UK Tech Secretary Michelle Donelan Recommits to Innovation But Her Ambition to Achieve Tech Superpower Status May Be Hindered By Her Own Party

The Secretary of State for Science, Innovation and Technology, Michelle Donelan, delivered her main 2024 priorities for the UK on January 16, 2024 in a speech focusing on how to encourage the continued growth of fast-growing businesses (dubbed "scale-ups"). Her recommendations, whilst commendable, fail to consider the wider context in which UK innovation currently sits, calling into question the feasibility of her plans in one of the most politically charged times of Conservative Party leadership.

Donelan reiterated her ambition for the UK to become a global tech superpower by 2030, striving to compete with the United States in terms of its venture capital funding; £5 billion per year extra will need to be invested by venture capitalists to match current levels of investment as a share of GDP in order to close the current gap. This is in addition to her goal for the UK to account for at least half of all new unicorns created by Europe as a whole. To achieve this goal, Donelan laid out several new measures to cultivate an attractive UK hub for businesses to build and scale.

A new forum to support startups

Donelan announced the creation of a new scale-up forum for founders and investors to offer input at Whitehall on the biggest barrier for start-ups. This forum will also drive a new scale-up support service offered to the twenty most promising businesses by matching them with leading UK investors. Donelan will kickstart this with a series of events supported by the British Private Equity and Venture Capital Association, an industry body and public policy advocate for the industry. This forum is certainly a strong step forward for Donelan's plans. By her own admission, "no one knows what business needs better than business."

A commitment to innovation

The UK Research and Innovation (UKRI), a non-departmental public body, has also declared its ambition to grow businesses across the UK with InnovateUK, the UK's national innovation agency. They aim to reach 1 million innovators by the end of 2024. One of the ways in which they will achieve this is by streamlining the funding process so that start-ups gain access to funding quicker. The UKRI however has committed to supporting businesses of all sizes to invest in the innovation they need to scale. Overall, it's a good start to encourage greater funding access.

A new regulatory support service

A new regulatory support service will be set up to help start-ups navigate the increasingly complex field of technological regulation. In doing so, Donelan hopes to provide clarity and certainty to businesses so they can move forward. A new regulatory support service would increase communication between startups and regulators which could help regulators better understand the impact of their rules and design pro-innovation regulations.

A data-driven scale-up agenda

Donelan has also decided to make data access a government priority, committing to providing start-ups with access to large amounts of quality data held by both local and national governments.

This agenda would greatly support business opportunities by harnessing the vast amount of public data held by the government. Large quantity, high-quality datasets can be expensive to acquire, and lower quality data absorbs manhours and computing resources. By prioritizing government data access, firms are more likely to realize a shift to data-driven solutions.

A commitment to pro-innovation regulation

Donelan formally backed the recommendations of the Regulatory Horizons Council, an independent expert committee identifying the implications of technological innovation in the UK, promising to review them in the pursuit of an "unapologetically ambitious" regulatory approach. In their report, they recommend expanding the knowledge base of government on pro-innovation regulation, equipping relevant government departments with the tools and resources to support start-ups and scale-ups, and working with relevant partners to better understand and engage earlier with regulatory issues. Donelan also declared her department will embark on a scale-up policy sprint to bring forward support at the right time by layering up policies, meaning new goals will be built up from established goals in existing policies. In taking this approach, Donelan seeks to speed up the policy process to reflect the ever-changing landscape of the industry.

It is promising to see how much emphasis Donelan places on the need to invest and innovate at scale. Donelan's ambition for the UK to become a global tech superpower by 2030 however may be thwarted by her own government, which continues to advance legislation hostile to technology, such as the IPA Amendment Bill and the Online Safety Act, in the name of public safety. Much like the old approach in the United States to tobacco policy which subsidized farming whilst taxing cigarettes, it would seem the UK is falling into a similar trap with its technology policy, promoting with one hand whilst deterring with the other. The UK needs to consider how this legislation not only directly impacts consumers and businesses, but also dilutes its image abroad as an attractive hub for technology. Oversees businesses seek a regulatory environment supportive of innovation, emphasizing the need for the UK government to explore the Regulatory Horizons Council recommendations.

Overall, it is clear that Donelan is prioritizing UK-grown businesses and making a distinct move away from the EU approach to digital regulation. The UK has already grown its tech offering since 2010, with a reported £13.5 billion of funding being brought to UK start-ups in 2021. Unicorns have also increased from 8 to 81 in the space of 10 years. Continuing to invest in startups and scale-ups by providing easier pathways to grow will have a beneficial long-term impact on UK innovation and pave the way for its ambitions to be a global tech superpower.

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