To realise the full potential of UK innovation, we must become more successful at turning startups into scale ups

In the UK we are recognised for our innovation – particularly in the AI and creative tech sectors - and this has the potential to be a significant driver of economic growth and address the long-standing challenge of low productivity.  But to realise the benefit of that potential we have to get better at turning our innovative startups into scale ups. This is something we have been less successful at and must now be a top priority.

There should be no doubt about the contribution successful scale-ups can make. In 2023 scale-up businesses in the UK made up only 1 percent of all Small and Medium Enterprises but accounted for 22 percent of SME economic turnover.

So why aren’t we producing more successful scale-ups? What is it that prevents the many innovative and exciting UK start-ups and university spinouts from becoming large businesses that can drive our economy forward? Take the AI and creative-tech sectors. These are areas where we are world leaders in research and innovation, but often struggle to turn those ideas into scalable businesses.

The House of Lords Communications and Digital Committee, which I chair, is looking into these issues. We have recently launched a new inquiry into UK Scale-ups in the AI and creative tech sectors and are inviting written submissions until the 16 October.

I know clients of Nash Squared and readers of Tech Bytes will have a keen interest in this area, so we want to understand your thinking on the challenges of scaling up, the barriers to growing AI and creative tech businesses in the UK, and how can they be overcome. Is the real problem just access to funding, or are there other factors holding us back?

We will also look closely at the existing efforts to support the infrastructure and know-how around scale-ups, including the performance of places like Innovate UK and UK Research and Innovation, to see if it is focussing on the right areas and if there are opportunities to improve performance. We are keen to hear evidence on the impact of catalyst schemes and other government initiatives to better understand whether they are delivering what’s needed. Does Whitehall understand the support scale-ups need to grow, and the barriers they currently face? Does the government need to do more or is it a case of the state getting out of the way to allow scale-ups to flourish?

The role of universities and academic institutions are important too. Do we have close enough links in the UK between academia and industry? If not, how can we improve that and make sure the brilliant and innovative work happening in our universities is supported with the right investment at the right time?

These issues have never been more pressing. AI and creative tech provide an opportunity for rapid and sustained economic growth if we get the right environment to support it. These are sectors that could give UK Plc the shot in the arm is so desperately needs. I hope our inquiry can contribute to making that possible and we would be delighted to hear from anyone with knowledge in this area to contribute to our work.

If you have views that you would like to submit, please submit written evidence to the inquiry here.

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