Engineering Biology (Science and Technology Committee Report)

Lord Mair Excerpts

Monday 28th April 2025 Grand Committee

[Lord Mair (CB)]

My Lords, I speak as the new chair of the Science and Technology Committee, and pay tribute to my predecessor, my noble friend Lady Brown, for her splendid leadership of the committee over the past three years. I congratulate her and the committee on producing this important report on engineering biology, and on her excellent introductory speech to this debate.

The report has the significant title: Don’t Fail to Scale: Seizing the Opportunity of Engineering Biology. It is on the more general topic of scaling up UK science and technology companies that I wish to briefly speak. As already mentioned by the noble Viscount, Lord Stansgate, our committee has recently launched a new inquiry into financing and scaling UK science and technology. It is about that challenging pipeline, from the initial innovation, through the scale-up investment and culminating in the development of new industries in the UK that can so effectively benefit our economy and public services.

It has long been recognised that the UK struggles to translate a lot of its excellent research into the largest technology companies. This is now leading to a relative decline. In 2013, 118 UK companies were in the top 2,000 spenders on R&D globally. By 2023, that had declined to 63. China has more than quadrupled its share, while the US has maintained a leading position, with around a third of those companies. The UK has only two companies in the top 100, both pharmaceuticals. There is also a growing trend for the companies that do start up here looking overseas for investment, and increasingly being sold to buyers in the US. This is leading to what this House’s Communications and Digital Committee described as the UK becoming an “incubator economy”.

All this matters immensely for the UK. The Government are relying on economic growth to continue to fund public services, healthcare, measures to mitigate climate change, and, increasingly, defence. There can be no doubt about the potential for technology to enhance growth, tackling global and national problems, but if our science and technology companies continue to fail to scale—and engineering biology is a specific example of this—then the economic and social benefit from these technologies, and from the UK’s R&D spend, may well end up overseas.

It is clear that the majority of investment that UK science and technology companies will have to raise will come from the private sector, but this has been limited in recent years by the pull of the US market, which has a much deeper pool of available capital. It has also been limited by global trends, such as the rise of passive investment, which has led to fewer investors actively seeking out and investing in smaller UK science and technology companies.

The committee’s report recommended reforms in the very important pensions sector. These entail supporting consolidated pension funds to be less conservative and to invest in small, innovative UK tech companies, providing scale-up capital for them as part of their diversified portfolios. Australia, Canada and the Netherlands are examples of countries that have successfully implemented such practices. The Government are seeking to address this through the Mansion House reforms to encourage pension funds to combine and invest in UK science and tech companies, but one witness described this as a generational shift that could take a decade to implement fully. The reforms and their implementation need to be more ambitious and faster. Can the Minister set out how DSIT is engaged with this process of encouraging major pension fund investment in innovative UK tech companies?

Our inquiry into financing and scaling UK science and technology is just getting under way, but we have already heard a lot of important evidence. Our call for evidence is open until 9 May and sets out some of the areas we are interested in, including what we can learn from international comparisons. We are interested in how well current UK policies to support scaling up are working.

The problem of scaling is not new, but we are in a new context with a new Government, a shifting global order, changing priorities and a new technological landscape. The response from the Government to the engineering biology report left a lot to be announced in the forthcoming industrial strategy and after the spending review. There are some promising initiatives, but we are still waiting to see the overall strategic direction and whether the UK will seize the opportunities available or continue to fail to scale. We look forward to continuing our present inquiry and the Minister’s participation in it. Scaling our science and technology is a hugely important and pressing issue. We can all agree that we have to get it right.