AI and Creative Technologies (Communications and Digital Committee Report)

Baroness Anderson of Stoke-on-Trent Excerpts

Friday 13th June 2025 Lords Chamber

[Lord Ranger of Northwood (Con)]

My Lords, I congratulate the noble Lord, Lord Massey of Hampstead, on his maiden speech: it was very well researched. I am sure he will make a huge contribution to this House with his knowledge and detail.

I also welcome and congratulate my noble friend Lord Evans of Guisborough. The noble Lord, Lord McNally, outed him in terms of his place of birth and where he has chosen, but, obviously, after his speech, I would say that London should have been a designation, if not Havering and Redbridge. I have known my noble friend Lord Evans for the best part of the last 20 years. As he mentioned, a number of us—maybe a golden generation of politicians and administrators across parties—have taken that well-worn path from City Hall to this place. He is very welcome to have taken that path.

I do remember my time there, because it was intense. I had a transport brief, an environmental brief and then the digital brief: there were plenty of briefs from my former boss. When it came to looking for good guidance, a bit of political compassion and camaraderie, you did look to assembly members on your side for support.

There were various kinds on the assembly. We would sit around the mayor’s table and say, “Who can we talk to? Who can we get some sage guidance from? Who will give us that calm, measured warmth, and a sense of direction?” We were quite inexperienced and new to the role. The name of my noble friend Lord Evans would invariably be at or near the top of that list. He provided me with much guidance, time and patience. I look forward to him being in this House and providing that to us and many more through his measured, emotional and intelligent approach, as he has done throughout his career. I welcome him.

I acknowledge yet again the excellent work of the House of Lords Communications and Digital Committee, which was chaired with great dedication by my noble friend Lady Stowell. My only regret is that I was not part of this committee through her tenure in producing this report on AI and creative technology scale-ups.

I acknowledge my registered interests, especially my roles in the technology sector, specifically with UK AI businesses. I have spent the best part of the last 25 years working in the technology industry and consider myself to be still in the industry. I am vice-chair of the APPG for AI, and an angel investor in tech businesses.

We cannot help but be aware of the pace of both development and investment in the world that is awakening to the endless possibilities of AI. I will speak today through the lens of not just the creative technology sector, because, as the report recognises, the challenge of evolving our numerous innovative and successful scale-ups to full-blown global businesses is consistent across many industries.

As most of us recognise, the report states that we in the UK have many of the essential ingredients for scale-up success. I am acutely aware of this because it was the emergence of the start-up scene in London in the late 2000s that led me to persuade the then mayor to establish the first digital office for London. Working with the then Government, we set out to support the emerging creativity and innovation in east London with policies and interventions to attract talent and investment by ensuring that risk takers—the entrepreneurs and investors—felt the city was on their side, wanting them to succeed and wanting them to stay in London and the UK to drive both opportunities and economic growth.

The result was Tech City, as the ecosystem became known, which significantly transformed London’s economy and global tech standing. By 2013, Tech City had grown from 85 start-ups in 2010 to approximately 200 firms. Around 5,000 companies were located in the wider area, contributing to economic growth and high-value jobs by four years after that.

Since 2010, London-based tech companies have raised $5.2 billion in VC funding. By 2021, London’s tech ecosystem was valued at $142.7 billion, with 76,660 digital technology firms employing 590,000 people, representing 14% of the UK’s total tech firms. Tech City helped position London as the digital capital of Europe, with more than a third of Europe’s tech giants based in the city, contributing over £56 billion to the economy.

Tech City also fostered a vibrant start-up scene, producing 23 unicorns—tech companies valued at over $1 billion or more—by 2019, and with a combined value of $132 billion. Community initiatives such as Digital Shoreditch, Independent Shoreditch and Silicon Roundabout meet-ups, along with events such as, as we have seen this week, the still-growing London Tech Week, created a collaborative ecosystem for networking and innovation. The UK Government’s £15.5 million funding package from the Technology Strategy Board and the UK digital services index, launched in 2013, supported innovative businesses and benchmarked digital sector performance.

But these policies were then, and this is now. The successful foundations from the last decade need to be built on as we enter the AI age, because now we are in a global economic race, not just to utilise AI technology in all its forms but to own the innovations and host the businesses and associated support ecosystems of businesses and jobs that will reshape the economy and the jobs environment. As the report states, the risk we take by being uncompetitive in this race is that the UK will become an incubator economy for other nations, as foreign companies and investors acquire and hoover up our emerging talents.

Where would this siphoning off of business talent leave us? Apart from being an incubator, we would become an AI-receiver economy. Yes, we would utilise more innovative services. We will still embed long-term solutions and costly platforms across our industries and public sector, which will enable transformative change and efficiencies. But we will be getting only a small fraction of the value from the AI economic cake, for it will be those owners and nations where the businesses reside that will take the lion’s share of the jobs, investment and vast revenues and tax receipts. In effect, we will receive the services; they will get the revenue. That is not all bad, noble Lords may say. We may be able to live with that. But it is like saying we would be happy for nearly all our future energy supplies to come from other nations. Let us just mull over the geopolitical risks we have seen materialise in recent years and the impact on our energy prices.

In the age of AI, the large-language models, the datasets that feed those models, and the AI services that are developed using the datasets will have huge influence and power over nations, their people and even our culture and traditions. If cultural artefacts—the UK’s museums, history and libraries—are not available online to non-UK companies and LLMs, will that history, literature and culture still exist in a future digital world where the answer to your prompt is provided by an American-based model that does not know, does not have access or just does not prioritise its response based on sovereign accuracy?

This debate is about how we can encourage more scale-ups to succeed, but it is also about the future of our economy and much more. It is about the future sovereignty of businesses, LLMs, datasets and the online world that will influence and fundamentally create our future society. This is an issue of our sovereignty.

In case noble Lords feel I may be somewhat overdramatising the scale of the issue, let me share some of the numbers that demonstrate the state of play in the global AI market. According to research by Silicon Valley Bank, the UK remains a dominant AI hub in Europe, securing nearly $6 billion in AI funding last year, more than France and Germany combined. However, France is rapidly catching up, with Mistral AI emerging as the region’s leading LLM provider, having raised over $1 billion within one year of its founding. Meanwhile, Germany’s AI sector remains deeply tied to its industrial roots, where advanced automation is transforming its automotive and manufacturing industries. Further good news for us is that, since September last year, the UK AI landscape has experienced robust expansion. There has been broader enterprise adoption, the daily influx of approximately £200 million in private investment and a rise of 17% in the number, 34% in the economic output and 29% in the jobs among AI firms. That might sound impressive, and I am supportive of the Government’s approach and initiatives taken to push and support the sector, but let us gaze across the pond.

In early 2025, the US unveiled the Stargate project, a $500 billion AI infrastructure initiative in partnership with Oracle, OpenAI, SoftBank, Microsoft and NVIDIA, to name a few, aiming to create thousands of jobs and reinforce the US’s determination to maintain its leadership in the AI race. To date, according to PitchBook, US-based AI companies have attracted nearly $100 billion in funding, more than the rest of the world combined. The US has first-mover advantage in AI, driven by a combination of world-beating private sector companies, chip makers, hyper-scalers, cloud providers and dataset providers. Combined, all these companies provide the infrastructure that enables AI training and deployment at scale.

The race to lead in AI has become a defining part of global business competition. So, are we really in this race? Are we doing enough with our action plan, investment in compute and our growth zones to really compete? Will we be able to keep the scale-ups that will give us a chance to have a real stake in the global AI field economy? We can, but we must be bolder and more ambitious in how we attract and lock in the critical element that drives growth—private sector investment. Yes, the Government must do their bit, as the report suggests, to remove barriers to necessary infrastructure and resources, and must maintain their proportionate approach to AI regulation. But none of this will work without the investors, the risk-takers, the VCs, the capital markets, and the time is now. I appreciate that the Government responded to the report by stating that for some technology and creative companies, accessing the

“capital required to scale a business can be a challenge”.

This is the challenge.

I welcome the report and what the Government have done so far. But I strongly suggest that it is now time for the Government to get creative with a laser-like focus and do all they can to unlock domestic growth capital and increase the incentives for investment in the UK. They need to make our investment landscape and policies more competitive so that strategies such as the Delaware flip, whereby UK businesses restructure and relocate to meet the requirements of an attractive investment proposition put forward by a funding partner in the US, are not the best options for British entrepreneurs.

[Baroness Anderson of Stoke-on-Trent (Lab)]

My Lords, I would be ever so grateful if the noble Lord could bring his contribution to a conclusion.

[Lord Ranger of Northwood (Con)]

We need to build a competitive, sovereign-based, British-made, British-owned AI economy for the future.