AI and Creative Technologies (Communications and Digital Committee Report)

Baroness Fall Excerpts

Friday 13th June 2025 Lords Chamber

[Baroness Fall (Con)]

My Lords, I echo others in welcoming the noble Lords, Lord Massey and Lord Evans, to the House and congratulate them both on their excellent maiden speeches this morning. I declare my interest as a senior adviser at Brunswick Group.

We meet today at the end of a week which, although it was BuildTech week, was really all about the spending review, but at least we get to revert to a discussion of tech scale-ups at the end. I congratulate the noble Baroness, Lady Stowell, and all the members of her committee on this very good report. Against a tough fiscal outlook at home and uncertainty abroad, I know that this group does not need to be persuaded that the question of how we scale up is not a niche issue, but core to the economic prospects of our country: for jobs, prosperity and the very growth which seems to elude us.

We are not alone in facing tricky economic headwinds. The geopolitical and geoeconomic context in which business operates is highly challenging and changeable. The only certainty is uncertainty: the worst possible investment environment. Just take President Trump’s tariff policy as one example. From its inception to so-called Liberation Day, we have seen a range of global tariffs first imposed, then partially suspended; a virtual boycott on China followed by a reprieve; and sectoral tariffs bobbing up and down. We in the UK cling on to our 10% as if it is a life raft. The US strategy remains unclear even to those in the White House. Is it a sort of global trade punishment or a vehicle to drive domestic policy? Is it to pay for tax reductions or to project a new industrial policy? Whatever the aim, the result is chaos; the only resistance, for now, is the bond markets; and business has to seek alternative supply chains and form new global relationships and alliances.

The fundamental dynamic for us is that we seek growth against an uncertain global outlook in an age of growing economic nationalism. The question for us, as nations turn inward, is that we need to focus on what our competitive advantage is. We are not a nation rich in raw materials; we are a nation of entrepreneurs and innovators. In other words, we live by our wits, not by our wealth. Just look at our record on start-ups, which others have mentioned this morning. London ranks as the second-best place for start-up companies, tied with New York city. As the committee’s report points out, the UK has emerged as one of the top three places in the world to invest in innovation. So it is to our wits that we must concentrate our attention, nurturing our unique talents, not allowing them to falter or, worse, get picked off by foreign investors. Many noble Lords have mentioned this this morning.

Yet, more often than not, that is exactly what happens. As the committee says so powerfully in its report, we are in danger of being an incubator nation or, as the noble Baroness, Lady Stowell, says, of bolting unicorns. From this week alone, the acquisition of Oxford Ionics by US quantum computing group IonQ and Qualcomm’s deal for chip designer Alphawave are examples of missed opportunities for the UK. Another example is that of Reaction Engines. This brilliant start-up, which emerged from some of the best tech engineers in the country, focused on revolutionary aerospace engines and was a thriving business for three decades, until it was forced to fold last year through a simple liquidity problem. We seem unable to leverage our home-grown creations into formidable businesses. Put simply, we find it hard to scale up. Just 1% of UK companies have reached scale-up status since 2012.

This point comes through loud and clear in the very good paper published this week by the Tony Blair Institute. From Startup to Scaleup examines in forensic detail the weaknesses across the cycle of a start-up journey and seeks solutions. I recommend it to noble Lords.

What can we do about it? First: talent. Attracting and growing talent is key. Trump’s America is pushing away foreign talent, and we should make the most of this opportunity to attract talent to the UK, looking at immigration policies and the global talent visa. At the same time, we must work hard to continue fostering talent at home. Secondly, universities really matter. Just look at the start-ups coming out of our great universities, such as Oxford Science Enterprises. We should focus on making sure that this excellent research can be commercialised, and we should take a closer look at our spin-out system, including IP rights. Thirdly: risk. We need to change our attitude towards risk—others have mentioned this—both as a society, in the way we view entrepreneurs and their inevitable early failures. and on a national level. We should be unashamedly focused on backing national winners, taking on more risk with our investments and giving higher rewards.

Fourthly, in the case of Reaction Engines we see how public money was needed at a critical moment, which could have paid dividends. The good news for our present Chancellor is that this is less about how much money and more about when we spend it—more wisely and at what time in the cycle. Fifthly, the Government have already made significant progress in modernising UK public markets, with reforms outlined in the listing review of the noble Lord, Lord Hill, but there is more to do and more to implement in that review. Sixthly, driving change across silos in Whitehall is notoriously difficult, as many in this House know, and requires political will and a powerful engine such as the Cabinet Office, the Treasury or even the No. 10 team to drive it.

Finally, do not be afraid to think big, a point that comes through loud and clear in the report. In response to the times in which we live, we must consider the importance of generating a global winning tech company. Just one of these tech companies would be a game-changer, not just in encouraging investment in other start-ups, but for our national prosperity, jobs and, ultimately, the projection of our nation’s power.