Forget the Budget bombast – to become a tech superpower, Britain must get the basics right

In his Budget speech this week, the Chancellor of the Exchequer repeated the Prime Minister’s ambition to “cement the UK’s position as a science and technology superpower by 2030”.

The leading and unquestioned superpowers of course are China and the United States. Jeremy Hunt rebuked “declinists”, claiming that Britain could soon join the club. “Over the last thirteen years we have become the world’s third trillion-dollar tech economy after the US and China” he announced, before going on to single out the UK’s performance record on life sciences, vaccines, films and television, aviation and clean energy.

Everybody likes good news stories, but it is worth looking under the bonnet and kicking the tyres of any budget. Predictably, representatives of each sector quibble at the relatively paltry adjustments in the levels of government assistance they are due to receive.

Fundamentally, though, is competitive boosterism the best way for a government to help key technology and innovation, which is self-evidently vital to all out futures? Does the governmental bark match its bite? Do we need less talk from ministers and more practical action?

For a start, the UK no longer has a trillion-dollar tech sector. That is because its global value has declined since the UK just nosed into the top zone last spring. In fact, according to the latest ratings from the same agency, Atomico, France has now pipped us for third place in terms of Tech listings. Over the past five years the UK has been the best funded European nation for tech investment, accounting for 35% of the total, although investment here has dropped significantly, by 22% to £27.9bn in the past year.

The UK dropped out of the top ten countries to twelfth place in the latest Network Readiness Index. In part Oxford’s Said Business School blames a slowdown in regulation and privacy protection. Meanwhile, pointing to plans in the US and EU, the CBI Director General warned that the UK may be “losing the race on green growth”. While largely sharing the government’s ambitions, the Labour leader Keir Starmer poured scorn on its pretensions in “a country”, he said, “set on a path of managed decline, falling behind our competitors, the sick man of Europe once again.”

Despite being a philosophy, politics and economics graduate, Sunak likes to be seen as a Tech Bro. He launched his premiership by rearranging ministries to create a Department for Science, Innovation and Technology, headed by Michelle Donnellan, who studied history and politics at York. They called on expert advice for their first moves. Nobel Prize winner Sir Paul Nurse conducted a “landscape review” of the “research, development and innovation” framework. The government is currently havering over his urgent recommendation to re-join the EU’s Horizon programme. The chancellor said he will accept in full the digital technological recommendations made by Sir Patrick Vallance, the government’s departing chief scientific advisor.

In practice the measures in the Budget are modest in amount, perhaps inevitably in these straightened times, and also a mixed bag, in which the politicians in Whitehall seem to be falling into the trap of trying to pick winners for favours, preferably known by fashionable buzz words. Quantum computing and AI get some extra money and a new million-pound prize. There will be renewed efforts to set internationally acceptable standards for medicines and drones. Bigger tech and life science businesses will get extra tax credits if they spend more than 40% of total costs on R&D, but small tech innovating companies, which typically cannot spend that much and which may become the big players of the future, still face cuts. Meanwhile, David Connell of the Cambridge’s Judge Business School, who has been advising Sunak on policy in this area, told the Financial Times that tax credits will not help turn “promising new STEM companies into significant, global players… We need other policies, including US-style government R&D contracts, to address this problem.”

In 2021, before the UK’s trillion-dollar moment, the global tech industry was valued at roughly $5.2 trillion, of which North America accounted for 35%, Asia 32%, and Europe 22%. The US share was the biggest tech industry in the world, with an approximate worth of $1.8 trillion, accounting for 10.5% of the United States’ total GDP.

The US government has consistently invested heavily in tech innovation. For example, many of the consumer-friendly features of Apple products, now one of the biggest companies in the world, were developed from technologies pioneered by the state-backed “military-industrial complex”.

President Biden has taken to the challenge with renewed urgency because of the geopolitical challenge he sees. In this year’s State of the Union Address he emphasized the need to continue “investing in American innovation, in industries that will define the future, and that China’s government is intent on dominating”. His Inflation Reduction Act is the latest push from the federal government. The IRA’s green measures include $158 billion investment in clean energy such as solar and nuclear, $13 billion for electric vehicle incentives, $14 billion in home energy efficiency upgrades, $37 billion and more than $30 billion for climate-smart agriculture, forests and cities.

The Chancellor redefined nuclear power as “sustainable” in the Budget and set up “Great British Nuclear” to oversee a new generation of Small Modular Reactors, which as yet do not exist off the drawing board, and lift nuclear energy supply from 15% to 25%. Funding for nuclear was frozen even though four of the UK’s five existing big nuclear power stations are due to retire by 2028. Farmers complain that they are yet to receive the promised support to match what they had during EU membership.

Viewing tech in terms of competition between European nations and aspirations to be the next junior “superpower” misses the point. The real challenge is pithily summed up, from a relatively detached viewpoint, by the Australian Strategic Policy Institute: “Western democracies are losing the global technological competition, including the race for scientific and research breakthroughs, and the ability to retain global talent—crucial ingredients that underpin the development and control of the world’s most important technologies, including those that don’t yet exist.”

The ASPI notes that China is ahead of the US in 37 out of 44 key innovative technologies. The UK is in the top five for vaccines and advanced aircraft engines in “a small, second-tier group of countries led by India and the UK: other countries that regularly appear in this group…include South Korea, Germany, Australia, Italy, and less often, Japan.”

The UK has a long history of academic excellence and innovation. As a country which prides itself on openness it has also been unusually permissive of foreign companies buying our businesses to promote inward investment. The bans on Tik Tok and Huawei here were instigated on security rather than economic grounds, following actions taken by the US government.

For growth, our excellent technologies are dependent on collaboration, including talent from abroad in universities as well as commercial offices and laboratories, a matter on which the present government has conflicting opinions. Clear thinking on supporting the basics for the long term, including education, is the way that the UK might become a collaborative tech superpower within Western alliances. Bombast will lead nowhere.

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