the world represent relatively small proportions of investment into AI industries, the UK’s divergence from its planned investments could contribute to perceptions of limited risk appetite and underdeveloped investment culture that the Committee identifies as a hurdle for sustainable growth for UK scale-ups.
