AI and Creative Technologies (Communications and Digital Committee Report)

Baroness Jones of Whitchurch Excerpts

Friday 13th June 2025 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, I thank the Communications and Digital Committee for its very thoughtful and timely report. I pay particular thanks to the noble Baroness, Lady Stowell, for her long and very effective contribution as chair of the committee, as well as for being instrumental in delivering this valuable inquiry. I also thank all noble Lords who have contributed to this discussion with such insight and urgency. As noble Lords’ interventions have shown, we are grappling with some very complex issues.

Before I begin, I take a moment to thank the noble Lords, Lord Evans of Guisborough and Lord Massey of Hampstead, for their engaging maiden speeches. It is a pleasure to welcome them both to the House. The noble Lord, Lord Evans, brings with him a wealth of insight from his time as a barrister and deputy mayor of London and his many years in public service. The noble Lord, Lord Massey, with his experience in political leadership and financial services, adds a valuable voice to our discussions. We are fortunate to have them both contributing to our work.

The title of this report, “less talk, more action”, is a challenge that we take seriously. The Government share the committee’s ambition to unlock the full potential of the UK’s AI and creative technology scale-ups. We understand that there are challenges in scaling these businesses and we are determined to ensure that they scale and stay in the UK. Before I respond to the many questions and interventions, I want to recognise the strength and importance of the UK technology and creative sectors at the current time.

The UK tech sector is an incredible UK success story, and I agree with the noble Baroness, Lady Stowell, that we do not do enough to celebrate the innovators and the risk-takers in the tech sector. Despite her quote, the UK continues to boast the largest tech ecosystem in Europe and ranks among the top five globally, driven by world-class talent, strong R&D and innovative, friendly regulation. It remains Europe’s top destination for tech investment, with a tech sector valued at £1.2 trillion in 2024. As the noble Baroness, Lady Fall, and the noble Lord, Lord Holmes, rightly point out, we have a wonderful university research sector, with four of the top 10 universities in the global index. This is a fantastic basis on which we can grow.

But we know that starting strong is not good enough. Too many of our promising companies struggle to scale. Too often, as we have heard, they grow elsewhere. I agree with the noble Baroness, Lady Wheatcroft, and others that urgent action is needed to avoid the “valley of death”. I also agree with the noble Lord, Lord Willetts, that we need ways to make the scale-ups’ route in the UK so compelling that it makes no sense for them to leave. We want them to stay, and we have to find ways to do that. I agree with the noble Baroness, Lady Lane-Fox, that we need to address the cultural issues that are holding back some of that ambition and expansion. I agree as well with the noble Viscount, Lord Camrose, that we need to find better ways of championing the entrepreneurs and holding them up as role models. We are indeed focused on building an environment where high-growth firms can start, scale and stay in the UK.

Like the noble Lord, Lord Willetts, I pay tribute to my noble friend Lord Vallance, who has a huge project ongoing to streamline funding throughout the start-up and scale-up funding stream in order to tackle, as we have heard, the plethora of government grants, many of which are not long term. We absolutely understand the need for long-term certainty for British businesses.

This work is already beginning to pay off. As of January 2025, 185 companies across the tech sector have reached unicorn status that were either founded or headquartered in the UK. That is more than France, Germany and Sweden put together. We want to see more tech businesses join UK success stories like Wave and Quantexa and scale in this manner.

As both the Prime Minister and the DSIT Secretary of State have made clear, the Government are going to have to keep this momentum going. We are already taking steps. This week we have announced a new £86 billion R&D settlement to fund everything from new drug treatments and longer lasting batteries to new AI breakthroughs to generate billions for the UK economy and drive our plan for change.

We have also announced TechFirst, a comprehensive talent initiative which will give young people across the UK unprecedented access to tech skills and careers, boosting our domestic supply of top tech talent. Our local innovation partnership fund will be investing up to £500 million to help our economic growth spread throughout every region and nation of the country. Yesterday I chaired a round table of regional cluster representatives who are driving forward that local enterprise. They very much welcomed our new funding announcements.

I thank the noble Baroness, Lady Kidron, for her contribution on the value of data. I can assure her that the points she made throughout the Data (Use and Access) Bill about data being a sovereign asset have been taken on board, and they were very well made. I assure her and the noble Lord, Lord Tarassenko, that the principle of it being sovereign data will underpin the national data library. I can also assure noble Lords that the NHS allows access to health data only when it benefits health and care, and we never sell data.

Our creative industries are a national treasure, contributing £124 billion in GVA and supporting 2.4 million jobs. More than that, they are the windows through which the UK presents itself and our values to the world. I can assure the noble Baroness, Lady Stowell, and other noble Lords that the Prime Minister and the Chancellor have hosted a number of events for the creative sector at No. 10 and No. 11 Downing Street to celebrate their success.

In 2025, DCMS-funded research found that 13,800 creative businesses are using emerging technologies, supporting 350,000 jobs. They are also a source of innovation, and where these sectors come together, they produce great things. Createch—the fusion of creativity and technology—is a major growth opportunity. With the right support, createch scale-ups could generate £18 billion in additional GVA and 160,000 jobs over the next decade. We are committed to removing the barriers these businesses face, from access to finance to regulatory complexity. Our upcoming creative industry sector plan, which is indeed due shortly, will set out how we will do just that.

At this week’s spending review, the creative industries received a transformational boost. The settlement announced for DCMS included increased funding, demonstrating the Government’s commitment to fuelling the creative industries. It will help drive regional growth and innovation and develop creative places, ensuring that the UK’s creative industries remain renowned throughout the world.

The opportunity was particularly clear to me this week as I attended London Tech Week. I saw the University of the Arts London bring Future Play from its Creative Computing Institute to the heart of London Tech Week, demonstrating just how engaging creative technology can be for users, as well as many fantastic speakers representing createch companies appearing on panels throughout the week, such as Anna Burke of Animated Technologies and Daniel Verten of Synthesia. We want to ensure that the creative and technology sectors continue to thrive. We want to leverage the strength of the UK in both sectors to ensure that, as both grow, they continue to strengthen one another.

I also want to recognise the strength of our AI sector. It generated £14.2 billion in revenue last year, employs over 64,000 people and is home to more than 3,700 companies, up 17% on the year before. The Prime Minister launched the AI Opportunities Action Plan in January, setting out 50 far-reaching actions needed to drive the development and deployment of AI. The Government will take all these recommendations forward.

In response to the noble Baroness, Lady Stowell, and the noble Lord, Lord Tarassenko, I am pleased to say that just this week we announced an extra £1 billion of funding to scale up our computer power by a factor of 20. This will include making Scotland home to the UK’s most powerful supercomputer, with up to £750 million for that project. We will also train 7.5 million workers in AI by 2030 through partnering with 11 major companies.

The Government are not unaware of the complexities that arise out of AI. I agree with the noble Lord, Lord Holmes, that the challenge is to ensure that our AI deployment is human-led and human-focused. In particular, we recognise the importance of getting the regulatory framework right, especially around copyright and intellectual property. As noble Lords know, we held a detailed consultation on future copyright reform, receiving over 11,000 responses, and no decision has yet been taken on the final policy. We recognise that this is a complex and rapidly developing area and will continue to welcome all views and evidence to help shape our thinking. We will act in the round and on the basis of a careful analysis.

Transparency and other issues raised during debates are of course crucial, but they must be developed as part of a balanced package, to avoid making the UK uncompetitive in AI development. I agree with the noble Baroness, Lady Stowell, that it is unfortunate that the arguments have become a divisive thing between the creative and tech sectors, when in fact they should go hand in hand. We want to ensure that these exciting createch companies are able to continue to innovate and scale, while also supporting our world-leading creative industries—a sector the Government have committed to support as one of the eight priority strands of our industrial strategy.

To show the Government’s ambition for balance in this space, we are convening working groups which will include representatives of all relevant sectors, including the creative and AI sectors. I can assure the noble Lord, Lord McNally, that we will of course also be working with parliamentary colleagues to help shape that report. I hope that that reiterates our commitment to developing policy that is effective, meaningful, proportional and practical in all sectors. Our commitment to supporting our tech sectors is evident in our industrial strategy. Invest 2035, a 10-year plan to support high-growth sectors and create a pro-business environment, will be published this month. The industrial strategy will deliver the certainty and stability that businesses need to invest, create a pro-business environment and support high-potential clusters across the country.

The industrial strategy will channel support to the eight growth-driving sectors, those in which the UK excels today and that will propel us forward tomorrow. Two of these sectors, the digital and technology and the life sciences sectors, are led by DSIT, and another, the creative industries, is led by DCMS. The digital and technology sector plan will build on the UK’s strengths in the six technologies with the greatest potential for growth, including AI, as well as advanced connectivity, cybersecurity, engineering biology, semiconductors and quantum. The plan will give every part of the country a stake in the technologies that are fundamentally reshaping our world, and which are critical to our national security and to growing our economy and improving the lives of citizens across the UK. We will also consider overlap and interdependencies across the growth-driving sectors.

Similarly for the creative industries, our sector plan will set out policies and interventions that will boost creative industries’ growth throughout the country, recognising that they are an economic and cultural success story. The sector plan will set out how the Government will work in partnership with industry to support access to finance, skills and education, innovation and exports. The Government have engaged with various stakeholders throughout the production of the industrial strategy—including through industrial strategy mission groups—to develop those solutions.

As we have heard, ensuring access to finance is absolutely central to our ambitions. The UK had the world’s third-largest venture capital market between 2021 and 2023, raising £72 billion, but we know there is more to do—particularly in unlocking domestic institutional capital. That is why we launched the Mansion House reforms, with the potential to unlock £50 billion for high-growth businesses. The Mansion House compact and the investment compact, now with more than 100 signatories and £100 billion in assets under management, are already shifting the dial.

We have also launched a landmark pension investment review and introduced the Pension Schemes Bill, aiming to increase investment in productive assets. This confirms our intention to change the pensions landscape, with a government-reserved power to ensure that providers sufficiently diversify investments. Today, just 0.5% of UK defined contribution pensions are invested in unlisted UK equities. In Australia that figure is closer to 5% or 6%. We must close that gap, and we have plans to do so.

We are reforming the British Business Bank, marking a major step change in financing companies to start and scale in the UK, and increasing its total financial capacity to £25.6 billion. This expansion will take British Business Bank investments to around £2.5 billion each year. We are also launching the British growth fund and the British growth partnership and remodelled the UK Infrastructure Bank into the National Wealth Fund, with £7.3 billion in new funding to crowd in private investment.

For the creative industries, to date the Government have offered substantial support, with the DCMS Secretary of State announcing £40 million of funding for the creative industries in January, supporting British start-up video game studios, music and film exports and creative businesses outside London. We also announced that the British Business Bank would increase its support for the creative industries to help creative businesses realise their full potential growth. Our soon-to-be-published creative industries sector plan will set out our approach to improving access to finance for creative businesses, developing business investment readiness and crowding in private finance.

We are proud of the work of Innovate UK, which now supports more than 450,000 innovators. Every £1 invested in business innovation returns over £3.60 in direct benefit and over £6 in total economic return. Through programmes such as Innovate UK Business Growth, we supported more than 10,000 innovation-focused SMEs last year, helping them raise £483 million in investment and create more than 2,600 jobs. Under the new executive chair of Innovate UK and the new UKRI CEO, we will refocus Innovate UK’s objectives to maximise its impact to the UK economy.

In addition, our investor partnerships programme has supported 360 SMEs with £144 million in grants and £393 million in aligned investment, unlocking over £1.2 billion in total. More than 3,000 creative businesses have applied for Innovate UK’s Creative Catalyst programme since 2021. We are also supporting late-stage R&D through innovation loans, with £229 million committed to 251 companies.

I agree with the noble Lords, Lord Ranger and Lord Clement-Jones, that skills pose a particular challenge. We currently have around 100,000 vacancies that cannot be filled in the digital sector in the UK. We are acutely aware of this, and we will address it through a reformed programme from Skills England.

To support innovation, we must also modernise regulation. That is why we established the Regulatory Innovation Office in October 2024. I am very grateful for all the work that the noble Lord, Lord Willetts, is doing in chairing the committee and tackling barriers to growth. RIO is already delivering results, from enabling beyond visual line of sight drone operations to launching the second year of the AI Airlock for healthcare and accelerating regulatory sandboxes for engineering, biology and space. RIO will help position Britain as the best place to innovate by ensuring safety, speeding up regulatory decisions and providing clear direction.

We have also commenced the digital markets regime, giving new powers to the Competition and Markets Authority to tackle the dominance of a few large firms. As the noble Lord, Lord Clement-Jones, pointed out, the CMA is investigating Google and Apple’s positions in search and mobile ecosystems. These steps are vital to ensure fair competition and open markets.

The noble Baroness, Lady Lane-Fox, rightly mentioned the challenge and opportunities of procurement. As she says, we are taking action on this. She asked for a progress report and I will write to her, giving an update on that information.

This Government are not just talking; we are acting. We are unlocking capital, reforming regulation, supporting innovation and backing our creative and digital industries. But as we close another fantastic London Tech Week, we recognise that there is more to do. We welcome the committee’s scrutiny and share its sense of urgency.

If I have not answered all the points that have been raised, I will of course write to noble Lords. We are committed to working with Parliament, industry and academia to ensure that the UK is not just a great place to start a business but the best place in the world to scale one. That is our ambition and we look forward to working with noble Lords to deliver it.