AI and Creative Technologies (Communications and Digital Committee Report)

Baroness Lane-Fox of Soho Excerpts

Friday 13th June 2025 Lords Chamber

[Baroness Lane-Fox of Soho (CB)]

My Lords, I, too, start by welcoming the noble Lords, Lord Massey and Lord Evans, to this Chamber and congratulating them on their maiden speeches, and by congratulating the noble Baroness, Lady Stowell, on her masterful chairmanship of the committee and raising the profile of these vital issues at a vital time.

In the noble Baroness’s incredibly comprehensive introduction, she mentioned that it has been London Tech Week, as did others, and I feel as though this debate has chased me around the panels and interviews I have done over the course of the week. In fact, this issue has chased me over the last 30 years of working in the technology sector and building my own businesses. I am grateful for the opportunity to contribute now to what is such an important topic, on the back of such an important piece of work by the committee.

I agree that we risk falling into becoming an incubator economy, but the risk is worse than that, because it is broader and deeper. By not scaling our AI and tech businesses, we are not only not building the sector of the future; we also risk those businesses failing to impact on the other sectors of our economy and the wider economy in which they operate. I would like to dwell on that issue for just a moment.

We have had two decades of becoming a nation of start-ups. I think back to the late 1990s, when we would go to an entrepreneurial meet-up and be the only entrepreneurs in the room. People would move away from me at parties when I said that I was going to start my own business, thinking that I was truly bonkers for wanting to do so. Now, the culture has fundamentally shifted. As we know, many young people have one or two businesses alongside their own jobs, perhaps both as a necessity of these economic times and because of a sense of entrepreneurship’s excitement and vibrancy.

We know that many companies hit a ceiling. It is a problem for not just them but the wider economy. It is vital to recognise that these challenges are not confined to the tech sector. The struggle to scale is a persistent thread that runs through the entire economy. I see this as president of the British Chambers of Commerce, as well as from the multiple boards that I am lucky enough to sit on. I was also a founding trustee of the ScaleUp Institute a decade ago.

Despite record numbers of entrepreneurs, only 2% of UK firms reach more than £1 million in turnover over three years—just 2%. The scale-up rate among businesses has slowed dramatically over the past decade, with the proportion of firms expanding their workforce falling by 40% between 2012 and 2022. Obviously, this has profound implications for employment and the wider economy. It does not just reflect the barriers faced by individual companies; it also reflects that the wider business environment is not adopting innovation and technology at the pace required.

At the British Chambers of Commerce, we did a report on the digital revolution. Although the pace of change is accelerating, especially in high-growth sectors—as everyone in this Chamber knows—many firms outside those high-growth sectors are struggling to keep up with the pace of change. Poor digital infrastructure, patchy broadband and a lack of digital skills mean that too many businesses are missing out on productivity gains and a competitive edge. When tech and AI scale-ups fail to thrive, it is a warning not only about them but about our whole economy falling behind, not just in tech but in manufacturing services and beyond.

The committee’s recommendations are impressively comprehensive: consolidate government support; unlock capital; and foster a culture that champions ambition and risk-taking. I agree wholeheartedly. I would like, to use terrible tech speak, to double-click on three levers that I think demand even more attention: government procurement; international expansion; and business culture.

First, on government procurement, public procurement is a £400-billion lever—one-tenth of our economy. The new Procurement Act is a real opportunity to open up contracts to scale-ups and SMEs by cutting red tape, mandating prompt payment and letting local authorities reserve contracts for local suppliers. I have seen this at first hand from businesses I have been involved in, most recently as a board member of Multiverse. Government contracts are a hell of bureaucracy and difficulty; they just cannot be given priority while you are also trying to scale your business across multiple other planes. So, I deeply welcome this new legislation, but I would appreciate an update from the Minister on how the implementation is going and what the redress will be for companies if they feel as though the Act is not working in their favour.

We must make sure that we set ambitious targets to include UK scale-ups in procurement participation so that we are really driving UK innovation and British jobs. Just yesterday, at a London Tech Week event, as I was thinking about what remarks I was going to make, as if by magic, a UK entrepreneur with a medical technology business appeared in front of me to berate me for 10 minutes—quite rightly—about how a recent procurement process in the NHS had led to a US company being procured. I do not know the details of this—I am not naming the company—but it is, I think, indicative. A US company had been procured at a vastly increased cost because it was already a supplier within the system. Despite our British company being a star success, it was unable to compete; this really was a missed opportunity and unacceptable from so many angles.

Secondly, on international expansion, scale-ups are more likely than any other SMEs to export and to innovate—and to grow quickly when they do—but, as the British Chambers of Commerce has taught me, only 10% of British businesses export, and they are over 60% of our members. That is an interesting fact in itself. We need to encourage more businesses full stop to scale through innovation in trade, through trade itself and through expansion into other markets. We cannot ignore the elephant in the room: Brexit. Although businesses recognise the improvement in relations with the EU, we have taken ourselves out of the capacity to work in a digital single market, which has had a fundamental impact on our technologies’ ability to scale.

I remember, as a young whippersnapper, going into the French company that we were building at lastminute.com and being met with derision, pretty much. The French entrepreneurs thought—quite rightly, probably—“How can it possibly be that these two whippersnappers are coming in to take over our country?” However, it is so important that we encourage companies to scale through Europe and do not scare them with the complexity of bureaucracy that we are creating in front of them. We can expand in our own market, of course, but, to become truly global, we need to expand way beyond our own shores and to make that as easy and attractive as possible.

Finally, culture is one area that I really do feel I have lived over the past two decades. It is not mentioned in this report, but I hope that members of the committee will find it interesting to know that the Bank of England did research showing that 77% of British businesses would rather not grow than take on new financing to expand. What a missed opportunity. Although this report rightly goes hard on the capital sources and unlocking more from the Mansion House accord, as well as on many other issues that we have heard about in the contributions made today, we still have in our culture the issue of how we grow and expand.

This comes from multiple reasons. I do not have time to unpick them all now, but it is vital that we celebrate the successes we have and do not denigrate them. Success does not have to mean just creating more money for the individual; it can mean creating more prosperity for communities, for us all and for the wider society in which businesses operate. When I am travelling around for the British Chambers of Commerce, I meet all the time businesses that are pushing back into their community, building relationships with charities and, often, delivering things where services cannot. This is fundamental if we want to make sure that we have not just a prosperous economy but a prosperous society; we must celebrate this and not denigrate it or view it with scepticism.

I end by saying that, as noble Lords may know, I find myself in hospital frequently. I have the most extraordinary hip surgeon, who could not resist badgering me when I was recently in hospital again by telling me that he was trying to raise money for his incredible robotics innovation. He really is a world leader in this area—I will be quiet in one second—and he had to go to Florida to raise the £100 million that he needed. He did so in two meetings; here, 20 meetings had led to a commitment of just £100,000.