British Chancellor of the Exchequer Jeremy Hunt’s spring budget, presented on the same day that teachers, transport workers, civil servants and others went on strike across the country, attempted to strike a note of its own: optimism in the face of many signals to the contrary. With the UK expected to avoid a recession this year and next, Hunt also took the moment to announce a series of cash injections into the country’s tech sector, including a new center for quantum computing; an annual £1 million Manchester Prize for AI research; and £3bn of investment in ‘high growth’ businesses over the next 10 years.
The announcements come in the wake of the Silicon Valley bank crisis – the company’s UK subsidiary was bought by incumbent HSBC earlier this week as part of it – and underscore the potential role the government is playing in what is unfolding in the crisis , complement and strengthen private sector. It remains to be seen whether Britain will stick to the plans presented today, how these could be postponed if there is a change of government and whether the sums it is investing will weigh on the global tech economy.
The government has been running its own investment operation called British Patient Capital since 2018, with a pledge to pump £2.5 billion into high-growth UK companies to boost their fundraising activities and help bridge the gap between the UK and leading countries like the US close USA when it comes to funding. This has led the firm, which is part of British Business Bank, to invest in companies like CyberSmart and Quantum Motion, as well as indirectly in separate funds investing under the same thesis. Today Hunt said British Patient Capital would receive a further £3bn in funding to invest over the next 10 years, with a focus on R&D intensive industries.
Alongside this, Hunt said the Local Government Pension Scheme, which has assets of £364bn, will direct more funds towards investment in innovative businesses “and other productive assets”. Pension schemes in countries like Canada are among the largest 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 in technology and science (LIFTS) initiative,” dubbed the “competition,” to encourage other investment-related initiatives related to pension funds. That seemed a little fluffy, so we’ll have to see what comes of it and if others snap at the idea.
Another big technology focus in today’s budget was quantum technology – a promising area due to the leap it will offer in terms of computing power; but also elusive, as many of his best ideas are still largely theoretical. That makes investing heavily in startups and academic research focused on quantum computing a risky but potentially very lucrative bet, and perhaps best suited to a public body given how early but fundamentally some of the works were and will be.
To that end, the UK is setting some ambitious targets here, planning to invest up to £2.5bn in quantum over the next 10 years. This funding includes not only investment in technology and research, but also funding for companies investing in quantum technologies and pilot projects, as well as investing in the first steps of what quantum technology regulation might look like.
It also plans to pour £900m into building what it calls an ‘exascale supercomputer’ to work on research and run projects. It is noteworthy that this has not been described as a quantum computer and may not be. There will likely be debates and offers for different approaches as and when this project takes shape.
Much of the development of technology over the past decade has been in the world of startups and tech companies, rather than in the research labs attached to universities. With the big drop in venture funding and the pressure we’re seeing on both private and public technology companies, it will be interesting to see if the most interesting innovations of the next decade are still among these companies, or if they’re switching Back to the slightly safer terrain of science.
The government is to some extent hedging its bets with funding tranches that could see money ending up on both sides of this innovation landscape.
Notable here is a new £1million award to be known as the “Manchester Prize”, said Hunt, which will be presented annually for the next 10 years to researchers who “drive advances in critical areas of AI. While £1million may feel like a small thing in the world of start-ups, for most (not all!) academics and researchers it is a huge sum. Notably, the idea of the award focuses on AI rather than other technologies. This really shows the impact AI is currently having on public discourse in technology and beyond.
The UK is doing this partly because it believes it needs to invest in its own “sovereign skills” around its own AI foundation models, indicating what types of AI research are most likely to win the annual awards. AI currently feels like a fast-moving target, and it’s really not clear what kind of economic or social impact it will have in the short, medium, or long term. The government is also planning to set up a task force to advise on future strategy in this area as well.
Another big area of investment will be accelerators: there are plans to invest £100m to build three ‘innovation clusters’ in Manchester, Birmingham and Glasgow, targeting 26 R&D projects each to drive AI, health and medicine and quantum around the world to promote three cities.
All in all, a lot of promises, and it will require budget approvals and consistent consensus among multiple executives and stakeholders (and most likely political parties and governments) to push through many of those commitments. And yes, the question remains whether government support will give the tech industry the fuel and, importantly, the confidence it needs to thrive.
Even outside the door, the opposition Labor Party criticized Hunt’s focus and solutions.
Labor leader Kier Starmer summed up the UK as “stuck in the waiting room with just a band-aid”, a reference to the underfunding of the country’s health service, and reiterated the point by describing the country as “the sick man of Europe” once again. “